Doing Advertising the Right Way - Part 2

Recap: Some of the time-proven lessons of advertising legend, Rosser Reeves, on whom Jon Hamm's character in Mad Men is based in part.

Lesson 2: The ideal life expectancy of a good campaign is forever
Here's an experiment that Reeves' firm conducted for a major brand 50 years ago.  The finding may surprise you - it certainly surprised me.  But it's just as applicable today to a marketing campaign as it was then.
Objective: Determine how long someone remembers an ad campaign (keeps it in their head).
The experiment: the penetration (unaided recall) for a major brand's campaign was 50% - which meant that 50% of the U.S. population sample knew it, and 50% didn't.  Six months later, with the same campaign - and same $ spend - still running, the same group of people interviewed a half year earlier were asked the same unaided recall questions.
The astonishing finding: half of the people who first recalled the campaign had forgotten it - no great surprise.  But half of the original group who could did not recognize the campaign now knew it!  The penetration remained the same after 6 months - it stood at the same 50% of the U.S. population.  Reeves' company found that this repeatedly held true for other campaigns conducted by similar companies.
But Reeves observed something else, too.  Most companies and their executives change campaigns after a year even if the penetration is high.  In other words, if penetration shoots up but sales do not, most executives do not have the patience to stay the course.
These learnings led to three principles which, by all accounts, hold true today.

1. When building or maintaining penetration, changing a story (the campaign theme) has the same effect as turning off the ad spending.  
2. If you run only brilliant campaigns, but change them often, a competitor who sticks to a good campaign will often pass you.
3. Unless the product becomes uncompetitive, a great campaign will not wear itself out.

Lesson 3: The average buyer will only remember one strong claim or concept.
Today we call it information overload.  But buyers have been suffering from it for decades.  In their landmark 1981 book, Positioning: the battle for your mind, Jack Trout and Al Ries coined the term tryanny of choice - the overwhelming number of products and attempts to promote them faced by the average buyer.  Marketers must not only compete with direct competitors in the product arena, but for mindshare as well.  Print, radio, TV, web, social media.  People can and will remember only so much.
From further experiments in penetration Reeves made two interesting and related discoveries:

1. As your penetration goes up, your competitors' penetration will go down, i.e. there is a finite amount that the average buyer will remember about all competitors in a product category.  I.E. if you increase your penetration from 25% to 50%, the aggregate penetration for all your competitors will, when tested, decrease from 75% to 50%
2. But, what happens in one product category does not affect the buyer's recall in other product categories.

The implications are twofold:

1. Great campaigns fuse all of the product components into one memorable message.
2. Increasing your own penetration also decreases the penetration of your competitors.

Lesson 4: Ultimate Selling Propositions are the levers that pull demand
In the 1950's Reeves developed what we know today as the value proposition.  His firm's experience showed that flash and dash (Reeves called this "show-window" advertising) could sell advertising contracts to clients, but sustainable value propositions were what moved the needle on generating demand and, ultimately, sales.  His firm backed this up (bear in mind they were a leader in their day) with a mound of evidence.

Reeves defined USPs precisely, as having three ingredients:

1. A customer proposition that confers a specific benefit to the buyer.
2. The proposition must be unique, i.e. competitors cannot or do not offer or mention it.
3. It must be compelling enough to pull customers, i.e. materially drive up penetration.

His firm's well-executed research showed that claims of usage (#1 seller) and preference (cosmetics used by the stars) were significantly more effective when the campaign revealed why.  This is what USPs are about.

Reeves observed that finding truly compelling and unique differentiators as the basis for USPs was difficult.  Over time, competitors catch up.  Just like they are doing with the iPhone and the iPad.  The data showed that there are three strategies that can be pursued to get ahead of the competition:

1. Find a relevant and compelling USP
2. Improve the product
3. If the product cannot be improved, preempt the competition with an attribute that is unique to the product (or firm) and deemed compelling by the competition

The third strategy is especially intriguing - a topic for an entire blog in its own right.

Doing Advertising the Right Way - Part 1

I'd never heard of Rosser Reeves until a few months ago.  Now I wish I'd heard of him 30 years ago.
Quick Bio: Rosser Reeves, former Chairman of Ted Bates & Co., is a TV advertising legend whose work would be instantly recognizable by Baby Boomers, e.g. M&M's "melts in your mouth, not in your hands".  He was enormously successful - so much so that Jon Hamm's character on Mad Men, Don Draper, is in part based on Reeves.

I came across Reeves' while researching the origin of value propositions - a term popularized by Harvard Business School pundits like Michael Porter.   Turns out that Reeves was a pioneer of this concept as well, having invented the Unique Selling Proposition in the early 1940s.  Reeves' work is so well-regarded by the likes of Al Ries, Jack Trout and Seth Godin that I had to get my hands on Reeves' classic book, Reality in Advertising, published in 1960.

It's out of print, so only available second-hand through rare book sellers.  Thanks to Abe Books I found one in good condition at Bank of Books in Ventura, CA.

Rosser Reeves is to advertising what Benjamin Graham is to value investing.  He's a writer who cuts to the chase and knows how to take a wealth of experience and insight and condense it into succinct powerful lessons.  For any of us who have spent our lives in sales and marketing, his are the kind of teachings you wish you knew when you started out.

His advice and the principles he describes are just as fresh and relevant today as they were 50 years ago.  In fact, I'd say the Reality in Advertising is a must read for every budding social marketer (and a few pros who haven't quite figured out the plot in my view).

I'd be selfish not to share (heck, who's got $95 and the patience to find an out-of-print copy).  So here you go, everyone.  I'll share a few of Reeves' lessons in my next four blogs.

Lesson 1: Advertising cannot by judged by sales alone
It wasn't Reeves' creativity that made him successful.  It was his mastery of measurement and data.  Most marketers are familiar with this lament from Reality in Advertising, "I know that at least half of my advertising money is being wasted.  My problem is - I do not know which half."
He knew that most marketers often incorrectly attributed a rise - or fall - of sales to a campaign.  And, he had the data to prove it.  He used a very simple formula to measure advertising effectiveness:

Penetration = % people who recall a campaign (brand, slogan, etc)

Usage Pull = [% customers who recall a campaign] - [% customers who don't]

Not rocket science so far, is it?  But consider that Reeves' firm amassed the data for several $B of advertising (big then - today it's $500B annually) by America's top firms.  It was the largest study of its kind ever done at the time.  And it tells an immensely powerful story  - just using two simple bar charts.
The first, a frequency distribution bar chart, shows the penetration for 78 of America's largest advertisers - coincidentally starting with the highest penetration (78%) and descending rather uniformly to the lowest penetration (1%).  Uniform, yes, but there are surprises.

• One bar represents a company that spent a hefty amount to score 5% penetration in a year.  Its biggest competitor spent less, and in less time, to garner 60% penetration - 12X more awareness.
• Two companies spending an identical amount in advertising score penetration of 44% of America vs. 1.8%
• An advertiser chose to use a gimmick which was remembered by 38% of the market ... but only 9% could recall the message.

The second bar chart shows usage pull.  It, too, shows 78 bars - but this time some rise above the horizontal line (a story that works because it pulls new customers) while other bars fall below the line (showing net customer loss).  About half the 78 companies show positive usage pull, and half show negative ... irrespective of the penetration.

• An advertiser with a pull rate of 20% changed its campaign (story) and its pull dropped by half to 10%.  But as sales were increasing, the company did not have a clue that its advertising was now only half as effective.
• One advertiser's value proposition (its story ... the crown jewels) is neatly tucked away in a corner of its advertising, largely unnoticed by most readers.  But those who do register it have a pull rate of 18%.
• A brewery spends $100m (today's dollars) running highly memorable imagery that scores high on penetration but, digging deeper, actually is recalled by those who drink less of its beer!  And the company is none the wiser.

But, Reeves offers hope.  Those companies that do the measurement and apply the principles show advertising performance 34% higher than the average performance for all advertisers.  That's like getting the punch of $4m advertising for only $3m.

When Marketing Strategy Mimics the Bumblebee

I like bees - especially bumblebees.

Did you know there are about 250 species of bumblebee worldwide?  They are social insects, not given to solitary pursuits except when it comes to foraging for food - flower nectar and pollen.  The hair on their legs is ideally suited to capturing pollen, in turn enabling them to pollinate flowers as they travel from one to the next.  And travel they do!

They'll travel up to 2 miles to find especially intriguing flowers (experiments show they are attracted to particular shapes, colors and fragrances).  They don't fly in straight lines nor in any predictable order.  If a particular flower catches their attention, off they go.  At speeds of up to 30 mph.  It is this frenzied, random activity that is so well captured in Rimsky-Korsakov's Flight of the Bumblebee.

Sometimes the bumblebee comes to mind when I'm asked to review an organization's marketing. That I'm asked at all usually indicates that either the engine is not firing on all cylinders, or that someone - often the CEO - is not at peace with the way things are working.

When I show up, before delving head-first into specifics it's helpful to get the lay of the land - some perspective and context-setting on the organization and its approach to marketing.  Sometimes I get a crisp synopsis of the marketing plan.  Often I'll receive a general outline with an admitted aside that the plan needs updating.  And sometimes (more often than you might think) I hear the buzzing of the bumblebee ....

Like the flight of the bee  - never in a straight line, moving unpredictability from one flower to the next - l am told of a strategy that is agile, fluid, dynamic, continually reinvented.  Like fingerprints, no two weeks of marketing are the same.  The teller is filled with pride that as many balls stay aloft in the air as they do.  I hear a different story.  Chaos in search of calm.  The entropy of the universe retreating into its own black hole.  Carpe diem! served up like a rich, hot and frothy latte.

I typically learn that the organization has nothing resembling a written plan, and that its marketing department operates like the NORAD Centre at Cheyenne Mountain, ready to spring into action when the alarm sounds.  (I once had an executive tell me that the market was evolving so quickly that a plan would be obsolete before it was finished.  I asked if his people just did whatever they wanted when they came to work. He said no, giving detailed examples of their roles. I offered that if that was the case then he indeed did have a plan - just one that was in his head. I got one of those, Yeah, well, duh!, looks and decided to move on.)

In such situations the strategy is starkly clear: approach it one day at a time, with Bobby Fisher deciding every move.  Everything is built for tactical swiftness, game score is kept (but usually not the win-loss record) with nothing glued or fastened.  As the briefing goes on I often find myself shifting metaphorically from the bumblebee to the caffeine-addicted gamer, reacting to obstacles and threats through lightning-quick reflexes and by blasting the whatever out of his opponent.  Should I get to meet some marketing staff I find they fit one of two molds: the highly creative and adrenaline-fueled who yearn for the eleventh hour, and the reserved I'll-just-do-what-I'm-asked-because-it-pays-well who have built up an immunity to their surroundings.

These are tough assignments - usually because any attempt to change the status quo is off-limits, and earns a look to suggest my sanity is in serious doubt whenever I raise it.

What's particularly fascinating to me may surprise you: a strategy like this often achieves great results - certainly in the early going.  But - and here's the 'gotcha' part ... the reason I'm blogging about this - I don't see it work well as organizations get larger.  It breaks down fast.  It doesn't scale.  When an organization gets to a certain size (this varies) the seams start coming undone.  What may have only needed a day to work its magic before now stretches out to weeks.  When the boss is absent the team, unsure how to respond to unexpected market changes, doubles down on what they were last told to do.
No!   This is decidedly not how Steve Jobs operates (I do get this come-back).  Mr. Jobs may be in complete control of Apple's marketing, but Apple is well-operationalized for speed and scale, and the marketing strategy is well-codified, communciated and reinforced across the company.  It is anything but a strategy du jour.

Transitioning from small to big can be challenging, to be sure.  But it need not imply a loss of either control or agility.  There are numerous examples of Fortune 1000 companies that not only market well, but are geared to respond swiftly and vigorously.  Apple.  P&G.  Clorox.  Google.  They can do what their smaller rivals do and yet stay ahead of them.

Mimicking the bumblebee can be a great way to start a business, but it's no way to grow one.

It Pays to be CEO (for now)

In Monday's blog I advised that it is a good use of one's time to pay attention to trends - the least risky alternative to placing bets on forecasts and outright predictions.  I wrote that without having sat down and gone through the Sunday papers (a car drives by at 4am and faithfully heaves some 5 pounds of print onto my driveway on Sundays).
The San Jose Mercury News published its annual What the Boss Makes survey of CEO pay among Bay Area firms, accompanied by the opinion of business writer Chris O'Brien - whom I've come to regard as one of the best business writers this side of the Mississippi.  Suffice it to say that, by any yardstick, CEO's make a lot.  (If you're like me, it's always fun to scroll down through the names of companies you know, and run your finger over to the salary, bonus and stock options columns.  Wow!)
Now, Chris likes to have fun when he writes, and he customarily awards laurels along with the barbs (unlike the WSJ's survey which tends to be spartan with its opinions .... until this year).
Then, I happened upon an article in the New York Times by Gretchen Morgenson - another writer whom I recommend who happily lifts up stones and peeks at what is underneath them in her Fair Game column.  This week's is titled Paychecks As Big as Tajikistan.  As of this writing it's only the 8th most emailed article (mortgage woes and selling big diamonds in China beat it out) but I encourage you to read it.  It's an easy and eye-opening read.
It references a report in The Analyst's Accounting Observer ($7500 annual subscription if you're interested) published by R. G. Associates that goes into intricate detail in assessing executive pay among S&P 500 companies.  The editors gave the article and interesting title - "S&P 500 Executive Pay: Bigger Than ... Whatever You Think It Is."
Here are a few highlights that caught my attention:

• Among the 483 S&P 500 firms surveyed, 2010 executive pay increased yr/yr by 13.9% to $14.3B - just shy of the GDP of Tajikistan (pop. 7million).
• One-third of these firms paid more to their execs in cash compensation than they paid in audit fees (to protect shareholders) and, in 32 companies, executive pay exceeded what they remitted in income taxes.  In 24 companies this amounted to 2%+ of net income from operations.
• From 2008 - 2010, 179 of the companies awarded raises to their executives even though shareholder value declined.  Eleven companies paid total compensation amounting to 1% or more of their market capitalization.

Now, these figures may surprise, shock, or even anger you.  Some of this data represents extremes - really out there! extremes. I can tell you that, as an executive myself at a Fortune 2050 firm, neither I nor my colleagues saw anything hovering at the oxygen levels implied in the R.G. A. report.
I'm not blogging to suggest that executives should be pilloried, or that there is a conspiracy of Board members to reward the few at the expense of shareholders.  Far from it.  I've worked along with CEOs who, in my experience, earned their keep.  It's a 7x24 job.  And, in the past 20 years, Wall Street and shareholders have turned it into "final exams every 90 days!"  Expectations are high, unrelenting, and seemingly unstoppable.  If bubbles didn't exist it's as if the market expects executives to create them - but without the fallout.  Hell, who wouldn't want top dollar to deliver against that kind of expectation.
But I am blogging to state that I'm seeing a trend regarding executive pay.  I'm coming across too many articles and OpEd pieces to ignore it.  The trend I'm seeing is eerily similar to that in government pensions: the party's over, let the hangover set in.  The economic environment is not kind to those at the right end of the bell curve, and I don't see it letting up.
But my question: will we see a corresponding re-leveling of shareholder - and Wall street - expectations to create sanity on both sides of the street?  I hope so, but it's not a prediction I'm comfortable making;-)

Facebook Poised to Overtake Yahoo in Display Ad $

An interesting forecast in Monday's eMarketer (remember: be skeptical of forecasts, and pay more attention to the trend at work): FB is expected to double its Display advertising revenue this year.  When it does so, it will overtake Yahoo's #1 position.

There are three other bits of interesting "trend" data in the tables accompanying the article:

• Display ad revenue is expected to maintain its overall 20%+ yr/yr growth through 2012.
• Google's yr/yr growth is expected to dip this year (still a respectable 34%) then bounce back in 2012.  Not sure why this is ... could it be the Admeld acquisition?
• Share of the Big 5 display ad companies (FB, Yahoo!, Google, Msft and AOL) is expected to grow even further - from 38% in 2009 to 53% in 2012.  Someone out there's feeling the pinch!

What's this all mean?

Well, the numbers themselves are less impressive than the general trends they point to.

• Marketers are mildly bullish on overall marketing spend two years out, but particularly bullish on the shifting spend to online media.  It's only going to get larger.
• Given all the online ad choices, display ads are among the faster-growing (see the outlookin my June 10 blog).  My best as to why: there's a long history with display advertising (print, mind you) and an enormous amount of data to show what does and doesn't work.  It's a market that today's agencies (let's face it; most of them have their heritage in the "old" media) understand.  It's the safe bet.

There are three implications to all of this.

1. Just as network TV duked it out for audience size to set ad pricing, so too will the big online display advertisers.  There's an enormous amount at stake - for ad-selling companies, agencies and advertisers alike.
2. That said, pricing is going to become, shall we say, interesting - especially in the social media space.  Going are the mass demographic generalizations that come with Nielsen data, being replaced with the laser-like demographics that accompany online media.  Also on the ascendancy is the allure of targeting micro-markets in fulfillment of the one-to-one marketing world put forth by Rogers & Peppers in the 90s.
3. Lobbying on privacy and user data is highly likely to get even more intense.  The value of online advertising in any form is significantly enhanced by the ability to associate specific and often precise information about users.  With almost $500B spent on all forms of advertising there is simply too much at stake to risk having too tight a lid put on consumer data.

Trends, Forecasts and Predictions

If you're looking for a definitive list of trends to keep an eye on I'm sorry to disappoint, but this is not it.

Each year I read any number of reports and articles that attempt to cast some light on the future - most of it directional, some of it fairly precise.  Irrespective, most of it's not very good.  I inevitably find myself wondering more about the thought process of the writer, and less about the forward-looking outlook.

A few years back I found myself in an impromptu debate with the CEO of my firm when I presented some systems, software and services market forecasts partly based on some work done by IDC.  He was of the opinion that IDC was a rear view mirror research company, and lacked any credible capacity to predict unexpected occurrences in the industry, e.g. like a disruptive innovation.  I agreed, but stated that as they captured the conventional thinking of the herd, their outlook at least had the value of presenting the wisdom of the crowd (albeit, an edited wisdom).

He did not agree one bit, as evidenced by the pulsating vein I could see on his forehead from my position at the podium 30 feet away.  He planted an enormous stake in the ground at my feet, and as I looked around the room at my colleagues a few minutes later (it was not a swift execution) I could almost visualize a few of them roasting marshmallows on the open flame that had ignited.  The point graciously conceded, I continued with my presentation, allowing the smoke to clear.


There's a lot to be said for being forward-looking.  It's hard to move forward in business unless you have some expectation or opinion about the future.  But acting on someone's view of the future is akin to acting on a stock tip: it's risky.  I liked how Warren Buffet responded to an undergraduate at a large presentation he gave when he was asked how he forecasts macroeconomic effects.  Buffet's response: I don't - it's simply not knowable.


To me, forward-looking views come in three varieties, each with its own pluses and minuses:

• Trends are directional tendencies.  They look out years into the future.  They offer a high degree of wiggle room as there is no attempt to be quantitatively precise with regard to speed or extent.  There not always easy to spot, and those who make a practice of picking them do not bat 1,000 (John Naisbitt's wildly popular bestselling Megatrends largely hit the mark, but not entirely).
• Forecasts are estimates of future conditions.  They're typically based on quantitative models, and usually confined to short term outlooks (from days for weather, to several quarters for economic variables like GDP).  I've observed that people like forecasts because they are concrete and specific.  And therein lies the problem: they are only as valid as the models on which they are based.  Those models are imperfect in that they invariably rely on assumptions that are a placeholder for knowing.  Remember: the vast majority of economists and Wall Street prognosticators, all equipped with exquisite forward-looking models, missed the 2007 financial crisis entirely.  
• Predictions are a statement of what will happen.  They require little in the way of time or expertise to make, and they don't rely on complex models.  Predictors are notoriously wrong.  Just look at the annual track record of investment picks - you're still better off closing your eyes and buying an index than you are buying the majority of mutual funds within the investment category.  And Nostradamus?  His celebration aside, try understanding his predictions as they were originally written - as quatrains - and compare these to their interpretations.  If ever there was a leap of faith, it is these.

My advice: read everything you can find on the trends in the business(es) that you invest in or follow.  Recognize that the value of forecasting lies in stating a possible future - not a guaranteed one.  When it comes to predictions you will suffer no harm if you regard them as entertainment, enjoyed in the company of others over a glass of good wine.

From Weiner to Burger

This past March, Boulder, CO-based ad firm Crispin Porter + Bogusky lost its Burger King account after a 7-year run.  Read on, friends 0 the story doesn't end there!

CP+B revived BK's "King" mascot -  18th century era figure wearing a large plastic head of a bearded, forties-something, perpetually smiling king with a gold crown who would romp around TV commercials performing mildly Fellini-esque skits.  CP+B did a number of TV commercials for BK, moving in to social media towards the end of their contract.  Here are a couple of relatively recent spots in the SM vein.

• Facebook's Friend Sacrifice  http://www.youtube.com/watch?v=F1AsycJNl7o
• Augmented Reality  http://www.youtube.com/watch?v=YhSc9TlCDBI

Creative?  Yes.  Effective?  You be the judge.  (hint: remember, they lost the contract)

I have to hand it to CP+B, though.  After losing the contract in March they didn't pack up their tent and go home.  This past Monday CP+B commandeered Direct TV's channel 111 and made this offer to viewers: spend 5 minutes watching a rotating Whopper and get a free one.  Watch for even longer and you can stuff yourself with Whoppers.  For those of you who are not DirectTV subscribers, here you go.

http://www.geekosystem.com/burger-king-whopper-channel/

By mid-Friday viewers had spent over 10,000 hours watching rotating Whoppers, earning almost 75,000 free Whoppers.  Unfortunately, the promotion ended Friday evening at midnight, so you're out of luck.

Multiple Choice question: The takeaway(s) from this undertaking is:

• [a] the agency got the laugh last
• [b] this is more fun than clipping coupons (Groupon, beware!)
• [c] there's evidence of a disturbing demographic among DirectTV subscribers
• [d] beats camping overnight outside the Apple store to get an iPad 2
• [e] all of the above