Efficient Marketing Spend ASVO 2014
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1 Efficient Marketing Spend ASVO 2014 Professor Larry Lockshin Ehrenberg-Bass Institute for Marketing Science University of South Australia COMMERCIAL IN CONFIDENCE
2 S U P P O R T E D B Y S O M E O F T H E W O R L D S B I G G E S T B R A N D S COMMERCIAL IN CONFIDENCE 2
3 Thanks to our corporate sponsors from many countries Asia Pacific AMBA Communications ANZ Australia Barossa Co-op Carlton & United Breweries Department of Environment, Water & Natural Resources Foxtel GlaxoSmithKline Google (Singapore) Kantar Worldpanel (Malaysia) Kmart kwp! Advertising Lion Dairy & Drinks Mondelez (Australia) Mondelez (Japan) Parmalat Australia People s Choice Credit Union PepsiCo PHD Red Rooster Foods Roy Morgan Research Sanitarium Health & Wellbeing (Australia) Schweppes Australia United Spirits Limited University of South Australia Global Sponsors Coca-Cola Colgate-Palmolive Mars Nielsen Procter & Gamble Unilever North America Anheuser-Busch InBev Bristol-Myers Squibb CBS ESPN General Mills General Motors Kraft Foods Group Mondelez International SC Johnson Sun Products Corporation Turner Broadcasting System Europe Britvic D.E Master Blenders 1753 Diageo Europe Edrington FrieslandCampina (Netherlands) Kantar Worldpanel (Spain) Kantar Worldpanel (UK) Kellogg s Leo Burnett Mountainview Learning Red Bull (Austria) TNT Express ZenithOptimedia Africa Caxton Publishers & Printers Distell FirstRand South African Breweries COMMERCIAL IN CONFIDENCE 3
4 Overall Agenda How to understand and predict consumer choices Laws of Marketing Law 1: must gain new customers to grow Law 2: loyal (heavy) buyers decrease over time Law 3: all brands share customers with other brands How to spend efficiently a few recommendations
5 How Science Works Repeated empirical observations, across a wide range of conditions... Scientific laws = prediction & explanation_ Theory = weaves laws together into a story... a view of the world
6 Laws are the vital building blocks Empirical laws simply say how things are related. And under what conditions... which tells us what matters and what doesn t.
7 A revelation: Many of the theories in your head which drive your intuition are wrong Theories need to be built on the bedrock of empirical laws
8 Law 1: Grow by gaining new customers Because in the real world... Brands vary tremendously in market share. With large variations in penetration (size of customer base). But vary little in their loyalty metrics (behavioural and attitudinal). Therefore: it is impossible to get already loyal (heavy) buyers to buy more. Focus on getting occasional (light) buyers and non-buyers
9 Law 1: growing your wine brand Panel data purchases (Lockshin, Jarvis, Cohen) Individual level records Repeat purchase analysis Loyalty card data from national liquor store chain 5000 card members purchases over 3 years Use of attributes instead of brands
10 Brands differ in penetration not in purchase frequency Market share and penetration decrease much more than purchase frequency 10
11 Market share and related measures for grape variety in Australia Market share and penetration decrease much more than purchase frequency
12 Wine regions follow the same pattern Market share and penetration decrease much more than purchase frequency
13 Double Jeopardy law Smaller brands have smaller customer bases and those customers buy the brand slightly less often. More popular brands are known by more people. And those people are slightly more likely to say they like the brand. w = wo/(1-b) To grow you must substantially increase the size of your customer base. Targets to lift purchase frequency (substantially) are a fantasy.
14 Law 2: The number of loyal customers shrinks over time Loyal (top 20% of buyers) = about 55% - 60% of sales: BUT Across 139 brands in 15 categories Only 50% of current heavy buyers remain heavy brand buyers the next year Sales contribution of those remaining drops 15% At the category level 65% of heavy (loyal) buyers remained after 1 year Heavy buyers of the category buy a wider range of brands 14
15 There are very few heavy/loyal buyers, even of Coca-Cola % of cola buyers buying Coke x times If you buy yourself a Coca-cola more than 3 times a year then you are one of Coke s heavy buyers! Source: TNS Impulse Panel (UK, 2005) 15
16 Frequency Number of buyers Wine purchasing is the same, Most buyers are light buyers There are many more light buyers than heavy buyers overall Quantity Number of bottles
17 Key implications Think heavy half; light half Focusing on heavy buyers means ignoring half of your sales!!! Look for tactics to (cost effectively) reach many light buyers or non-buying wine drinkers
18 Who do you compete with?
19 Law 3: Duplication of Purchase law In any time period, you share much of your customer base with the big brands, and a little of your customer base with the smaller brands. You share customers with all the rival brands in line with their size. by/x = DbY (D = ave.duplication/ave.b) b = penetration
20 But do Coke buyers really buy Pepsi? Do Pinot buyers buy Shiraz?
21 Coke shares customers as predicted % who also bought: Buyers of: Coke Diet Coke Pepsi Tango Lilt Fanta Dr Pepper Coke Diet Coke Pepsi Tango Lilt Fanta Dr Pepper Diet Pepsi Average Expected Diet Pepsi 29 *1.3 x Penetration
22 Duplication of purchase by wine brand 22
23 Duplication of purchase by grape variety Grape varieties share buyers in relation to their overall size
24 So, how do we spend efficiently on marketing? 1. Don t change packaging 2. Use same logo/colours in all communication
25 Evolution not revolution
26 Do you recognise these?
27 So, how do we spend efficiently on marketing? 3. Consider each promotion opportunity: tastings, sponsorships, wine dinners, road shows.in terms of penetration- how many new or light buyers will I reach on top of my heavy/loyal buyers?
28 Communication: what to focus on? Media that cost effectively reaches many light/non-buyers (who are essential for maintenance as well as growth) regular intervals (not 1 or 2X per year) What about social media? Isn t this a cheap way to reach consumers? What about engagement? Doesn t this create strong mental structures?
29 Illustration of media planning for wine $100,000 spent on 3 different campaigns Aiming for reach (not frequency) Increase the total number seeing the brand One viewing increases purchase probability Repeat viewing has little effect
30 Alternative 1 TV advertising Media Class TV Freq per Week Position Weeks On Air Reach (%) Reach Cost ($000s) Channel 10 Wed - Fri 1 Brisbane Prime-time , Channel 10 Wed - Fri 1 Perth Prime-time , Channel 10 Wed - Fri 1 Adelaide Prime-time , Average , Total Cost $98,810
31 Alternative 2 Print advertising Media Class Newspaper Sydney Morning Herald The Weekend Australian Freq per Week 1 Position Good Food supplement Weeks On Air Reach (%) Reach Cost ($000s) ,004, Run-of-press , Courier Mail 1 Run-of-press , Freq per Months On Magazine month Air Australian Gourmet Traveler 1 Within magazine , Average , Total Cost $98,000
32 Alternative 3 print and online advertising
33 Thank you
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