The O.P.E.N. Imperative for Consumers and Business Results

O.P.E.N. IMPERATIVE I ©2011 I WWW.RESOURCE.COM

LITMUS A RESOURCE INTERACTIVE WHITE PAPER

THE O.P.E.N. IMPERATIVE FOR CONSUMERS AND BUSINESS RESULTS

O.P.E.N. IMPERATIVE I ©2011 I WWW.RESOURCE.COM 2

LITMUS THE O.P.E.N. IMPERATIVE FOR CONSUMERS AND BUSINESS RESULTS

EXECUTIVE SUMMARY

When Resource Interactive published The OPEN Brand: When Push Comes to Pull in a Web-Made World in 2008, the Internet had been shifting power away from brands and toward consumers for more than a decade. But through the rapid rise of social media, the strengthening consumer voice was amplified. Consumers were creating and sharing content and influencing each other directly, and many brands, to regain their own influence, began to open up to consumer involvement in their brand’s messages and offerings. Our early recommendations that brands foster participatory relationships with consumers based on shared values has emerged as nothing less than the bottom-up consumer imperative of the digital age. Open branding has also become a verifiable business growth strategy. Through our O.P.E.N. Indicator that leverages multidimensional analyses of both consumer survey research and publically available Compound Average Revenue Growth (CAGR), we found a statistically significant correlation between openness, likelihood to recommend and purchase intent, and between openness and 5- and 9-year CAGRs. Measuring and strategically optimizing a brand’s On-Demand, Personal, Engaging and Networked (O.P.E.N.) experiential attributes demonstrably creates better business results.

INTRODUCTION: AN O.P.E.N. REVIEW

From the outset, we wanted open branding to be both philosophy and strategic framework. As a philosophy, it enabled us to position client projects as part of the open innovation marketplace where consumers have a recognized role in shaping new brand value including content, products, services or experiences. As a new framework for digital marketing, it became the common thread throughout our offerings, as it clarified the objectives for our work based on the four attributes of an optimal open brand experience: On-demandPersonalEngagingNetworked As a way to measure an open brand in the marketplace, we then developed the OPEN Assessment, an expert heuristic that evaluates tactics in Mobile, Social and the Web on how well they deliver On-Demand, Personal, Engaging and Networked experiences. These baseline assessments of brands inform everything from budgets to social media marketing plans to ecommerce upgrades.



In the past three years, the O.P.E.N. mandate has come to life in several successful campaigns and new revenue for our clients. But a new challenge has presented itself: to move beyond expert analysis and provide a real consumer-based metric for open branding that could become an industry standard. Does an open brand drive consumers to further consumption and the brand to growth? To answer these questions, we adopted a twofold approach. First, Resource Interactive commissioned Harris Interactive and Ipsos to survey members of their online consumer panels about how, if at all, the key elements of open brands were related to consumer purchase intent and their likelihood to recommend brands. Second, we studied the 5-year and 9-year revenue CAGRs of our publically traded brands and analyzed their growth over the period of time they had implemented an open brand strategy.

THE O.P.E.N. INDICATOR: CONNECTING THE DOTS

MethodologyHarris Interactive surveyed 5,300 members of its online consumer panel in February/March 2011 to obtain consumer opinions on a total of 55 consumer goods, retail and technology/service brands.

The survey’s eight core questions (answerable on a 0-to-10 scale) were designed to reveal the consumer’s perception of the brand relative to various O.P.E.N. experiential attributes. In addition, each consumer rated their purchase intent and likelihood to recommend the brand. Ultimately, we had more than 31,000 unique person-brand responses.

AN OPEN ASSESSMENT ALSO

PROVIDES A COMPETITIVE

ANALYSIS TO SHOW A BRAND’S

OPEN STATUS RELATIVE TO OTHERS

IN THE RELEVANT VERTICAL.



To standardize the findings, Resource Interactive created an “O.P.E.N. Indicator” score based on the responses to the eight core questions and then correlated that score with those for purchase intent and likelihood to recommend.

We also then analyzed 5-year CAGR and 9-year CAGR for our publically traded brands and performed a regression analysis against those brands’ O.P.E.N. scores.

SURVEYED BRANDS

The 55 retail, consumer goods, and technology/services brands about which consumers were surveyed are:

Retail BrandsAce HardwareAmazonBehrBenjamin MooreBest BuyCVSExpressGapThe Home DepotJCPenneyKohl’sThe LimitedLowe’sMacy’sSearsSherwin-WilliamsTargetVictoria’s SecretVS PINKWalgreensWalmartZappos

Consumer Goods BrandsClairolCoca-ColaDove Fancy FeastFriskiesGarnierHead & ShouldersHerbal EssencesJohn FriedaKellogg’sL’OrealMeow MixNature ValleyNine Lives PantenePepsiPurina Cat ChowQuakerSchickSelsun BlueSmucker’sVenus

Technology/Service BrandsAppleAT&TDellDirectTVHewlett-PackardHTCIntuitMicrosoftNetflixNintendoVerizon



SCORING POINTS WITH CONSUMERS AND BRANDS

Thousands of consumers, 55 brands and eight questions later, did the survey results bear out our O.P.E.N. premise?

Indeed, they did. We found there is a statistically significant relationship between a consumer’s perception of a brand’s openness and their purchase intent (99% confidence interval). Additionally, there is a statistically significant relationship between a consumer’s perception of openness and their likelihood to recommend (99% confidence interval). The bottom line is that the more open the brand, the higher the purchase intent and likelihood to recommend, meaning an open brand strategy can lead to key business results.

The study also found that the total variance of O.P.E.N. scores across the brands evaluated to date was 2.5 points on a 10-point scale. However, the range of purchase intent scores was 5. Therefore, it appears that a brand’s O.P.E.N.-ness is an amplifier: a relatively small change in O.P.E.N. score correlates to a much larger change in consumers’ purchase intent. Specifically, a one-point-higher O.P.E.N. score correlates with a 2.5-point increase in purchase intent for consumer goods companies, a 1.75-point increase in retail, and a 1.77-point increase in technology.

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Retail

Consumer Goods

Tech

O.P.E.N Score

PurchaseIntent



We then extended the analysis to see if a brand’s O.P.E.N. score was a predictor of the more direct financial measure of revenue. Recognizing that there are factors beyond simply the degree to which a brand is O.P.E.N. that determine top line results, we were unsure whether the influence of O.P.E.N. would be strong enough to be picked up through the noise of these other factors.

We looked at the 5-year CAGR and 9-year CAGR for the 28 brands included in our surveys for which annual revenue data was available and performed a regression analysis against those brands’ O.P.E.N. scores. The result was that we did see a statistically significant relationship (>95% confidence) between O.P.E.N. score and revenue CAGR (p-value of .023 for the 5-year CAGR and p-value of .020 for the 9-year CAGR).

To visualize this result, we calculated the average cumulative revenue growth by year for the ten brands in the sample that had the highest O.P.E.N. scores and for those brands that had the lowest O.P.E.N. scores and plotted them over time. The result is striking:

Cum

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Rev

enue

Gro

wth

500%

450%

400%

350%

300%

250%

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150%

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50%

0%2001 2002 2003 2004 2005 2006 2007 2008 2009 2010

Low O.P.E.N. Score Brands

High O.P.E.N. Score Brands



DON’T WAIT TO O.P.E.N.!

Consumer goods, retail and technology brands alike can increase the openness of their brands and engage consumers to further consumption and great business results. In essence: O.P.E.N. = success among consumers, both for direct transactions and for tapping into the referral power of their extended networks.

More work is underway as we continue to build the repository of open brands. We plan to conduct similar studies on an ongoing basis to measure brands over time. In the meantime, with this latest evidence that the numbers add up, we encourage brands to step up and open up. Your consumers are waiting.

Take our O.P.E.N. assessment and have your brand and your competitors added to our Indicator database to see just how open your brand is and what you need to do to grow.

Please contact:Melissa DorkoDirector of Business [email protected]

The O.P.E.N. Imperative for Consumers and Business Results

Business

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