Next Generation Media Mix Optimization

Using audience and media management to create certainty in an increasingly uncertain world

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Executive Summary: People have more media choices than ever to research the products and services they buy. CMOs are challenged to rationalize their budgets and demonstrate increasing ROI while embracing new media and distinguishing the media consumptions of their customer. Next generation media mix optimization is how winning marketing organizations will allocate their investments to target high-value audience and media options, while delivering accurate attribution, cross channel measurement and tools for high-performance planning.

Like clockwork, each year marketing organizations provide marketing plans and budget recommendations that outline sophisticated media investments, spanning a growing number of channels chasing an increasingly fragmented customer and illusive return on investment.
The world is more complex. Your companys audience your existing and prospective customers have changed and so must your marketing. Consumers are connected to a greater array of devices and media outlets than ever before. They Twitter and browse social networks on smart phones, check email in their local coffee shops, and choose from over 100 TV channels every day1. They seek and use information: 51% of U.S. and UK consumers always compare products and services before a purchase; only 5% rely upon advertising or promotional features for advice2. In this cacophony of change, 80% of CEOs believe their brand delivers a superior customer experience yet only 8% of their customers agree3. And, only one in five targeted online ads actually reaches its intended audience4. Are your media investments delivering against the promise of return on marketing investment? Can you identify and target the appropriate audience using the most efficient media tools? Can you properly attribute and track marketing efforts across media investments? Are you better than your competitor at optimizing a sophisticated media mix?

These are very difficult questions. Gaps in answers create immense issues: Waste 47% of U.S. ad spend reaches the wrong audience5. These gaps in delivery accuracy mean that when marketers cant align their target audience strategy closely to their ad delivery, they make investment decisions based upon averages and educated hunches, causing them to overspend on low value customers and media channels while under spending on the high value ones. Given the top 30% of a brands customers are typically five times more profitable6, the inability to create certainty in audience and media management costs advertisers huge profits. To address these challenges, many companies are turning to the next generation in media mix optimization, delivering high-performance audience and media management. Designed to optimize the performance of media mix investments, the solution takes the guesswork out of planning helping marketers to better orchestrate and execute their marketing strategy.
NEXT GENERATION MEDIA MIX OPTIMIZATION

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Challenges to effective media mix optimization

Todays chief marketing officer is tasked to deliver increasing results in the face of decreasing or flat budgets, while also adopting and embracing technology changes that influence consumers. Here are some of the key challenges: Existing media mix optimization solutions break on several levels While nearly all top marketing executives have used or researched solutions in this area, there are many who have not experienced success or have seen that success wane in recent years. Legacy nomenclature The delineation between traditional mass advertising (ATL Above the Line) and promotional or addressable-based advertising (BTL Below the Line) efforts is blurring. The continued increase in media addressability is delivering new opportunities, like household based television commercials driven from advertiser segmentation and data insight. While optimization efforts tend to focus on either ABT or BTL, in the end, one consumer is the same person whether they view a TV commercial or receive a display advertisement. And, they see your brand as one entity regardless of organizational and technological silos. Differentiated customer value Legacy sources for media mix optimization While advertising agencies and consultants have driven media optimization solutions for many years, there are issues to consider: Advertising agencies can present an improper alignment of business objectives and tend to focus on the channels of their expertise. This is natural as their talent also pools around those areas of expertise. And, while primarily done through test programs, the connection to actual consumer behavior and correlation to revenue lift is usually soft, at best. Econometric models have long been used but invariably rely upon superhuman leaps in assumptions and footnotes in their reports to achieve their mathematical summations. Also, they tend to focus on either ATL or BTL programs, limiting their effectiveness to drive performance and attribution, while fragmenting the view of current and future customers. Today, digital media accounts for nearly 35% of the average U.S. consumers media consumption yet less than 15% of ad spend is directed toward these new channels7. Successful media mix optimization solutions need to drive consolidated answers for BOTH above the line and below the line investments. Your target audience doesnt know that line exists and transcends channels with the greatest of ease. The struggle for marketing leaders seeking to optimize against this new reality is to find models adaptive to the rate of change that drive shifts in media investment and more closely mirror the shifts in media consumption of their target audience. incremental customer is a static average. The reality is that only 30% of customers typically return a profit, yet cost as much to acquire as the 50% that are profit-neutral, or the 20% that actually cost you money to service. To significantly increase your ROI, consider the impact of customer value and target your best customers first.

Profitable 30%

The key to real optimization is to reduce wasted ad impressions on two

Neutral 50%

dimensions: audience and media channel. One of the most difficult assumptions of existing media mix optimization solutions is that the value of an

Loss 20%

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US Adults (millions)
250
All US Adults Mobile Phone Internet Camera Phone

Fast-forward to the current decade. Todays teen has become a moving target. Nearly all are double or triple tasking while watching TV. U.S. teenagers trust information from each other 5X more than adults and 10X more than ads11. If you think about what this world looks
Laptop MP3 Player

200

150

like 5 to 10 years from now, this scenario will be even more complex as this demographic will be your future target. It will pay to get on top of this challenge sooner than later.

100 Digital Still Camera

Portable Navigation Device Satellite Radio

50

0
2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013
Actual Forecast

Activities US Teen Influencers* Are Doing Simultaneously While Watching TV, May 2010 (% of respondents)
Texting/spending time on mobile phones Spending time online 50% Doing homework
88% 79%

Source: July 25, 2008, Benchmark 2008: Forecast Growth of Devices And Access In The US report Note: Actuals from 2005 and earlier are adjustments based on surveys of household heads.

Reaching consumers has become more difficult The challenge has increased exponentially. There are more channels, more screens and more data than ever and the rate of change is increasing. Adoption driven by accessibility and affordability, technology enables consumers to access a vast wealth of information, on their terms. Starting in the last few decades, the trajectory of change has ramped up fast and is not projected to slow down. Selecting one of the top spend channels, TV, we can see dramatic intra-channel shifts: From a peak year in mass TV advertising, 1965, until 2002, the number of 60-second spots necessary to reach 80% of ones target audience has increased from three to 1178. Translating this to trust and recent research surrounding brand message acceptance, 60% of respondents said they need to hear information about a company three to five times before they believe it9. Correlating these two points, an advertiser would need to provide at least 351 60-second TV spots to provide sufficient TV exposure to satisfy 80% of ones target audience need for message acceptance. This, all while nearly 40 million U.S. households have DVR capabilities and 59% of them currently use a DVR to skip through the commercials.10
NEXT GENERATION MEDIA MIX OPTIMIZATION

Note: *top 15% most active and engages myYearbook Members Source: myYearbook and Ketchum, Social Media Teen In uencer Survey, provided to eMarketer, May 25, 2010 116033 www.eMarketer.com

Complicating this, pushing more noise at consumers who have become increasingly insensitive to the charms of marketers has proven to risk exacerbating the issue and drives negative long term brand impressions.

The solution: Next generation media mix optimization

Next generation media mix optimization seeks to develop a causal relationship between consumers, segments to response, and to drill down into which media mix actually drives consumer behavior for your high value audience. It reduces the guesswork through better attribution; quantifying media mix decisions through causal channel contributions to sales. The solution is designed to eliminate misleading performance measures and align the marketing organization through common goals.

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Start with your best customers Of finer resolution than your target audience, determine those customers who tend to buy more, buy more frequently, return less, and refer you to others more those top 30% of your customer base who deliver 100% of your profitability. Determine what this elite class looks like demographics, purchase habits, media habits, decision process and how you can acquire more of them. Top down and bottom up The resulting analytics should include both ATL and BTL data in a holistic model. Driven from a steeped understanding of your best customer portrait, you can then use syndicated segmentation methodologies and look alike analysis to drive acquisition media decisions, in particular those above the line. While the value of a customer is not static, neither are their needs, desires, demographics, attitudes or behaviors. Its not about customer averages or the mean, but adding a level of intelligence and insight. Using historic media placement data, company sales history and third-party demographics, your statistical model should be agnostic to the legacy view of the advertising line. This approach delivers several incremental benefits; Attribution problems become less of a concern as the full picture of media consumption is viewed by a single model. You see the overlapping effects of alternate channels rather than the internal flurry of discussion seeking to claim last click ownership. Current shifts in media consumption tend to favor BTL, digital channels yet concurrent monitoring alleviates the need for constant tweaking of the underlying analytics. Economic value proposition Through elimination of media wasted on the wrong audience or mix of channels, a successful media mix optimization program should cover at least the cost of incremental resources. Sure, this is a worst case scenario but given the pressure on cost containment and hurdles for justification, this is the safest decision for todays CMO. Put tools in the hands of decision makers Planning tools Rather than a static report in a dynamic market, you need to be able to adjust and form recommendations based upon your planning cycles and needs. Three degrees of resolution you should consider: Media type (e.g., TV, radio, print or online) Marketing channel (e.g., email, direct mail postcards, etc.) Region (metro, state, country, etc.) What if scenarios Marketers are seldom happy with inflexible rationale. Instead, consider the impact of tools that allow you and your team to examine whatif scenarios to understand how constraints impact the media mix and campaign outcomes by accounting for parameters such as budgets, partner obligations, regional investments or revenue mandates.
Economic Value Proposition

Incremental Revenue People, Process & Opportunities Technology

Incremental Sales x Operating Profit (%) Current Base Costs /+ Scale Efficiencies (Build vs. Buy) + Incremental Spend Required

Media Spend
Above the Line Spend Media Arbitrage Opportunities + Incremental Direct Marketing Spend

+
Levers for Improvement Touch points Engagement factor Marketable universe Response rate Conversion rate Shopping basket value

Pricing: People, Process and Technology Levers for Improvement Consolidation Collection Virtualization Standardization Severance expense

Direct Marketing Spend: Email Executiion, Direct Mail, Banner Purchases, etc. Levers for Improvement Map media buys to the best customer demographics What data is available on rate cards? Do sponsorships align with customerbase? PersonicX value overlay

EVP =

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Validation reporting Media mix optimization solutions are only as helpful as the validity of their predictions. Consider the need for a system of self checking the accuracy of your optimization model and its recommendations by testing and measuring initial results against objectives. Incremental adjustments will increase visibility, accuracy and ROI. Its a journey Start with bit-sized chunks, the building blocks; dont try to boil the ocean. Begin as a self-funding practice through a crawl, walk and then run with your differentiated customer strategy, revving the engine of your new media optimized machine. Like any journey, youll need a destination and roadmap to guide your way as you deploy the appropriate engagement strategies and tactics while balancing customer demands and organization goals. Throughout the journey, youll identify ways to reallocate budget from less profitable media channels to other, more profitable ones as you measure and refine your tactics.

The Acxiom advantage

Next generation media mix optimization is crucial for marketing organizations to meet their business objectives. Winning marketing teams will target their investments toward high-value audiences with the right media options. With more than 40 years of global marketing experience across all industries, Acxiom is the partner of choice for those who want to impact their bottom line. With offices in the United States, Europe, the Middle East, Africa and Asia-Pacific, Acxiom is well-equipped to meet the global needs of our clients. Start improving your marketing ROI, let Acxiom be your guide. To learn how Acxioms media mix optimization solutions can increase marketing ROI and reduce budget waste, call 1.888.3ACXIOM (1.888.322.9466) or visit www.acxiom.com/consulting.

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Nielson, 2008 Alterian Your Brand: At Risk? Or Ready for Growth?, 2010 Bain & Company, Closing the Delivery Gap, 2005 Comscore, 2009 Rex Briggs and Greg Stuart, What Sticks: How most Advertising Fails and How to Guarantee Yours Succeeds, 2006, Kaplan Publishing Acxiom, average customer analysis Forrester Research, 2009 Tim Stengel, former CMO at P&G Edelman Trust Barometer, 2009 eMarketer Mintel, Attitudes toward Traditional Media Advertising and Promotional marketing US, 2009 eMarketer Deloitte, State of the Media Democracy Fourth Edition: Select US Highlights, 2009

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See how Acxiom can work for you. For more information, visit our website at www.acxiom.com/consulting or call:

1.888.3ACXIOM

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