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Paid versus Owned Media
Prof. Dr. Koen Pauwels
Paid versus Owned Media? it depends on your brand and category
Prof. Koen Pauwels
Online budget has increased
3
“You cannot build a brand simply on the Internet. You have to go offline.” J.G Sandom, Co-founder and former director of Ogilvy
Paid search under fire• Who likes the “Google Tax” ?
• Paid search has 0 effect for eBayConsumers will find it anywayShuts paid down, saves $ millions
• But paid search fantastic for InofecIncreases profit 14x doubling it
5
Online and Traditional Marketing:What do we know?
• Online marketing such as search, social media is more effective than traditional marketing, TV (Manchanda et al. 2006, Wiesel et al. 2011)
• Paid, owned and earned media have different effects (Li and Kannan 2014)
• Online-offline synergy for specific cases (Naik and Peters 2009) within-offline synergy for others (Schultz, Block & Raman 2011)
• Unknown: When do online paid, earned, owned media work best and have most synergy with traditional marketing?
TRUSTWORTHINESS VERSUS REACH OF MEDIA
Our view: Consumer involvement & knowledge
• High involvement: customers desire the best information
a) Experience good: need deep, trusted information (Nelson 1974)
b) Search good: fast information by search (Erdem et al 1999)
• Low knowledge increases need for cross-channel media:a) Internet poor for building brands (Erdem et al 1999, Sandom 2010) unfamiliar brands need both
online and offline mediab) Familiar brands can leverage within-online synergies
Involvement vs knowledge effect conditions
Experience goods
(services)
Search goods
(products)
Unfamiliar
brandElasticity: Owned > Paid
Synergy: Cross > Within-online
Synergy: Cross-channel > Within online
synergy
Familiar
brandElasticity: Owned > Paid
Synergy: Within online > Cross
Elasticity: Paid > Owned
Synergy: Within online > Cross
Specific actions differ by firm
PAID OWNED EARNED TRADITIONAL
Paid search costDisplay adsNews site adsBanner adsAffiliate site adsPrice comparison site ads
Site TrafficOrganic site visitsOrganic search
Social media conversations
Direct mail costTV ad costOut-of-home costPrint (Circulars)RadioPriceDiscounts
• Treating online marketing (especially online media) as just another direct driver of sales leads to misattribution of sales to drivers and ultimately bad mix decisions
• The following picture simply no longer holds true:
Old mix modeling does not work for integrated online measurement
PRINT x COU
PONS x TRA
DE x Online x SA
LES
A far more complex marketplace exists in which online activity acts as an outcome of offline marketing, as well as a driver of sales. We analyze these dynamic effects in a systems of equations.
XTV x
Earned Media
TVSales
Paid Media
Price
Distribution
Owned Media
Offline actions invite (online) consumer action + sales
Academic Foundations of VAR• Sims (1980) regressed a vector of variables on their own
past as well as those of fellow influential variables creating the term "Vector Autoregression" (VAR).
• This groundbreaking work that continues to add value in the business community (particularly finance) earned Sims the 2011 Nobel prize for Economics.
Christopher Sims receiving his Nobel prize in December 2011
Reference: Sims (1980) "Macro-Economics and Reality" in Econometrica.
Findings
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Performance Elasticity of Paid Search and Owned Website Visits
0 5 10 15 20 25-0.1
-0.05
0
0.05
0.1
0.15Brand A: Paid Media
Weeks
Revenues R
esp
onse
Response to shock in Paid Search
0 5 10 15 20 25
0
0.05
0.1
0.15
0.2Brand A: Owned Media
Weeks
Revenues R
esp
onse
Response to shock in Organic Visits
16
Performance Elasticity of Paid Search and Owned Website Visits
0 5 10 15 20 25-0.2
-0.1
0
0.1
0.2
0.3
0.4Brand B: Paid Media
Weeks
Rev
enu
es
Resp
onse
0 5 10 15 20 25-0.1
-0.05
0
0.05
0.1
0.15
0.2
0.25
0.3Brand B: Owned Media
Weeks
Rev
enu
es
Resp
onse
Response to shock in Paid Search Response to shock in Web Visits
Summary of Key Findings • Owned > paid media if high enduring involvement (e.g.
fashion, GMAT testing) but paid > owned if high need only at specific time (e.g. furniture, refrigerator)
• Cross-channel synergy higher than within-online synergy for unfamiliar brands, within-online synergy highest for familiar brands (e.g. eBay, Kayak.com, Old Navy)
• Earned media has highest elasticity across conditions.
Managerial ImplicationsExperience (Service) Search (Product)
Unfamiliar
brand
Owned (and Earned) key to purchase
Spend on offline media for synergy
Owned key to Purchase
Spend on offline media for synergy
Familiar
brand
Owned key to purchase
Spend within online for synergy
Paid (and Earned) key to purchase
Spend within online for synergy
OK, but which paid online actions?• Content-integrated have highest effect:Affiliate sites if high enduring involvement (e.g. fashion, cars)Paid search and price comparison site if high need NOW (refrigerator, glasses, office desks)• Retargeting effective if mood of new website matches mood of
your product
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Proposed Usage: Dashboard input and output
| 20
Comparing profit from saved scenarios
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Want to learn more ?• It’s not the Size of the Data, it is How You Use It: Smarter Marketing with
Analytics & Dashboards• Website: www.notsizedata.com for free diagnosis
• Blog: http://analyticdashboards.wordpress.com• Twitter: @koenhpauwels• LinkedIn/Twitter: koenhpauwels• Facebook: http://www.facebook.com/pages/
marketdashboardscom/207532115957700
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• Thank you very much for your attention!
Any Questions?