GO BEYOND CREATIVE & BUDGET TO DRIVE ROI

BRIAN LAVERTYSr. ManagerConsumer Insights Research

SUNIL SOMANSr. DirectorMeasurement Innovation Research

…Creative remains the undisputedchamp in terms of sales drivers…1

1 Nielsen, “When it Comes to Advertising Effectiveness, What is Key?” Oct 10, 2017. http://www.nielsen.com/us/en/insights/news/2017/when-it-comes-to-advertising-effectiveness-what-is-key.html

IDENTIFYING DRIVERS OF ROI

Explore traditional and nontraditional drivers of ROI:

1. Key Brand Measures 2. Implementation Variables

Perform meta-analysis of previous MMMs and ROI analysis

for multiple brands

Analyze drivers by category vertical, including non-CPG

RESEARCH PARTNER METHODOLOGY

• Sourced from Nielsen mix

• Non-CPG & CPG clients:11 categories, 130+ brands from 2015-2017

• BRAND-level ROAS, including all execution

• Structural & executional analysis

• TV IMPACT and ROI drivers for brand

• Sourced from ROI Genome, database of 20,000 studies

• Focused on executional and implementation variables

• Have created best practices and learnings

• Additional multi-platform campaign analysis

• Sourced from KMB Global Link database of 20,000 ads as well as case studies

• Deep-dive on creative drivers

• Ability for creative to break through

• Executional factors

• We applied a Gradient-Boosted Regression Tree model to identify drivers of ROAS

• Each tree in the equation creates splits in our dependent variable (ROAS) based on significant differences in our independent variables (Long-Term & Short-Term factors)

• GBM models identify the factors most important to driving TV ROAS relativeto other variables tested in the data set

MODELING APPROACH

Boosted Regression Trees

Simple Decision Tree

• 11 categories

• 130+ brands

• 2015 - 2017

Category # of Brands

Household cleaners & goods 8

Cosmetics & beauty products 11

Personal hygiene & health 15

Medicine & pharmaceutical 14

Confectionery & snacks 12

Food 34

Beverages 22

Consumer financial services 4

Communications & technology 4

Automotive 6

Retail 3

NIELSEN MMM SAMPLE

FACTORS ACCOUNTING FOR 1%+ OF ROAS VARIATION

Structural

Brand Size

Brand Dollar

Share

Brand Media

Incrementality

Executional (Creative)

Duration

Copy Quality

Executional (Media)

Daypart

Distributor

Reach

Frequency

Position

Pod Placement

Ad Clutter

DEFINITIONS

Variable Tested Description Source

TV ROAS TV Return on Advertising (Revenue/Spend) Nielsen MMM

Brand Dollar Share % Revenue Share of Segment Nielsen Ad Intel

Brand Media Incrementality % Revenue Attributed to Media Nielsen MMM

Brand Size $M Revenue Nielsen MMM

Duration % Execution as 30 Seconds Nielsen Ad Intel

Ad Quality % Memorability and Likeability Nielsen TV Brand Effects

Ad Clutter Number of Ads Per Minute of Programming Nielsen Ad Intel

Pod Placement % Execution in First Pod of Program Nielsen Ad Intel

Position Placement % Execution in First Position of Pod Nielsen Ad Intel

Distributor % Execution in Cable Distributor Nielsen Ad Intel

Daypart % Execution in Prime Time Nielsen Ad Intel

Frequency Average Monthly Household Frequency Nielsen NPower

Reach Average Monthly % Household Reach Nielsen NPower

58% 55%

17%11%

24% 33%

Structural Long-Term Short-Term Creative Short-Term Media

CPG NON-CPG

RELATIVE INFLUENCE OF FACTORS ON TV ROAS

Short Term

Long Term

Less than 50% of ROAS are controllable in the short term through Short-Term shifts

Short-Term

Long-Term

54% 56% 55% 56% 57% 55% 58% 57% 62% 56% 58%

12% 11% 11% 9% 11% 12% 10% 20% 15% 20% 15%

34% 32% 34% 35% 32% 33% 32% 23% 23% 24% 27%

Structural Long-Term Short-Term Creative Short-Term Media

CPG NON-CPG

Beverages Conf. & Snacks

Cosmetics & Beauty

Food HH Cleaners

Medicines & Pharma

Personal Hygiene

Tech & Comms

Auto Retailer Financial Services

RELATIVE INFLUENCE BY CATEGORY

SIZE OF BRANDS’ BUSINESS AND IMPACT ON POTENTIAL ROAS

$1.07

$2.20$2.57

$5.03

< $300 M $300 -$600 M

$600 -$1,300 M

> $1,300 M

YEAR REVENUE OF BRAND

Average TV ROAS by Brand Size Quartile

SALES ($M) AD SPEND ($M) AD LIFT

SMALL BRAND $50,000 $5,000 10%

LARGE BRAND $200,000 $5,000 5%

REVENUE ($M) REVENUE/ SPEND ($M) ROAS

SMALL BRAND $5,000 $5,000/$5,000 $1.00

LARGE BRAND $10,000 $10,000/$5,000 $2.00

For example – if we spent the same amount on advertising, and even though we “stacked the deck” by assigning the Small Brand a greater percentage sales lift (10% vs. 5%), the Large Brand realized a greater ROAS on its advertising investment. A large brand has the ability to leverage fixed costs of advertising across its existing business.

‘Thought Experiment’ to Demonstrate Brand Size Impact on Potential ROAS

5.2%

6.0%

3.0%

3.8%

4.3%

5.1%

4.7%

6.0%

6.5%

Duration

Ad Quality

Ad Clutter

Pod Placement

Position Placement

Frequency

Daypart

Distributor

Reach

Relative Influence on TV ROAS – CPG

4.3%

13.1%

2.0%

2.0%

1.8%

2.4%

2.9%

6.3%

6.9%

Duration

Ad Quality

Ad Clutter

Pod Placement

Position Placement

Frequency

Daypart

Distributor

Reach

Relative Influence on TV ROAS – NON-CPG

RELATIVE INFLUENCE ON TV ROAS

ACROSS CATEGORIES, EXECUTIONAL DRIVERS OF ROI VARY SIGNIFICANTLY

BEVERAGESCONFECTIONERY

& SNACKS

COSMETICS & BEAUTY

PRODUCTS FOOD

HOUSEHOLD CLEANERS &

GOODSMEDICINES &

PHARMACEUTICAL

PERSONAL HYGIENE &

HEALTH TECHNOLOGY &

COMMUNICATIONS AUTOMOTIVE RETAILER

CONSUMER FINANCIAL SERVICES

Reach 1 3 2 1 1 2 1 3 2 2 2

Ad Quality 2 2 1 7 3 1 6 1 1 1 1

Distributor 3 1 3 2 2 3 2 2 3 3 3

Duration 4 4 6 4 4 4 3 4 4 4 4

Frequency 5 6 4 3 5 5 5 7 6 9 6

Daypart 7 5 5 5 6 6 4 5 5 5 5

Position Placement 6 7 7 6 7 7 7 9 9 7 7

Pod Placement 8 8 8 8 8 8 8 8 7 6 9

Ad Clutter 9 9 9 9 9 9 9 6 8 8 8

INFLUENCE OF REACH BY CATEGORY

6.0% 6.1% 6.1% 6.4% 6.4% 6.6% 6.7% 6.8% 7.3% 7.4% 7.8%

Relative Influence of Reach on TV ROAS

Conf. & Snacks

HH Cleaners

Tech & Comm

Personal Hygiene

Medicines & Pharma

Cosmetics & Beauty

Auto Beverages FinancialServices

Retailer Food

CPG Norm = 6.5%

Non-CPG Norm = 6.9%

Driver Rank 1 1 2 1 2 2 2 3 2 2 1

Relative Influence -7% -5% -11% -1% -1% +2% -3% +5% +6% +7% +21%

Median Value +11% +26% -47% +5% +12% +7% +3% -8% +32% +19% -6%

BRANDS SHOULD MAXIMIZE COST-EFFECTIVE REACH

Case StudyTV Avg. Frequency Levels

By Reach Level

Reach Levels

Case StudyTV Communications

Cost of Reach

W18-34 Reach

INFLUENCE OF DISTRIBUTOR BY CATEGORY

5.0%5.8% 6.0% 6.0% 6.1% 6.3% 6.3% 6.6% 6.6% 6.8% 7.1%

Auto Medicines & Pharma

Food Beverages HH Cleaners

Personal Hygiene

Retailer Conf. & Snacks

Cosmetics & Beauty

Tech & Comm

Financial Services

Driver Rank 3 3 2 3 2 2 3 1 3 2 3

Relative Influence -20% -3% 0% +1% +2% +5% +0% +10% +6% +8% +12%

Median Value +45% -20% +5% +13% -6% 0% -2% +12% -7% -67% -45%

CPG Norm = 6.0%

Non-CPG Norm = 6.3%

ADVERTISERS SHOULD BALANCE CABLE/NETWORK MIX TO MAXIMIZE COST-EFFECTIVE REACH

TV AdvertisingCable vs. Network

ROIResponsive IndexCost Index

Cable Network

200

150

100

50

0

INFLUENCE OF AD QUALITY BY CATEGORY

4.1% 4.1%6.0% 6.1% 6.4% 6.5% 6.6%

10.3% 10.6%

15.7% 16.0%

Food Personal Hygiene

HHCleaners

Beverages Conf. & Snacks

Medicines & Pharma

Cosmetics & Beauty

Auto Financial Services

Tech & Comm

Retailer

Driver Rank 7 6 3 2 2 1 1 1 1 1 1

Relative Influence -31% -32% +1% +8% +2% +9% +11% -22% -19% +19% +22%

Median Value +18% -18% +55% -9% +27% +32% -41% -9% +55% -18% +23%

CPG Norm = 6.0%

Non - CPG Norm = 13.1%

MESSAGING & CREATIVE QUALITY ARE KEY – PARTICULARLY FOR VIDEO

Moving creative quality from Average to Good creates similar increased efficiency for both CPG and non-CPG products. However, further improving creative quality to Very Good does not generate as much lift in ROIs for CPG brands.

70100

123143

Poor Average Good Very Good

Impact of STSL on

ROIs – CPG

53

100137

169

Poor Average Good Very Good

Impact of STSL on

ROIs – Non-CPG

10% of Ads

26% of Ads

30% of Ads

32% of Ads

12% of Ads

41% of Ads

39% of Ads

10% of Ads

Based on ~3,500 Copy tested ads in Link Validation database

IMPACT OF CREATIVE SCORE ON SALES ROI’S VARIES BY CPG

VS. NON-CPG CATEGORY

CREATIVE QUALITY IS A MULTIPLIER FOR MEDIA EXPOSURE TO DELIVER ROI’S

Stronger ad requires lower media weight to achieve same in-market sales performance with good creative quality; it requires 18% lower GRPs to achieve similar ROIs with an average ad.

Average Sales ROIs by Creative Quality and Media Weight

11 studies across 514 ads – Link Validation DatabaseGood quality: 10% above category norm

BETTERCREATIVE

100ROI Index

90ROI Index

AVERAGECREATIVE

+18% GRP weight

125ROI Index

102ROI Index

GOODCREATIVE

+18% GRP weight

/ = GRP “weight”

AD REQUIRES SUFFICIENT AIRING TIME TO CREATE IN-MARKET EFFECT, BUT NEEDS TO AVOID BEING AIRED FOR TOO LONG WHEN DIMINISHING RETURN OCCURS

85

100

71 69

4-6 weeks 8 weeks 8-12 weeks >12 weeks

Inde

x of S

ales

ROI

Impact of # of Weeks on Sales ROIs

From 3 case studies – Link Validation Database

FLIGHTING PATTERNS MATTER

Testing a few flighting scenarios indicates Tapered flighting to yield 5% incremental sales ROIs compared to Uniform or On-Off 3-week flighting schedule.

Tapered flighting is optimal because it enables the copy to break through clutter with high GRPs in the early weeks and then sustains continued momentum weeks after due to ad stock effects.

However, the lowest weekly GRPs with Tapered flighting should remain above threshold level.

We would recommend using On-Off Tapered flights over 8-10 weeks for TV.

Based on one CPG and one Non-CPG study – ROI database

0

20

40

60

80

100

120

140

160

Uniform Tapered 10 OnOff3 Tapered8

Wee

kly

GRPs

On-Off 3 Tapered 8

Flighting ScenariosRaw GRPs

COPY WEAR-OUT CAN REDUCE ADVERTISING RESPONSE BY +30%

Air higher quality copies longer than low quality copies• High-quality commercials can be aired well-after wear-out has

begun and still achieve a higher response than lower-quality copies• Remember, airing beyond the point of wear-out still drives sales

and brand equity, just at a lower rate

Wear-out occurs as frequency becomes excessive• Broadly speaking, this is typically at around 2,500 GRPs for General

Market and 1,500 GRPs for Hispanic in the US, though good copy can be aired beyond that

• Target size and “purchase” cycle frequency determine how much support it will take to reach your target audience before wear-out occurs

Consider copy type when planning copy rotation• Wear-out typically occurs faster for ads focused on new items/initiatives• Seasonal ads with nostalgic or cherished holiday associations tend

to see lower wear-out than nonseasonal ads

Consider production costs• Re-airing stronger copies with moderate wear-out saves on production costs• Copy refreshes (subtle changes to main concept) may help minimize wear-out

Wear-out Principles

Creative Optimization goes beyond Copy Quality. In addition to making sure that creative resonates with the desired target segment, it is equally important to make sure that proper flighting is employed to maximize creative impact.

CPG and non-CPG. Long-term (brand characteristics) and short-term (controllable media) factors have similar influence on ROAS variation across both CPG and non-CPG brands with long-term accounting for an average of 56% for CPG and 58% for non-CPG. This suggests that ability to control short-term ROI at a higher level is comparable in both groups.

Short-term factors can drive ROAS. While brand Long-term factors account for more than half of variation of ROAS, opportunities exist for brands and categories to optimize ROAS 5+% through adjusting key factors such as ad quality (non-CPG) and reach (CPG) in the short term.

Category differences. ROAS variation is best explained by brand presence factors (including size, category share, media incrementality), not necessarily by the industry they play in. Focus on individual brand, not industry, for optimization opportunities.

SUMMARY