The Total Economic Impact Of Advertising With Valassis Digital

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1 A Forrester Total Economic Impact Study Commissioned By Valassis Digital September 2018 The Total Economic Impact Of Advertising With Valassis Digital Cost Savings And Business Benefits Enabled By Valassis Digital For A Print Plus Digital Marketing Strategy

2 Table Of Contents Executive Summary 1 Key Findings 1 TEI Framework And Methodology 3 The Valassis Digital Customer Journey 4 Interviewed Organizations 4 Key Challenges 4 Solution Requirements 5 Key Results 6 Composite Organization 6 Analysis Of Benefits 7 New Marketing Response Leads To More In-Store Visits And More Sales 7 Unquantified Benefits 9 Flexibility 10 Analysis Of Costs 11 Digital Marketing Campaign Costs Including Valassis Digital Services To Augment Print Marketing Tactics 11 Financial Summary 13 Adjusted Financial Summary (With Removed Digital Coupon Costs) 14 Valassis Digital: Overview 15 Appendix A: Total Economic Impact 16 Appendix B: Endnotes 17 Project Director: Sean Owens ABOUT FORRESTER CONSULTING Forrester Consulting provides independent and objective research-based consulting to help leaders succeed in their organizations. Ranging in scope from a short strategy session to custom projects, Forrester s Consulting services connect you directly with research analysts who apply expert insight to your specific business challenges. For more information, visit forrester.com/consulting. 2018, Forrester Research, Inc. All rights reserved. Unauthorized reproduction is strictly prohibited. Information is based on best available resources. Opinions reflect judgment at the time and are subject to change. Forrester, Technographics, Forrester Wave, RoleView, TechRadar, and Total Economic Impact are trademarks of Forrester Research, Inc. All other trademarks are the property of their respective companies. For additional information, go to forrester.com.

3 Benefits And Costs New sales from added digital marketing strategies: $3.2 million per year Composite organization: Retailer with own brands and stores 25 campaigns per year Delivers coupon offers Executive Summary Valassis Digital provides digital marketing services that help its customers enhance product marketing campaigns and more precisely target individuals for an offer or advertisement based on their past purchases and browsing history. Valassis Digital commissioned Forrester Consulting to conduct a Total Economic Impact (TEI) study and examine the potential return on investment (ROI) enterprises may realize by leveraging Valassis Digital services in addition to Valassis Print or other print services in a holistic marketing campaign. The purpose of this study is to provide readers with a framework to evaluate the potential financial impact of adding Valassis Digital to their existing marketing strategy for their organizations to drive in-store visits and sales. To better understand the benefits, costs, and risks associated with this investment, Forrester interviewed four customers with years of experience working with Valassis Digital in a variety of marketing campaigns. Interviewed organizations completed successful campaigns with high clickthrough rates (CTR) from digital channels that led to more in-store visits and sales. Interviewed organizations were able to identify a 30% lift from these digital marketing efforts, meaning that about 30% of visits and sales attributed to Valassis Digital efforts were not reached by any other marketing channels. Forrester s Global Business Technographics Marketing Survey, 2017 asked more than 1,000 marketing professionals to identify their most important demand management tactics; 25% named digital advertising which in fact, makes it one of the most important named tactics. 1 The four interviewed organizations also found digital marketing to be a valuable strategy. Prior to using Valassis Digital, the organizations focused on print marketing with some basic digital marketing efforts. These organizations not only grew their digital marketing strategies through the years, but they enabled additional benefits by: 1) leveraging the services of Valassis Digital such as hyperlocal targeting and 2) focusing on omnichannel marketing strategies across a variety of delivery types and channels such as coupons and advertisements, web, and mobile. Key Findings Quantified benefit. The following risk-adjusted present value (PV) quantified benefit is representative of that experienced by the companies interviewed: A 30% lift from digital marketing efforts led to more than 9,000 new sales from each campaign, adding up to nearly $3.2 million per year (risk-adjusted). Based on interviewed organizations, this is representative of how these organizations use Valassis Digital services to deliver special offers or digital coupons to more people that are more likely to be interested. They also use hyperlocal targeting to identify likely buyers near a store and serve relevant mobile advertising or other contact methods for store loyalty customers. Unquantified benefits. The interviewed organizations experienced the following benefits, which are not quantified for this study: 1 The Total Economic Impact Of Valassis Digital

4 ROI 224% Benefits PV $7.9 million NPV $5.4 million Valassis Digital targeted marketing services result in more than just in-store visits. Valassis Digital services impacts online, mobile, and phone sales as well as at the retailers or consumer goods producers own online and mobile-enabled stores, and through third-party ecommerce sites. However, this analysis focuses on the impact of instore visits and sales due to a developed marketing strategy that includes print and digital; those sales channels were certainly impacted, but they were not included in this financial analysis. Valassis Digital marketing services can impact brand lift and other key metrics. Again, while only the impact from in-store visits and purchases are measured in this study, a digital marketing strategy can help strengthen brand awareness and advertising recall, which can impact revenue, especially as more and more campaigns are completed. Valassis Digital s tracking and measurement tools and services can drive future campaign improvements. More accessible and detailed data helps drive more sales, covered above, but this information can help identify opportunities for future campaigns. The impact from a digital campaign could be even greater if the detailed learnings from each program are put into place and applied for future campaigns, in addition to the brand awareness impact described in the previous point. Cost. The interviewed organizations experienced the following riskadjusted PV cost: Investing $975,000 per year in new digital marketing efforts. Based on the campaign scale detailed above, the addition of Valassis Digital services to existing print strategy includes some Valassis Digital service fees, additional internal resource time, and possibly some couponrelated costs. Forrester s interviews with four existing Valassis Digital customers and subsequent financial analysis found that an organization based on these organizations experienced benefits of $7.9 million over three years versus costs of $2.4 million, adding up to a net present value (NPV) of $5.4 million and an ROI of 224%. Financial Summary Total benefits PV, $7.9M Total costs PV, $2.4M Initial Year 1 Year 2 Year 3 2 The Total Economic Impact Of Valassis Digital

5 TEI Framework And Methodology From the information provided in the interviews, Forrester has constructed a Total Economic Impact (TEI) framework for those organizations considering implementing advertising with Valassis Digital. The objective of the framework is to identify the cost, benefit, flexibility, and risk factors that affect the investment decision. Forrester took a multistep approach to evaluate the impact that Valassis Digital can have on an organization: The TEI methodology helps companies demonstrate, justify, and realize the tangible value of IT initiatives to both senior management and other key business stakeholders. DUE DILIGENCE Interviewed Valassis Digital stakeholders and Forrester analysts to gather data relative to advertising with Valassis Digital. CUSTOMER INTERVIEWS Interviewed four organizations using Valassis Digital to obtain data with respect to costs, benefits, and risks. COMPOSITE ORGANIZATION Designed a composite organization based on characteristics of the interviewed organizations. FINANCIAL MODEL FRAMEWORK Constructed a financial model representative of the interviews using the TEI methodology and risk-adjusted the financial model based on issues and concerns of the interviewed organizations. CASE STUDY Employed four fundamental elements of TEI in modeling Valassis Digital Valassis Digital s impact: benefits, costs, flexibility, and risks. Given the increasing sophistication that enterprises have regarding ROI analyses related to IT investments, Forrester s TEI methodology serves to provide a complete picture of the total economic impact of purchase decisions. Please see Appendix A for additional information on the TEI methodology. DISCLOSURES Readers should be aware of the following: This study is commissioned by Valassis Digital and delivered by Forrester Consulting. It is not meant to be used as a competitive analysis. Forrester makes no assumptions as to the potential ROI that other organizations will receive. Forrester strongly advises that readers use their own estimates within the framework provided in the report to determine the appropriateness of an investment in Valassis Digital Advertising. Valassis Digital reviewed and provided feedback to Forrester, but Forrester maintains editorial control over the study and its findings and does not accept changes to the study that contradict Forrester s findings or obscure the meaning of the study. Valassis Digital provided the customer names for the interviews but did not participate in the interviews. 3 The Total Economic Impact Of Valassis Digital

6 The Valassis Digital Customer Journey BEFORE AND AFTER THE VALASSIS DIGITAL INVESTMENT Interviewed Organizations For this study, Forrester conducted four interviews with Valassis Digital customers. Interviewed customers include the following: INDUSTRY REGION INTERVIEWEE CAMPAIGNS Consumer goods Consumer goods Retail US national US Midwest US Northeast Shopper marketing manager Digital media buyer and shopper marketing manager Senior marketing specialist Retail US West coast Marketing executive Ongoing product campaigns Targeted reach based on past household purchases Digital coupons A large multi-month holiday campaign and shorter targeted campaigns Digital coupons 25 campaigns per year Targeted, hyperlocal advertising focus Weekly campaigns Digital coupon delivery to augment print marketing Key Challenges The goal of any marketing effort is to drive product awareness and sales, and all interviewed organizations have been and are still always looking for new ways to reach new customers. According to the Forrester Global Business Technographics Marketing Survey, 2017, digital marketing is an important tactic; 25% of 1,039 respondents use digital marketing as a strategy in the awareness stage and 22% use it in the consideration stage a top four strategies in both phases. 2 Also, according to the Forrester Consumer Technographics North American Retail And Travel Benchmark Recontact Survey 1, Q3 2017, more than 30% of 3,315 US consumers surveyed say they are comfortable having product offers or discounts delivered to them while shopping in that store in exchange for providing location information more than 60% including those in the middle (see Figure 1). 3 Digital advertising is a key tactic Many consumers are comfortable receiving useful information and offers in-store. 4 The Total Economic Impact Of Valassis Digital

7 Interviewed organizations have come to the same conclusion: digital marketing is a valuable part of a complete marketing strategy: Print marketing is often air cover. While print can involve some targeting, the delivery of many print marketing materials goes to everyone that has a newspaper delivered, or every household in a zip code, or ATZ (advertising targeting zone), with Valassis Print and Valassis Digital sub-zip code targeting capabilities. Customer targeting is difficult. Any targeting or customization within groups of consumers receiving mailers and circulars can be logistically difficult and expensive. Several interviewed organizations did not use Valassis print services (or use them all the time) so many print campaigns were able to leverage the tools and features Valassis print provides, such as leveraging hyperlocal targeting for customized print mailers. Solution Requirements The interviewed organizations searched for a solution that could: Deliver increased store visits and sales across a variety of digital channels. The digital media buyer as a Midwest consumer goods producer said, We ve always been trying to seek digital solutions to enhance the customer experience and deliver offerings and education through digital as much as possible. Add digital marketing to existing print marketing tactics. The senior marketing specialist at a Northeast retailer said, There was a lack of understanding of digital on a local level. Take advantage of digital marketing s capability for granular consumer targeting. There are more opportunities to customize digital marketing efforts based on customer preferences, past purchases, location, and more. The interviewed organizations chose Valassis Digital as the best option that met these requirements. Of particular value was Valassis Digital s rich consumer data set that includes customer profiles that identify wants, past purchases, location, and other metrics, a large opt-in database, and integration with current loyalty programs. Consumer goods firms often work with retailers on marketing campaigns. Their partner retailers often have preferred marketing service providers. So, for the interviewed consumer goods organizations, Valassis Digital is not used for all digital marketing campaigns, even though they would like to. I would say that I wish it could happen with Valassis Digital more, said the shopper marketing manager at a national consumer goods firm. Retail firms have leveraged Valassis Digital s hyperlocal targeting to be able to focus on consumers that shop at a competitor, or that looked online for a product they can now get at a nearby store. Adding Valassis Digital has been a very easy partnership, said the marketing executive at a West coast retailer. The two retail firms are also regular users of Valassis Print marketing services; combining the digital marketing measurement capabilities was an added value. The marketing executive at a West coast retailer said: Valassis is already handling our print circular ads. They know exactly what households receive that ad and provide insights into who We ve always been trying to seek digital solutions to enhance the customer experience. Digital media buyer, Midwest consumer goods firm Adding Valassis Digital has been a very easy partnership. Marketing executive, West coast retailer 5 The Total Economic Impact Of Valassis Digital

8 those customers are, and pair that with digital to make sure that we re also targeting the right households. Key Results The interviews revealed that key results from the Valassis Digital investment include: Adding digital to the holistic marketing strategy has been valuable in driving in-store visits. A more complete marketing strategy includes multiple layers of digital marketing, including web display ads, digital coupons, and mobile display ads and targeted offers. An ad can be served that delivers an offer to a consumer that has signaled interest in a product, highlighting a specific store they shop at, and even serve that ad as they travel nearby the store while browsing their phone or being sent a text or as a member of a loyalty program. The number one KPI [key performance indicator] is sales. What we look for are clicks through to either making a purchase or clipping a [digital] coupon, said the shopper marketing manager at national consumer goods firm. Composite Organization Based on the interviews, Forrester constructed a TEI framework, a composite company, and an associated ROI analysis that illustrates the areas financially affected. The composite organization is representative of the four companies that Forrester interviewed and is used to present the aggregate financial analysis in the next section. The composite organization that Forrester synthesized from the customer interviews has the following characteristics: The number one KPI is sales. What we look for are clickthroughs to either making a purchase or clipping a [digital] coupon. Shopper marketing manager, national consumer goods firm Description. The composite organization is a retailer that supports its own brands and other brands sold in physical stores and online. It conducts many campaigns each year to drive product awareness and incentivize purchases through advertising and discount offers. It uses Valassis Digital for all of its digital campaigns. As mentioned above consumer goods firms interviewed for this study did not use (and actually were not able to use) Valassis Digital for every campaign. For simplicity of benefit and cost modeling, the composite organization is more closely based on the interviewed retail organizations, as they use Valassis Digital for virtually all campaigns, as the only digital marketing service provider, and they have more visibility of the process, starting with the campaign through to the sale. Even so, the costs and benefits apply the same to consumer goods organizations, except that readers may want to adjust estimates based on a lower number of digital campaigns that leverage Valassis Digital, campaigns that use multiple digital marketing providers, and other considerations related to throughretailer selling. Deployment. The organization uses Valassis Digital services in 25 campaigns each year, as the only digital advertising service provider, to deliver advertising and offers targeted to consumers with a likely interest in the product. 6 The Total Economic Impact Of Valassis Digital

9 Analysis Of Benefits QUANTIFIED BENEFIT DATA AS APPLIED TO THE COMPOSITE Total Benefits REF. BENEFIT YEAR 1 YEAR 2 YEAR 3 TOTAL PRESENT VALUE Atr Revenue from net new in-store sales via digital marketing to drive in-store traffic $3,158,513 $3,158,513 $3,158,513 $9,475,538 $7,854,753 New Marketing Response Leads To More In-Store Visits And More Sales The composite organization has leveraged Valassis Digital services to reach more consumers, generate more interest and bring more people to physical stores all resulting in new sales. For the composite organization, each campaign reaches an average of 16 million consumers, and these targeted digital marketing tactics are expected to result in a 3.5% average click-through rate (CTR), based on best practices and marketing tactics reported by interviewed organizations. While interviewed organizations saw their own individual results, overall they realized new opportunities and sales leveraging Valassis Digital capabilities: The Northeast retailer uses Valassis Digital as a key digital marketing channel using location services to help target the right people at the right times. They can deliver mobile advertising and other content via loyalty program opt-in communications. We are able to identify consumers closer in the purchase funnel, with higher purchase intent, than just with print, said the senior marketing specialist at a northeast retailer. With this solution, the firm, with Valassis Digital, can target a consumer interested in a product, then serve an ad or message as they walk near their retail location. So, now we can not only see how many people were served ads and how many times that was clicked on, we can tell how many people actually went into a physical store location. And with Valassis Digital s help we are able to measure implied sales, continued the senior marketing specialist. The West coast retailer uses Valassis Digital services to deliver digital coupons to augment existing mailer and circular print strategies. Digital allows us to expand that reach and deepen the relationship with customers, said the marketing executive of a West coast retailer. While there s a large amount of repeated contact across print and digital, that helps with brand recognition. And digital marketing reaches many people that don t subscribe to a physical newspaper and immediately recycle mailers. It s layered on top of what we re getting in print, added the marketing executive for the retailer. The Northeast consumer goods producer uses Valassis Digital to target consumers for digital coupon campaigns, augmenting their own loyalty program. Valassis Digital s ability to very specifically target the right people at the right time is where they bring a ton of value, said the digital media buyer at a Midwest consumer goods firm. The table above shows the total of all benefits across the areas listed below, as well as present values (PVs) discounted at 10%. Over three years, the composite organization expects risk-adjusted total benefits to be a PV of nearly $7.9 million. We are able to identify consumers closer in the purchase funnel, with higher purchase intent, than just with print. We can tell how many people actually went into a physical store location. Senior marketing specialist, Northeast retailer 7 The Total Economic Impact Of Valassis Digital

10 It can target shoppers that: 1) show interest in a particular product to print a coupon at home or add it to their loyalty card app; 2) shop at a particular store (the target store, or even a competitor); or 3) are close to the target store and then deliver coupons in real time. Many other parameters are also available to help target consumers more likely to be interested in an offer. The national consumer goods producer also distributes coupons. Valassis Digital provides value by making sure messages are reaching the right audiences, such as targeting consumers that shop at key retailers. The shopper marketing manager for a national consumer goods firm said, With digital, we want to amplify our coupons and really target shoppers who shop at a specific store, who are close to that store and have bought a product in the same category. The composite organization has leveraged Valassis Digital for specific campaigns and can attribute new in-store sales to the addition of digital marketing: The organization estimates 25 campaigns that annually leverage Valassis Digital. Each campaign reaches an average of 16 million consumers. These campaigns, including coupon-led campaigns, estimate a 3.5% average CTR, or 560,000 clicks per campaign. In coupon-led campaigns, CTR can be measured differently. We measure clips which is showing intent to buy, to take advantage of the offer, said the digital media buyer at a Midwest consumer goods firm. It s expected that about 5.5% of consumers that click on the advertisement or digital coupon will act on that information in other words, 31,000 consumers go to a store because they saw an interesting advertisement or to redeem the coupon. Many of these 31,000 consumers were reached in other ways, or perhaps would have come in to the store anyway, but the composite organization has attributed a 30% lift due to digital marketing efforts. Valassis can do a good job following advertising to clipping, and to actual redemption of a particular coupon, said the shopper marketing manager at a national consumer goods firm. More than 9,000 new sales are specifically attributed to digital marketing per campaign. As mentioned above, a 3.5% CTR and a 5.5% redemption rate are assumed, based on interview feedback and are reflective of campaigns including digital coupons. The marketing executive at a West coast retailer said Digital is more measurable. So, it s a win, win, win. A basket size is estimated to be $14.30 that may be lower for a grocery retailer distributing a digital coupon for a specific product, or higher for a more specialty retailer advertising higher-priced items, or when including additional items added to the cart. Some potential risks can impact this benefit. While in most cases the reader can reduce this risk by using his or her own marketing campaign data, the assumptions and metrics for the composite organization may be overestimated: CTR and redemption rates were lower for some interviewed organizations. Basket size is highly variable based on campaign and retailer type. 25 campaigns 16 million impressions per campaign 3.5% CTR 560,000 clicks 5.5% redemption 31,000 sales 30% lift 9,300 sales attributed to digital marketing Valassis can do a good job following advertising to clipping, and to the actual redemption of a particular coupon. Shopper marketing manager, national consumer goods firm Digital is more measurable. So, it s a win, win, win. Marketing executive, West coast retailer 8 The Total Economic Impact Of Valassis Digital

11 Note that campaign size is not at risk of overestimation while the total benefit amount would raise or lower, costs would as well, resulting in the same or nearly the same ROI. To account for these risks, Forrester adjusted this benefit downward by 5% for the organization, yielding a three-year risk-adjusted total PV of $7.9 million. Impact risk is the risk that the business or technology needs of the organization may not be met by the investment, resulting in lower overall total benefits. The greater the uncertainty, the wider the potential range of outcomes for benefit estimates. New Marketing Response Leads To More In-Store Visits And More Sales REF. METRIC CALC. YEAR 1 YEAR 2 YEAR 3 A1 Digital impressions per campaign 16,000,000 16,000,000 16,000,000 A2 Clicks on digital impressions About 3.5% CTR 560, , ,000 A3 Physical store visits and sales due to clicks About 5.5% response 31,000 31,000 31,000 A4 Incremental store visits and sales (lift) 30% lift 9,300 9,300 9,300 A5 Average basket size $14.30 $14.30 $14.30 A6 Number of campaigns per year At Revenue from net new in-store sales via digital marketing to drive in-store traffic A4*A5*A6 $3,324,750 $3,324,750 $3,324,750 Atr Risk adjustment 5% Revenue from net new in-store sales via digital marketing to drive in-store traffic (risk-adjusted) $3,158,513 $3,158,513 $3,158,513 Unquantified Benefits Additional benefits were discussed but not included in this analysis, or not available for measurement at this time. First, this analysis focuses on in-store visits impacted by adding digital marketing tactics to a campaign. Digital coupons and advertisements also impact web, mobile, and phone sales, but was not part of this study. Digital campaigns can help improve brand recognition and advertising recall, meaning CTR and/or the number of in-store visits may improve, especially as more and more campaigns are completed. Interviewed organizations have also highlighted the value enabled by Valassis Digital s tracking and measurement tools and services. This has been seen to help drive new sales, as measured above. This information also helps identify areas of improvement or opportunity in future campaigns. While not quantified yet, organizations plan to measure this in the future. Valassis Digital s ability to very specifically target the right people at the right time who shop at the retailer that we re trying to support is where they bring a ton of value, said the digital media buyer at a Midwest consumer goods firm. The impact from a digital campaign could be even greater if the detailed learnings from each program are put into place and applied for future campaigns. Additional sales from phone, mobile, and web channels are also expected by all interviewees. 9 The Total Economic Impact Of Valassis Digital

12 Flexibility The value of flexibility is clearly unique to each customer, and the measure of its value varies from organization to organization. There are multiple scenarios in which a customer might choose to implement Valassis Digital and later realize additional uses and business opportunities, including: One organization highlighted video as a new marketing channel to explore. The national consumer goods company has started to leverage Valassis Digital s services for video marketing. We want to expand our advertising into targeted introductory commercials, said the shopper marketing manager for a national consumer goods firm. Flexibility would also be quantified when evaluated as part of a specific project (described in more detail in Appendix A). Flexibility, as defined by TEI, represents an investment in additional capacity or capability that could be turned into business benefit for a future additional investment. This provides an organization with the "right" or the ability to engage in future initiatives but not the obligation to do so. 10 The Total Economic Impact Of Valassis Digital

13 Analysis Of Costs QUANTIFIED COST DATA AS APPLIED TO THE COMPOSITE Total Costs REF. COST INITIAL YEAR 1 YEAR 2 YEAR 3 TOTAL Btr Valassis Digital marketing costs as part of print + digital campaign strategy PRESENT VALUE $0 $975,188 $975,188 $975,188 $2,925,563 $2,425,147 Digital Marketing Campaign Costs Including Valassis Digital Services To Augment Print Marketing Tactics For the 25 digital marketing campaigns described in the Benefits section, some investment is required: Valassis Digital services are estimated to be $25,000 per campaign, as part of digital marketing services to existing advertising and marketing efforts, including print campaigns. These campaigns are specifically described as primarily print campaigns in the past, that have now matured into print plus digital campaigns. That means a lot of the planning and overhead costs for a campaign (especially if adding digital marketing to an existing print campaign) are already part of the past scenario, so only a small amount of incremental internal resource costs is assumed to be required. The table above shows the total of all costs across the areas listed below, as well as present values (PVs) discounted at 10%. Over three years, the composite organization expects risk-adjusted total costs to be a PV of less than $2.5 million. Valassis Digital Marketing Costs As Part Of Print Plus Digital Campaign Strategy: Calculation Table REF. METRIC CALC. INITIAL YEAR 1 YEAR 2 YEAR 3 B1 Number of campaigns per year A B2 B3 Average Valassis services fees per campaign Average other marketing costs per campaign $25,000 $25,000 $25,000 $7,500 $7,500 $7,500 B4 Average digital coupon offer value $0.50 $0.50 $0.50 B5 B6 B7 Bt Btr Average digital coupon redemption costs per campaign Total Valassis services fees and other marketing costs per year Total coupon redemption costs per year Valassis Digital marketing costs as part of print + digital campaign strategy Risk adjustment 5% Valassis Digital marketing costs as part of print + digital campaign strategy (risk-adjusted) A4*B4 $4,650 $4,650 $4,650 (B2+B3)*B1 $812,500 $812,500 $812,500 B5*B1 $116,250 $116,250 $116,250 B6+B7 $0 $928,750 $928,750 $928,750 $0 $975,188 $975,188 $975, The Total Economic Impact Of Valassis Digital

14 And most interviewed organizations included digital coupons in their digital marketing campaign. While the redeemable value of this coupon is often not paid from the same department, it is still often a cost that the organization may need to consider, so to provide a conservative estimate a relatively small coupon amount (50 cents) is included in the costs. However, one organization did not offer digital coupons. Another pointed out that often coupons are sponsored by another organization in the sales and marketing chain and would not be considered a cost for digital marketing investment for the composite retail firm. The riskadjusted amount with no added coupon costs for this category is $853,125 per year adding up to a present value of $2.1 million. A second Financial Summary is provided below with NPV and ROI results for the Benefits listed above versus the Costs estimated here, without the coupon offer value lost revenue. Costs are measured on a per-campaign basis, adding up to full-year cost estimates. Coupon investment has already been covered above, but other costs may be underestimated, and Forrester adjusted this cost upward by 5%, yielding a three-year risk-adjusted total PV of $2.4 million. Implementation risk is the risk that a proposed investment may deviate from the original or expected requirements, resulting in higher costs than anticipated. The greater the uncertainty, the wider the potential range of outcomes for cost estimates. 12 The Total Economic Impact Of Valassis Digital

15 Financial Summary CONSOLIDATED THREE-YEAR RISK-ADJUSTED METRICS Cash Flow Chart (Risk-Adjusted) Cash flows Total costs Total benefits Cumulative net benefits $8.0 M $7.0 M The financial results calculated in the Benefits and Costs sections can be used to determine the ROI, NPV, and payback period for the composite organization's investment. Forrester assumes a yearly discount rate of 10% for this analysis. $6.0 M $5.0 M $4.0 M $3.0 M $2.0 M $1.0 M -$1.0 M -$2.0 M Initial Year 1 Year 2 Year 3 These risk-adjusted ROI, NPV, and payback period values are determined by applying risk-adjustment factors to the unadjusted results in the Benefit and Cost sections. Cash Flow Table (Risk-Adjusted) INITIAL YEAR 1 YEAR 2 YEAR 3 TOTAL PRESENT VALUE Total costs $0 ($975,188) ($975,188) ($975,188) ($2,925,563) ($2,425,147) Total benefits $0 $3,158,513 $3,158,513 $3,158,513 $9,475,538 $7,854,753 Net benefits $0 $2,183,325 $2,183,325 $2,183,325 $6,549,975 $5,429,606 ROI 224% 13 The Total Economic Impact Of Valassis Digital

16 Adjusted Financial Summary (With Removed Digital Coupon Costs) CONSOLIDATED THREE-YEAR RISK-ADJUSTED METRICS Cash Flow Chart (Risk-Adjusted) Cash flows Total costs Total benefits Cumulative net benefits $8.0 M $7.0 M As mentioned in the Cost section, some organizations did not include coupons in their digital marketing campaigns, or the reduced revenue due to the coupon discount was sometimes picked up by another organization (such as a supermarket chain instead of the product manufacturer). For readers expecting a similar situation, a second financial summary is included here. Forrester assumes a yearly discount rate of 10% for this analysis. $6.0 M $5.0 M $4.0 M $3.0 M $2.0 M $1.0 M -$1.0 M -$2.0 M Initial Year 1 Year 2 Year 3 These risk-adjusted ROI, NPV, and payback period values are determined by applying risk-adjustment factors to the results in the Benefit section, plus the Cost section results minus coupon discount costs. Cash Flow Table (Risk-Adjusted) INITIAL YEAR 1 YEAR 2 YEAR 3 TOTAL PRESENT VALUE Total costs $0 ($853,125) ($853,125) ($853,125) ($2,559,375) ($2,121,596) Total benefits $0 $3,158,513 $3,158,513 $3,158,513 $9,475,538 $7,854,753 Net benefits $0 $2,305,388 $2,305,388 $2,305,388 $6,916,163 $5,733,157 ROI 270% 14 The Total Economic Impact Of Valassis Digital

17 Valassis Digital: Overview The following information is provided by Valassis Digital. Forrester has not validated any claims and does not endorse Valassis Digital or its offerings. DIGITAL MARKETING INTELLIGENCE Valassis Digital is a leading digital marketing intelligence company, providing a best-in-class data management platform and online and offline targeting capabilities that fuel superior display advertising and media offerings. Through proprietary technology and the Valassis Consumer Graph, we power the life cycle of marketing campaigns from planning to activation and measurement. In fact, 19 of 20 leading brands work with Valassis Digital to drive better campaign performance. UNPARALLELED ONLINE AND OFFLINE INTELLIGENCE Every path-to-purchase is unique and understanding diverse consumer signals is in our DNA. Our proprietary technology continually connects billions of consumer, digital, and real-world behaviors, bridging disjointed data sets and building a single identity to intelligently target across channels. By merging exclusive offline and online data, we create a powerful view of each consumer to anticipate behavior and determine optimal targeting. TRANSLATING KNOWLEDGE TO ACTION We use our intelligence to engage consumers with consistency and precision across print and digital channels to drive results. The scale of our quality media portfolio allows us to coordinate delivery to reach consumers in moments of need and in channels they expect. Our diversity of channels also gives us flexibility to align the right media and deliver based on what works and doesn t work. MEASURING REAL-WORLD IMPACT With a fully connected platform, we are able to understand who is responding and what is driving response to optimize performance. With our robust insight and measurement, you are able to truly understand how your media impacts results from foot traffic to sales. 15 The Total Economic Impact Of Valassis Digital

18 Appendix A: Total Economic Impact Total Economic Impact is a methodology developed by Forrester Research that enhances a company s technology decision-making processes and assists vendors in communicating the value proposition of their products and services to clients. The TEI methodology helps companies demonstrate, justify, and realize the tangible value of IT initiatives to both senior management and other key business stakeholders. Total Economic Impact Approach Present value (PV) The present or current value of (discounted) cost and benefit estimates given at an interest rate (the discount rate). The PV of costs and benefits feed into the total NPV of cash flows. Benefits represent the value delivered to the business by the product. The TEI methodology places equal weight on the measure of benefits and the measure of costs, allowing for a full examination of the effect of the technology on the entire organization. Costs consider all expenses necessary to deliver the proposed value, or benefits, of the product. The cost category within TEI captures incremental costs over the existing environment for ongoing costs associated with the solution. Flexibility represents the strategic value that can be obtained for some future additional investment building on top of the initial investment already made. Having the ability to capture that benefit has a PV that can be estimated. Risks measure the uncertainty of benefit and cost estimates given: 1) the likelihood that estimates will meet original projections and 2) the likelihood that estimates will be tracked over time. TEI risk factors are based on triangular distribution. The initial investment column contains costs incurred at time 0 or at the beginning of Year 1 that are not discounted. All other cash flows are discounted using the discount rate at the end of the year. PV calculations are calculated for each total cost and benefit estimate. NPV calculations in the summary tables are the sum of the initial investment and the discounted cash flows in each year. Sums and present value calculations of the Total Benefits, Total Costs, and Cash Flow tables may not exactly add up, as some rounding may occur. Net present value (NPV) The present or current value of (discounted) future net cash flows given an interest rate (the discount rate). A positive project NPV normally indicates that the investment should be made, unless other projects have higher NPVs. Return on investment (ROI) A project s expected return in percentage terms. ROI is calculated by dividing net benefits (benefits less costs) by costs. Discount rate The interest rate used in cash flow analysis to take into account the time value of money. Organizations typically use discount rates between 8% and 16%. Payback period The breakeven point for an investment. This is the point in time at which net benefits (benefits minus costs) equal initial investment or cost. 16 The Total Economic Impact Of Valassis Digital

19 Appendix B: Endnotes 1 Source: Global Business Technographics Marketing Survey, 2017, Forrester Research, Inc., September Ibid. 3 Source: Forrester Analytics Consumer Technographics North American Retail And Travel Benchmark Recontact Survey 1, Q (US). 17 The Total Economic Impact Of Valassis Digital