Maximising EfficiencyKey learning from the IPA Databank

• Analysis of 996 IPA cases over 30 years.

• Covers 700 brands in 83 categories.

• Identifies the ingredients for effectiveness, over the short and long term.

• “Effectiveness” measured in hard business terms.

“Long-term results cannot be achieved by piling short-term results on short-term

results.” Peter

Drucker, 1993

This presentation

• 5 drivers of efficiency• 5 implications for performance measurement

What do we mean by efficiency?

0% 2% 4% 6% 8% 10% 12%0%

2%

4%

6%

8%

10%

12%

Share of market

Shar

e of

voi

ce

SOV > SOM: brands tend to grow

SOV < SOM: brands tend to shrink

Equilibrium: SOV = SOM

What do we mean by efficiency?

Share growth α 0.04 x ESOV

Above average

Below average

Grow

th

Investment

Drivers of efficiency

1. Balanced campaign of long-term brand-driven growth and short-term activation

The 60:40 rule

Time

Sale

s upl

ift o

ver b

ase

Sales activationBig direct effect,

but decays quickly. Brand buildingSmaller effect on all metrics.Decays slowly.

Two ways marketing can affect sales

Time

Sale

s upl

ift o

ver b

ase

Sales activationShort term sales uplifts, but no long term growth

Brand buildingLong term sales growth

Brand building drives long-term growth

Short term effects dominate ~6 months

Different time-frames favour different strategies

0-3 months 3-6 months 6+ months0%

10%

20%

30%

40%

50%

60%ADMA data

Brand-build-ing

Activation

Campaign evaluation period

Shar

e gr

owth

effe

cts

For maximum profit, you need both

Brand buiding Both Sales activation0%

5%

10%

15%

20%

25%

30%

Campaign objectives

Profi

t effe

ct

For maximum efficiency, you need both

Brand buiding Both Sales activation0.0

0.1

0.2

0.3

0.4

0.5

Campaign objectives

ESO

V Effi

cien

cy

Balance is important to effectiveness

Balance is very important to efficiency

Optimum: ~35%

Balance is very important to efficiency

The 60:40 ruleBrand:Activation

2. Pricing effects

Volume is not enough

Neither Sales/share only Price only Both0%

10%20%30%40%50%60%70%80%90%

100%

Improvements reported in…

Profi

t effe

ct

Volume is not enough

Neither Sales/share only Price only Both0.0

1.0

2.0

3.0

4.0

5.0

6.0

Improvements reported in…

ESO

V Effi

cien

cy

Insufficient data

But price effects are long term

3 months 6 months 1 year 2 years 3 years0.0%

0.5%

1.0%

1.5%

2.0%

2.5%

3.0%

3.5%

Campaigns periods up to

Pric

ing

effec

t

Brand building is key to lower price sensitivity

0 1 2 3 4+0%

2%

4%

6%

8%

10%

12%

Number of brand metrics improved

Pric

e eff

ect

3. Emotional engagement

Emotional campaigns work harder

Rational Combined Emotional0%1%2%3%4%5%6%7%8% Price effect

NONE

Rational Combined Emotional0.0

0.1

0.2

0.3

0.4

0.5

0.6 ESOV Efficiency

4. Fame

Fame drives volume and pricing

Fame campaigns

Other campaigns

0.00.20.40.60.81.01.21.41.61.82.0

SOV Efficiency

Fame campaigns

Other campaigns

0%1%2%3%4%5%6%7%8%9%

10%Price effect

4:1

5. Creativity

Creativity amplifies fame

0.0

2.0

4.0SOV Efficiency

0%3%6%9%

Price effect

10:1

And creativity is getting more efficient

Up to 2002 Post 20020.0

0.5

1.0

1.5

2.0

2.5

3.0

ESO

V effi

cien

cy

Implications for performance measurement

A challenge for performance measurement

0%

5%

10%

15%

20%

25%

30%

35%

40%

19%

31%27% 26%

35%

Shor

t-ter

m a

ctiva

tion

effec

ts

Pre-testing has promoted short-term effects

≤ 6 months 1 year 2+ years

-15%

-10%

-5%

0%

5%

10%

15%

Campaign duration

Upl

ift to

cam

paig

n sa

les e

ffect

s pr

etes

ted

min

us n

on-p

rete

sted

Balancing the metrics

1. Beware of quarterly sales measures or shorter-term activation sales as a sole measure of success: balance short term sales responses with long-term metrics:– Year-on-year sales uplifts – econometrics will help

apportion these to the campaign– Annualised efficiency – ESOV is not a short-term metric– Price elasticity - econometrics will be needed

Balancing the metrics

2. Beware persuasion scores as a sole measure of success: balance these with emotional responses and emotional brand equity shifts: these relate to long-term effects

3. Measure buzz and advocacy4. Encourage creativity – reward major achievements5. Aim for a balanced scorecard of a wide range of short and

long-term metrics – the more metrics, the more reliable the indication.

www.ipa.co.uk/content/the-long-and-the-short-of-it

Thank you