For many years, cable and satellite television services have been viewed almost as a utility akin to electric, water or telephone service – as an essential. However, recent trends toward cord cutting – the discontinuation of cable service – and cord shaving – changing to smaller and less expensive television packages – is dramatically changing how television content is viewed and the corresponding advertising opportunities.

There are three primary drivers of the trend toward cord cutting.  The first is the escalation of prices charged to consumers.  The NPD Group reported that the average monthly cable bill for 2011 in the US was $86 and projected this to increase to $123 by 2015 (costs include premium TV channels).  In the current environment of stagnant household income, these increases are not trivial.  Consumers are also frustrated by the necessity to purchase bundles of channels, many if not most of which they never watch.  In fact, a recent consumer survey from cg42 found that:

72% of current customers feel their cable provider engages in predatory practices and takes advantage of consumers’ lack of choice.

The second driver is the surge in alternative providers of video content available through consumers’ internet connections, which has been fueled by broadband penetration which has now reached 79 percent in the US according to Leichtman Research Group.  Most popular among these are video on demand providers Netflix (which just reported its best quarter ever, adding 4.3 million subscribers in Q4 of 2014), Hulu Plus and Amazon Instant Video, each of which provides a huge amount of syndicated content at a relatively low cost.  Included within these subscriptions is a growing amount of original content not available through traditional television channels.   And most recently, Dish Network announced its new web-based Sling service which will provide a small number of the most popular networks for only $20 per month with the option to add on targeted modules such as children’s networks.   Most notably this new service will include the ESPN channels, challenging the last stronghold of the traditional distributors, real time sports coverage.

The third driver is a fundamental change in how television content is consumed.  For most of its history the serial nature of television programming led to viewers scheduling their calendar around their favorite programs.  But with each improvement in time shifting technology, from VCR to DVR, there has been a movement to fitting television around other items on their calendar.  Now the broad availability of video enabled mobile devices such as smart phones and tablets is growing a sentiment of IWWIWWIWI – I Want What I Want When I Want It.  This is giving a tailwind to streaming video providers who not only give access to all these devices, but also provide on demand access to complete archives of programs.

Evidence of the cord cutting trend is a 16% increase from 2012 to 2014 in the number of U.S. households that purchase broadband service but not cable television according to SNL Kagan.  But regardless of whether consumers are cutting the cord, shaving the cord, or just supplementing cable offerings with streaming video, the upshot is that substantial video viewing time is migrating to internet-based platforms.

Not surprisingly, the group leading the move away from cable television is Millennials.  A comScore study reported that “18-34 year olds are 77 percent more likely than average to be a cord-never household… and 67% more likely than average to be a cord-cutter household.”  So to better target this attractive but relatively hard to reach demographic, savvy advertisers are diversifying their media mix to include video advertising on the online platforms that Millennials increasingly frequent.

While many of the paid subscription video-on-demand services such as Netflix and Amazon do not carry advertising, most other online streaming alternatives to the cable cord are ad supported.  These include Hulu and Hulu Plus, YouTube, Crackle and network sites like CBS.com.  Given that one of the major motivating factors in cutting the cord is the cost of cable, it is likely that most viewers fleeing the grip of the cable companies are willing to engage with the advertising to realize the cost savings afforded by on-line viewing.  And many providers are experimenting with ways to make the advertising served as relevant as possible.  For example on Hulu users can tailor the types of ads they are served by completing an online survey of category usage.  Another Hulu capability allows viewers to swap ads in real time.

 

Advertisers who combine digital video with television in their media mix can significantly boost the reach of their campaigns, particularly among younger viewers who have cut the cord or just prefer accessing television content online.  In fact, a comScore study of ten cross-platform campaigns found that on average, television reached 49 percent of the population while digital platforms uniquely contributed an incremental 5.8 percent to overall reach.

While cord cutters can be reached through online advertising, some may question whether video ads embedded in online content can be as effective as advertising viewed on television.  After all, television has a long and well documented history of delivering sales and strong ROI to advertisers.  While some internet-based video viewing occurs on television sets using devices such as Roku or Apple TV, much of this viewing occurs on the smaller screens of computers, tablets or even smartphones for which the viewing experience may differ.

To investigate whether any differences exist in relative advertising effectiveness for video ads viewed online versus on TV, MSW●ARS undertook a large scale experiment.  Specifically, we tested the same video ads in two different ways among separate samples of consumers: as television ads viewed on standard television screens, and as pre-roll ads viewed online prior to short-form video.  This study encompassed tests of 30 different ads for 15 different brands.

MSW●ARS’s sales-validated CCPersuasion™ and Related Recall™ metrics were used to evaluate the effectiveness of the advertising tested in each of these two environments.  The results were highly correlated for both metrics, as can be seen in the charts below.  This suggests that an ad that is effective when viewed on television is also highly likely to work well in an online video format – what works creatively on the television screen will translate to the online viewing environment.  It also suggests that video advertising on digital platforms can be as effective as advertising on television, perhaps even more so when digital techniques to improve relevancy are employed (these techniques were not examined in the experiment).

So, advertisers can turn the cord cutting phenomenon to their advantage by following this audience online.  And many are already doing so.  According to a recent comScore study, advertising already comprises 15.8 percent of online viewing time of premium (long-form) video.  This represents two thirds of the comparable percent for television (23.3 percent).  These advertisers are using online video to improve upon TV-only reach levels – especially among the younger demographic – and can be confident it will move the sales-needle as expected.  Furthermore, they will get a leg up on the competition in terms of building equity among Millennials, while those who fail to follow suit risk losing the next generation to competitors.

With the unique TouchPoint™ system for testing advertising’s effectiveness on any media platform – including online video – and the patented outlook media planner for optimizing media spend, MSW●ARS has the tools to help advertisers capitalize on the changing media environment and turn the cord cutting trend into an advantage.

Please contact your MSW●ARS representative to find out more about how we can help your brand evaluate and optimize online video advertising as well as other touchpoints in your media mix.

Not since the advent of the television ad in 1941 has the potential for new ad formats been so great. The emergence of digital platforms is enabling marketers to experiment with a number of new ad formats, each of which could revolutionize marketing as we know it. Throughout 2014 we have been highlighting the most effective techniques being broadly adopted.

Part VIII – Creative is (Still) King

The proliferation of new advertising formats has provided marketers with effective new tools to better optimize their media budgets in terms of such worthwhile goals as reach, targeting, engagement and recency.  At the same time these formats have opened up avenues for creativity in terms of use of technology, cross platform integration and enhanced production values.  But it bears keeping in mind an adage from a simpler time in the history of advertising:

If it doesn’t sell, it isn’t creative.

–  David Ogilvy

What Ogilvy opposed was misdirected creativity.  Creativity for its own sake, rather than being employed to promote the brand.  Ogilvy recognized that advertising is not a commodity, but rather that ads vary in their effectiveness at selling the product – in a big way.

Results from advertising research studies have firmly established that the sales effectiveness of advertising can differ greatly among different pieces of copy.  The following graph shows the distribution of CCPersuasion scores indexed to norm from the MSW●ARS database for tests of all media types conducted in the past three years.   Less than a quarter of ads score within 20 percent of the norm, while a full 40 percent of ads score at least 60 percent above or below norm.  So the range in levels of creative quality is substantial.

This is also true when you look within brand and at different types of media, both traditional and emerging.  As displayed in the following tables, in three anecdotal case studies covering television, print and digital media, two ads for the same brand tested at the same point in time had vastly different levels of sales effectiveness as measured in copy testing.  A brand that assumes all ad creative is equally effective is taking quite a large risk.

Through the assembly of in-market sales results for brands whose ads had been tested before airing, MSW●ARS built a database of hundreds of cases that demonstrates just how important creative is.  Analysis of this data set has shown that 52% of shifts in brand market share are attributable to the quality of the creative.  In fact, creative is seen to be four times more impactful in influencing sales than key media planning variables.

This may seem hard to reconcile given the vast sums spent on media buys, but it reflects the range seen in advertising test scores.  In addition, a story related by comScore Co-Founder Gian Fulgoni a few years ago in MediaPost is illuminating.  Fulgoni describes a situation early in his career when he was involved in a project to see what would happen if a major brand increased TV spending by a factor of four.  After a year of exposing a panel to what he describes as “huge amounts of ad money,” Fulgoni was surprised to find no increase in purchasing of the advertised brand among exposed panelists when compared to a control group.  The answer was finally found in copy test results of the aired advertising, which showed this ad to be “particularly poor”.  The words of the client’s research manager stayed with him as an important lesson: “Gian, you need to remember that four times zero is still zero!”

So when it comes to the key advertising objective of selling the product, it’s undeniable that creative truly is king!  Recognition of this reality leads to the question of how brands can gain an advantage on this vital dimension.  Ogilvy again has succinct advice:

Never stop testing and your advertising will never stop improving.

–  David Ogilvy

Appropriate research can quantify an ad’s creative quality level.  MSW●ARS’s Touchpoint Plus^TM system is unique in that it has the flexibility to test the sales effectiveness of any type of media, including the emerging formats discussed in this series, either alone or as part of a cross media campaign – providing a consistent, calibrated and extensively validated metric of creative strength.  So, good research provides the key to maximizing the value of creative by identifying ads that will effectively sell the brand and projecting which ad is likely to produce the largest return on investment.  We can say this with confidence due to the extensive body of validation supporting advertising testing techniques.  As an example, the following chart shows how accurately advertising testing results predict actual sales volume impacted by the ad, as determined through marketing mix modeling.

In addition, research has more to offer when it comes to the advertising development process.  As the following clip shows, David Ogilvy had some pretty strong opinions on the best point of leverage.

Research done by MSW●ARS also vividly illustrates how getting the promise, or basic selling proposition, right before creative development commences will greatly improve the likelihood of an ad’s success.  Specifically, in studying more than 200 ads for which the basic selling proposition was tested before creative production, 70 percent of ads based on an above average proposition were also above average (vs. norm); while 65 percent of ads based on a below average proposition also were significantly below norm when tested.

Thirty years ago MSW●ARS teamed-up with Vanderbilt University and The Marketing Science Institute to identify advertising content elements proven to influence an ad’s potential selling power.  The “validated” content drivers identified by this study, which incidentally was recognized by the Journal of Advertising Research as an article that has “stood the test of time”, have been refined and updated over time and now provide important guidance to advertisers and their agencies when developing creative.  That these validated content elements can help a brand effectively deliver on a strong selling proposition is well documented, as the following chart demonstrates.  Inclusion of more of these content elements is seen, on average, to substantially improve an ad’s selling power.

While Ogilvy clearly had an appreciation for research, he also had a sense that at times something was missing from the tools available at the time.

The trouble with market research is that people don’t think what they feel, they don’t say what they think, and they don’t do what they say.

–  David Ogilvy

Ogilvy perceived that consumers didn’t or even couldn’t rationally express their true feelings or reactions to a product or advertisement on a conscious level.  It is now widely believed that consumers’ choices are driven not only by conscious opinions but also by their subconscious reactions.  That is, our brains make snap judgments while in “autopilot” mode.  The veiled, behavioral methodology used to collect the CCPersuasion measure allows for this type of decision making.  Furthermore, a tremendous amount of scientific research has been published regarding techniques for measuring and understanding these gut-level, or System 1 responses to stimuli – and they are being used to provide a richer understanding of consumers’ reactions to advertising.  EEG, galvanic skin response, facial coding, reaction times and eye tracking are some of the techniques MSW●ARS employs to help marketers understand how consumers feel about an advertisement and its various segments on a sub-conscious level, adding a new dimension in understanding how great creative is achieved.

A contemporary of Ogilvy, the esteemed quality expert Philip Crosby, was fond of saying that “quality is free”.  Indeed, ROI calculations have shown that application of the research techniques cited above can move typical advertising quarterly returns from $0.54 on the dollar to $1.24!  This makes the research not only free, but a wise investment.  However, for this to occur the research needs to be applied in a manner that frees creative judgment, not displaces it.  It should give confidence to marketing teams to experiment with radical ideas knowing that the insights gained will remove the obstacles to implementing truly breakthrough creative.

I notice increasing reluctance on the part of marketing executives to use judgment; they are coming to rely too much on research, and they use it as a drunkard uses a lamp post for support, rather than for illumination.

–  David Ogilvy

The advertising landscape has been rapidly changing.  Technology has enabled new advertising formats to emerge and quickly develop, and advertising spending is shifting rapidly from traditional media to digital, mobile and other emerging formats highlighted in this series.  But despite these changes, one thing remains the same – the importance of creative quality in driving the brand’s return on its media investment.

Please contact your MSW●ARS representative to find out more about how our products and research findings can help your brand in its quest for great creative.

Chances are you have heard of the Higgs Boson, an elusive elementary particle that physicists have spent the last fifty years and billions of dollars to find.  Reports of its potential discovery have captured headlines around the globe.  If verified, not only will it help cement our mathematical understanding of how the universe works, but will set the trajectory for future technological advances.

What has this got to do with the marketing discipline?  For the last fifty years we have been dealing with our own elusive particle, an accurate metric that quantifies the financial value a brand provides.  Without this the mathematics is incomplete for financial forecasting, planning, justifying marketing investment or improving marketing return.

But 2015 may be the year that this changes due to the work of the Marketing Accountability Standards Board (MASB).  This group of marketing and financial practitioners and academics has been pursuing aggressive “game changing” projects to not only create general principles and methodological standards for brand valuation, but to prove them out in brand “trials” that serve as practical examples of their application.  Based on prior research, MASB chose the MSW•ARS brand preference measurement approach as the cornerstone of its two-year long brand investment and valuation trials.  The first installment of this research was presented at the group’s summer summit in August and the initial results have been making waves in industry news.

Mathematics of Brand Preference

Just like physics equations hinted at the existence of the Higgs Boson, so did the equations of marketing hint at brand preference.  For years marketers have dissected sales data and realized that maintaining market share and price point were critical to maintaining revenue streams.

But this just pushes the question a level deeper to: What drives a brand’s unit market share?  Economic theory provides two of the key elements, price relative to competing products and distribution.  Simply put, on average the less costly in terms of time and money a product is to obtain, the higher the demand for it will be.  But people are not economic robots.  They will oftentimes choose a more costly option if they feel that it will provide them a decisive benefit, even if it is a purely emotional one.  Thus it is the breadth and strength of consumers’ preference which set the base level for a brand’s unit market share with distribution and relative price acting as modifiers to it.

So how effective is brand preference in explaining a brand’s unit market share?  In the initial MASB trial analysis, six months of brand preference, unit share, price premiums, and distribution were analyzed across twelve participant categories containing one hundred nineteen brands.  The categories examined included a diverse mix of product types; prices from thirty cents to thirty thousand dollars, impulse buys to deliberate purchases, consumables to durables.  Across these categories brand preference accounted for seventy-one percent of the differences between brands while effective distribution and price premium added another fourteen percent.

With this milestone achieved the next step is already underway, incorporating brand preference in financial and marketing forecast and planning applications.  More details on these endeavors will be forthcoming in future installments.

Please contact your MSW●ARS representative to learn more about how brand preference is embedded throughout all of our research solutions.