Henkel study on advertising effectiveness
Prepared for: FIPP Research Forum Presented on: 30th May 2012 By Sam Fellows, Ohal, and Charlotte Danielsson, MEC www.ohal-group.com @Ohal_Group
What effect does magazine advertising have on sales and how can we optimise future media campaigns?
Introduction
• Commissioned by Sveriges Tidskrifter in order to get a better understanding of the role of Magazine advertising on sales
• Can magazine advertising be used to drive sales?
• If so, to what degree and in particular how does it compare to TV?
• How can Magazine advertising be used to get the most out of the
investment in it?
Introduction to Ohal: The World’s Local Econometrics Agency
Ohal International
• Established for 40 years
• Leading Marketing Response consultancy
• Global team with 80+ consultants
• Independent consultancy within the WPP group since 2002
Ohal have been measuring & improving Marketing & Media ROI for 40 years We have an exceptional client retention rate in excess of 90% over 5 years
New York
Ohal UK Global Clients
London Paris
Singapore
Copenhagen
Ohal Nordics
Ohal France
Travel and Leisure Publishing
Entertainment
Transportation
Recruitment
Mail Order
Banking
Online
Fast Food
Telecommunications
FMCG/CPG Retail
Stockholm
*Ohal UK trained analysts operating within WPP companies
Ohal / WPP* Asia Pacific
Ohal US North & South
America
Ohal / WPP* Mexico
Ohal / WPP* Moscow
Econometrics Measuring advertising effects on sales
TV
Magazines
Sales
Availability
Price
In order to measure the effects from marketing on sales… … all factors that influence consumers must be accounted for
Yt KaXat KbXbt ... KxXxt
Study data and background information (I)
• Several different sub-brands under the Schwarzkopf umbrella, each with their own marketing plan
• Objective — Increase sales from marketing of the total portfolio — Return on investment net of portfolio switching
• Current Strategy — Mainly TV and Magazines — Pressure to run in the same weeks
The study is an analysis of hair care and colouring products in Sweden.
Study data and background information (II) Within the models all factors that influenced sales are accounted for
Sales
TV
Magazines
Online + Cinema
Leaflets / DM
Distribution
Pricing
Promotions
Competitor activities
Pay-days + Holidays
Climatic Factors
BasförsäljningPris i butikDisplay i butikDR (reklamblad)MediaKonkurrent pris i butikKonkurrent lanseringKonkurrent mediaLönehelg och helgdagarFörsäljning (volymenheter)
Example of an econometric model for Gliss Factors were identified that consistently influences sales over time
2008 week 21 2011 week 20
Base
Price / Promo
In store
DM
Media
Comp. Price / Promo
Comp. Launches
Comp. Media
Seasonality
Sales
Total ATL media accounts for c.10% of sales
Calculation of the Return on Investment for Schwarzkopf media
ROI = Additional sales (volume) x Price per volume unit
Cost of media
For each media channel
Price of incremental volume
Media Cost (excl. production cost)
For Gliss, magazines had a higher pay back than TV Magazines were the most cost effective vehicle per Kroner invested in Gliss’ media mix
Media budget (indexed SEK)
Sales effect (indexed SEK) ROI
Source: econometric model of weekly sales of GLISS shampoo w. 41 2009 till w. 20 2011, and sales of GLISS conditioner and treatment products for the same period of time
84%
13%
1%
2%
TV
Magazines
Online
Web TV
81%
18%
0%
1%
TV
Magazines
Online
Web TV
1.2
1.7
0.0
0.46
TV
Magazines
Online
Web TV
73%
64%
78%
60%
26%
29%
100%
77%
11%
19%
1%
8%
23%
7%
20%
4%
TVMagazines
Online
TVMagazines
Online
Magazines
MagazinesOnline
TVMagazines
OnlineCinema
TVMagazines
Online
Magazines gave high ROIs for Henkel’s established brands TV had the strongest impact of media during the launch phase of products
54%
49%
91%
84%
44%
45%
100%
68%
7%
10%
3%
7%
32%
0%
6%
1%
TVMagazines
Online
TVMagazines
Online
Magazines
MagazinesOnline
TVMagazines
OnlineCinema
TVMagazines
Online
2.3
1.0
2.2
0.6
5.3
2.0
0.9
0.5
1.2
0.2
5.7
1.2
0.8
0.1
0.1
0.6
TVMagazines
Online
TVMagazines
Online
Magazines
MagazinesOnline
TVMagazines
OnlineCinema
TVMagazines
Online
ROI Media budget (Indexed SEK)
Sales effect (Indexed SEK)
(Launch)
(Launch)
Source: econometric model of weekly sales of Henkel's coloration products w. 21 2008 till w. 20 2011, and SYOSS sales of shampoo w. 41 2009 to w. 21 2011 and conditioner and treatment products for the same period of time
Multimedia campaigns are perceived differently Some individuals have a different experience of the same campaign
Effe
ctiv
e W
eigh
t
Effe
ctiv
e W
eigh
t
Effe
ctiv
e W
eigh
t
Effe
ctiv
e W
eigh
t
Effe
ctiv
e W
eigh
t
Effe
ctiv
e W
eigh
t
TV
Magazine
Online
Cinema
Different Weights of Media
• One Magazine exposure might have the same effect as one TV exposure • Or is, One Magazine exposure worth one TV and two online • Or, other combinations…
• We use survey data which shows how individuals consume media and in what proportions
The way we combine media can have implications for the overall effectiveness of campaigns
inte
rnet
Out
door TV
Pres
s
Effe
ctiv
e W
eigh
t inte
rnet
Out
door TV
Pres
s
Effe
ctiv
e W
eigh
t
=
inte
rnet
Out
door TV
Pres
s
Effe
ctiv
e W
eigh
t inte
rnet
Out
door TV
Pres
s
Effe
ctiv
e W
eigh
t
= =
Real World Survey Simulated World
Scenario Planning Using the results to help optimise future media campaigns
Simulated GLISS campaigns What media plan gives the highest sales effect for a fixed budget
Scenario 1 Scenario 2 Scenario 3
1 2 3 4 5 6 7 8 9 10
11
12
13
14
15
16
17
18
19
1 2 3 4 5 6 7 8 9 10
11
12
13
14
15
16
17
18
19
1 2 3 4 5 6 7 8 9 10
11
12
13
14
15
16
17
18
19
Budget Indexed SEK
129*
Budget Indexed SEK
129*
Budget Indexed SEK
129*
week
week
week
TV Magazines
TV Magazines
TV Magazines
129* = TV 100 + Magazines 29
Joint Exposure TV Magazines
W e e k
2
W e e k
4
W e e k
6
W e e k
8
W e e k
1 0
W e e k
1 2
W e e k
1 4
W e e k
1 6
W e e k
1 8
W e e k
2 0
W e e k
2 2
W e e k
2 4
0 5
10 15 20 25 30 35 40 45 50 55 60 65 70 75 80 85 90 95
100
S a l e s
e f f e c
t
Simulated effect on GLISS scenario 1 Total sales effect from the TV campaign with magazines following directly on from TV is indexed to 100
Sales effect Indexed volume
100
1 2 3 4 5 6 7 8 9 10
11
12
13
14
15
16
17
18
19
week
TV Magazines
Sal
es
Joint Exposure TV Magazines
W e e k
2
W e e k
4
W e e k
6
W e e k
8
W e e k
1 0
W e e k
1 2
W e e k
1 4
W e e k
1 6
W e e k
1 8
W e e k
2 0
W e e k
2 2
W e e k
2 4
0 5
10 15 20 25 30 35 40 45 50 55 60 65 70 75 80 85 90 95
100
S a l e s
e f f e c
t Simulated effect on GLISS scenario 2 Both magazines and TV within the same week lead to overexposure which decreases the sales effect by 4% for the same campaign budget
Sales effect Indexed volume
96
1 2 3 4 5 6 7 8 9 10
11
12
13
14
15
16
17
18
19
week
TV Magazines
Sal
es
Joint Exposure TV Magazines
W e e k
2
W e e k
4
W e e k
6
W e e k
8
W e e k
1 0
W e e k
1 2
W e e k
1 4
W e e k
1 6
W e e k
1 8
W e e k
2 0
W e e k
2 2
W e e k
2 4
0 5
10 15 20 25 30 35 40 45 50 55 60 65 70 75 80 85 90 95
100
S a l e s
e f f e c
t Simulated effect on GLISS scenario 3 The effect on sales increases by an additional 5% with the same budget by spreading out the magazine advertising over a longer period of time after the TV campaign
Sales effect Indexed volume
105
1 2 3 4 5 6 7 8 9 10
11
12
13
14
15
16
17
18
19
week
TV Magazines
Sal
es
1 2 3 4 5 6 7 8 9 10
11
12
13
14
15
16
17
18
19
Scenario 1 Scenario 2 Scenario 3
1 2 3 4 5 6 7 8 9 10
11
12
13
14
15
16
17
18
19
Gliss campaign The most cost efficient scenario was to prolong the media campaign with magazines following a high weight of TV
1 2 3 4 5 6 7 8 9 10
11
12
13
14
15
16
17
18
19
Budget Indexed SEK
129
Budget Indexed SEK
129
Budget Indexed SEK
129
Sales effect Indexed volume
100
Sales effect Indexed volume
96
Sales effect Indexed volume
105
week
week
week
TV Magazines
TV Magazines
TV Magazines
Summary of findings from the study
• Ohal use econometrics to understand what drives products’ sales • The results allow us to help Schwarzkopf generate a greater return from
their media spend, by:
• Making recommendations on the how to allocate the media budget between different channels within the marketing mix
• Providing assistance with phasing media to maximise the effectiveness of campaigns
In this study we’ve shown how econometrics can be used to isolate the impact of media activity on sales