MASB Standards Project - Where marketing activities meet ...€¦ · Unit Share Gain Projected: 1.0...

Marketing Accountability Standards Boardof the Marketing Accountability Foundation

Brand Investment & Valuation

(BIV)

Frank FindleyMASB Executive Director

August 2017Boston

MASB Standards Project

10 Year Anniversary

© 2017 MASB 2

BIV Game Changer (Phase I completed)

Project Brand Investment &

Valuation (BIV)(Stewart, K Richardson)

Project Objective

ExpectedOutcome

Empirically proven model for valuing brands & guiding

investment decisions

IssueAddressed

Brand represents great Value (but how much)

Establish “generallyaccepted brand investment &

valuation standards”

2013 - 2015When

StrategyBuild bridges from

customer metrics to market metrics to

financial metrics… empirically.

© 2017 MASB 3

BIV Phase I Trials

Establish missing linkages between marketing & financial metrics

Identify cornerstone brand strength metric

Link this to other marketing metrics

Validate a practical model for brand valuation that finance teams can easily implement

Brought together:

Leading Academics (LMU, Duke, Michigan, Cologne, Witwatersrand)

Specialists from research companies (nielsen, MSW•ARS)

Finance and marketing practitioners from six blue chip corporate participants

© 2017 MASB 4

BIV Phase I Trials Study Details

18 months

12 diverse categories, 120 brands

Product prices from 30¢ to $35K

Few competing brands to highly fragmented

Weekly purchase cycles to years

Spontaneous purchase vs. deliberative with influencers

Financial and brand strength metrics

Unit Share, Price, Distribution - from each participant’s provider

Brand Preference - provided by MSW•ARS

Other marketing metrics - from each participant’s proprietary system

Robust samples (e.g. n=7,200 consumers for preference)

© 2017 MASB 5

Brand Preference/Choice* is Behavioral

The MSW•ARS methodology isolates brand strength by holding everything else in the actual buying experience – price, promotion, shelf position, etc. – constant.

25z

01a 02b

07g

10j 12m

13n

22w

23x 24y

17r

19t 20u

08h

04d 03c

06f

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11k

14o 15p

16q 18s

21v

STARBUCKS

MCDONALD’S

* Note: Not all measures of brand preference/choice or “persuasion” are of equal quality. The quality of MSW•ARS Brand Preference/Choice has been

assessed through the MMAP Audit. See appendix for details.

© 2017 MASB 6

BIV Phase I Trials - Results

Across All Twelve Categories Within Each Category

Source: MASB Brand Investment and Valuation, a New Empirically-Based Approach March 2016*MSW∙ARS Brand Preference

*

© 2017 MASB 7

BIV Phase I Trials - Results Continued

With Price & Distribution Included There Is Little Variation Left to Explain

Source: MASB Brand Investment and Valuation, a New Empirically-Based Approach March 2016*MSW∙ARS Brand Preference

* *

© 2017 MASB 8

Additional Categories Validated

Credit Card Networks

Source: MSW•ARS Research MASB’s Game Changing Brand Investment and Valuation Project – Part IV Nov. 2015

Search Engines Casual Dining Restaurants

RX Pharmaceuticals Auto Insurance

Note: Search Engines would have no price or distribution effects to bring the relationship

closer…and the relationship between

BP/C is nearly perfect.

© 2017 MASB 9

Total Trial Categories + Additional

Sh

are

Brand Preference

N=240r= 0.92

*

*MSW∙ARS Brand Preference

© 2017 MASB 10

Brand Investment/Valuation Model (8/15)

Brand Activities

OperatingCash Flow*

2

Market Share

5

CategoryVolume

Price(Premium

& Absolute)7

Margin4

Velocity3

CustomerBrand

Strength(Brand

Preference/Choice)

Brand Value 1

Distribution6

Real Options(Leverage)

*Current and Future Cash Flows including

volatility & risk

© 2017 MASB 11

BIV Phase I Education Highlight

September 2015: MASB Board approved Brand Investment & Valuation (BIV) Model as a standard

Two key aspects differentiate it from other valuation models.

1) Incorporates a behavioral measure of brand strength in the hearts & minds of customers (Brand Preference/Choice)

2) Establishes mathematical linkages from customer brand strength to brand monetary value.

This empirically proven framework provides Finance & Marketing teams a practical approach for monitoring the value of their commercial brands

Positive reception by the industry has fueled demand for more information on how to deploy it

May 2017: White paper on how to apply the model

© 2017 MASB 12

Key Question Emerged After Phase I

“What marketing/advertising drivers can be identified to continuously improve consumer brand preference and thus improve financial impact and,

ultimately, brand values?”

© 2017 MASB 13

BIV Game Changer (Phase II)

Project Brand Investment &

Valuation (BIV - Drivers)(Tsvetkov, Stewart)

Project Objective

ExpectedOutcome

Empirically proven drivers for increasing BP/C &

Brand Value

IssueAddressed

Brand Preference/ Choice Brand Value

(but how to increase it)

Establish drivers of “generally accepted” BP/C

standard metric

2018When

StrategyFind drivers to

improve consumer brand preference to

improve market impact & financial

performance.

Note: “drivers” refer to actions or decisions

brand & finance teams can implement that will

have a statistically significant & relevant

effect on financial performance.

© 2017 MASB 14

Brand Investment/Valuation Model (Phase II)

Brand Activities

OperatingCash Flow**

2

Market Share

5

CategoryVolume

Price(Premium

& Absolute)7

Margin4

Velocity3

CustomerBrand

Strength(Brand

Preference/Choice)

Brand Value 1

Distribution6

Real Options(Leverage)

External Activities*

*Environmental/Social Media, etc. **Current & Future Cash Flows inc. volatility & risk

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at

are

ac

tiv

itie

s

tha

t d

riv

e B

P/C

?

© 2017 MASB 15

BIV Phase II Milestones (2015 & 2016)

VAcceptance*

IITeam

LeadershipPlan

IIIResources

VIEducation*

IFrame-UpPrioritize*

IVResearch*

Plan Execution

Phase II Team 9/15What is Known 2/16

MMAP Audit 4/16

ARF Rethink 3/16

MSI Webcast 5/16

ISO Bev Meeting 5/16

First 10 Principles – 8/16

16 Principles – 12/16

Added Principles 9-12/16

© 2017 MASB 16

BIV Phase II Milestones (2017)

VAcceptance*

IITeam

LeadershipPlan

IIIResources

VIEducation*

IFrame-UpPrioritize*

IVResearch*

Plan Execution

ARF Webcast-Principles 3/17

Winter Summit 2/17

Wearout Learning Reverified 5/17

ARF Podium 6/17

Summer Summit 8/17

ARF/WARC Article 7/17

© 2017 MASB 17

Promotion (communications):

1. TV activity explains 65% of variation in Market Share changes, quarter-to-quarter.

PI: Use TV to impact Market Share; improve the ads & use of the medium

2. Variation in strength of the TV ads that aired (APM Facts*), as measured by Brand Preference/Choice) explains 52% of the variation in Market Share.

PI: Improve the ads

16 Principles w/ Practice Implications

*Note: This presentation uses APM Facts as the measure of change in Brand Preference /Choice applied to TV ads that aired. The metric was MMAP assessed/audited in 2007 and 2009.

MSW•ARS Research, the current owner of APM Facts, has replaced it with an online collected measure and renamed it CCPersuasion. The CCPersuasion metric is currently (2017)

undergoing the MMAP audit/assessment. See appendix for details.

© 2017 MASB 18

TV in Total65%

TV Media Weight & Wearout 8%

Unexplained 28%

Continuity of Airing 5%

Normal Competitive Environment 2%

Product Price & Distribution2 3%

Error in Sales Data 2%

TV Ads(APM Facts*)

52%

Source: Blair Summary of the ARS Group’s Global Validation & Business Implications (2005 & 2008)*MMAP assessed 2007/2009; now owned by MSW∙ARS Research

Quarter-to-Quarter Variance in Market Share

© 2017 MASB 19

Case Study:Improving the ads & using the medium

Ma

rke

t S

ha

re

Prego brand group forms a “better practice team” to monitor advertising effects and implements learning leading to stronger ads

Year 1 Year 4Year 3Year 2

Average APM Facts* = +7

Source: Adams [Campbell Soup Company] (1997)*MMAP assessed 2007/2009; now owned by MSW∙ARS Research

© 2017 MASB 20

Case Study Continued:Improving the ads & using the medium

Prego brand group turns over, cancels team, slips back to old habits

Year 9

Year 8

Year 7

Year 6

Year 5

Year 4

Year 3

Year 2

Year1

APM Facts* = +7

APM Facts* = +3

Prego brand group forms “better practice team” to monitor advertising effects and implements learning leading to stronger ads

Source: Blair and Kuse (2004)*MMAP assessed 2007/2009; now owned by MSW∙ARS Research

Ma

rke

t S

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re

© 2017 MASB 21

3. It is no longer a matter of whether or not TV advertising is effective, but whether it is effective enough to meet the specific business objectives.

PI: Establish quarterly business objectives as cornerstone of the advertising plan

4. When there are indications that the advertising plan will not meet the business objectives, just a “couple of points” improvement will often make the difference.

PI: Use proven better practices to improve the ads and use of the medium


© 2017 MASB 22

Case Study:Establish business objectives as cornerstone of ad plan

StarKist faced daunting task of releasing radical new product form in an 80-year stable category

Ads needed to grow both line extension and brand overall

Forecasts based on planned GRPs + Brand Preference predicted sales outcome of first wave and led to approval of second wave

3.8

4.9

Unit Market Share

StarKist Tuna in a Pouch

Unit Share GainProjected: 1.0

Actual: 1.1

38.4

40.1

Unit Market Share

StarKist Total Tuna Line

Unit Share GainProjected: 1.6

Actual: 1.7

Predictions vs. Actuals

Source: Shepard. A True Return on Investment – Developing and Managing Advertising for StarKist Tuna in a Pouch; Quirk’s Marketing Research Review, March 2003

© 2017 MASB 23

The results from the initial advertising quarter yielded an ROI

of 76 percent, an enormous improvement over the break-even

ROI we had expected for the quarter using a traditional

approach. Incorporating the costs and incremental profits

involved with the unplanned – or second – flight, we were up to

368 percent return on our TV advertising activity.

- Barry Shepard, StarKist VP of Marketing

Source: Shepard. A True Return on Investment – Developing and Managing Advertising for StarKist Tuna in a Pouch; Quirk’s Marketing Research Review, March 2003

Case Study Continued:Establish business objectives as cornerstone of ad plan

© 2017 MASB 24

5. Executing from a superior (best-in-class) proposition results in superior (TV) ads over two-thirds of the time.

PI: Measure upstream (with BP/C) to find a value proposition strong enough to support subsequent ads that meet the business objectives… spend a little more early in the process and less later…in classic Deming fashion

Corollary:

5a. Use of a consistent value proposition across media platforms leads to stronger lifts in brand health metrics. (Note: creative strategy also would take into account the specific targets, venues and path to purchase/use)

PI: Advertisers should create and implement a consistent value proposition across media platforms


© 2017 MASB 25

Brand Preference Change vs. Benchmark Finished Execution Stage

Below At Above

Below Benchmark 67% 33% 0%

At Benchmark 22% 68% 11%

Above Benchmark 0% 31% 69%

Va

lue

Pro

po

sit

ion

Sta

ge

Source: Blair, Kuse Better Practices in Advertising Can Change a Cost of Doing Business to Wise Investments in the Business Journal of Advertising Research (2004)

Superior Propositions Translate into Superior Ads

© 2017 MASB 26

Case Study:Find proposition strong enough to support objectives

• The insight was simple: There is a strong emotional moment of anticipation when opening a bag of Lay’s Chips

• The proposition performed at multiples to benchmark levels and the finished copy exceeded those results

• And it produced some of the highest incremental sales the brand had seen

• It won numerous industry accolades including a coveted David Ogilvy Award

© 2017 MASB 27

6. A handful of strategic elements have been found to be present in stronger ads.

PI: Consider use of these elements when formulating value propositions and ads

7. A few executional elements have been found to be present in stronger ads.

PI: Consider use of these elements when creating ads


© 2017 MASB 28

Elements often found in Stronger Ads

Brand-Differentiating Key Message

New Product/New Feature

Product Convenience

Competitive Comparison

Superiority Claim

Brand Name Reinforces Benefit

Setting Directly Related to Use

Actual Product on Screen

Brand Name Mentions

Brand Name/Logo on Screen

Category Identification

Product/Package Shown

Demonstration of Product in Use

Source: rsc Summary of Factors Affecting ARS Persuasion Scores (March 2005 Revision)

Strategic Executional

© 2017 MASB 29

Case Study:Consider use of these elements in propositions and ads

The elements can be used in radically different ways to fit with the brand’s ‘personality’ over time

Apple Mac - 1984 Apple Mac - 2006

© 2017 MASB 30

8. An ad’s selling power (BP/C) works quickly (and predictably) with diminishing returns…and wears out in the process.

PI: Account for wear out at the “shoot” so that there is enough footage to refresh executions w/others when they will no longer be working at desired levels

9. Each execution—even within a campaign—has its own unique Brand Preference building power/value.

PI: Measure executions as they go to air & apply weight (“traffic GRPs”) relative to size of market, profit margins and business objectives

10. Continuous airing produces more sales than flighting (w/similar weight).

PI: Plan for continuous airing versus flighting


© 2017 MASB 31

An Ad Wears Out in a Predictable MannerM

ark

et

Sh

are

Four-Week Periods

Ad B=10.0Ad C=10.8

Ad A=5.8

Share Change

Percent Ad Power Left (measured in-lab as GRPs placed behind ad)

As media weight (GRPs) are place behind an ad, it delivers its selling power to market and ‘wears out’ in the process

© 2017 MASB 32

Case Study:Measure executions as they go to air & apply weight

Major food brand measured all television ads for four brands over a 12 month period just before they went to air

Goal: “Implement system for allocating TV media weight based on the unique value of each ad in the portfolio for only as long as they are working”

Results compared to market mix modeling calculated ROIs

Source: Blair Innovative Business Solutions for the emerging ROMI Branding Environment 2006

© 2017 MASB 33

CommercialBP/CShift*

Planned GRPs1

Optimized GRPs2

Commercial A:60 5.9 34 166

Commercial B:60 5.5 116 65

Commercial C:60 2.6 162 81

Commercial D:30 4.3 42 106

Commercial E:30 3.0 36 18

Commercial F:30 2.9 58 29

Commercial G:30 2.3 35 18

Source: Blair Innovative Business Solutions for the emerging ROMI Branding Environment 2006*APM Facts MMAP assessed 2007/2009; now owned by MSW∙ARS Research

Case Study Continued:Measure executions as they go to air & apply weight

Allocations were determined as actual ads went to air

© 2017 MASB 34

23.1

28.0

36.0

0

5

10

15

20

25

30

35

40

Original 50% Optimized 100% Optimized

MMM confirmed even 50% optimization yielded 21% improvement in volume impacted, a $4.9 million increase in a quarter for same spend

Source: Blair Innovative Business Solutions for the emerging ROMI Branding Environment 2006

+21%

Case Study Continued:Measure executions as they go to air & apply weight

© 2017 MASB 35

11. Advertising across platforms (especially TV and digital) delivers larger changes in brand preference and reach resulting in higher ROI

PI: Advertisers should invest in multiple platforms instead of shifting media dollars from one platform to another.

12. Word of Mouth (including e-WOM) has a measurable impact on sales and brand preference; often impact from negative WOM is larger than that from positive.

PI: Marketers should invest in creating and managing positive brand conversations in social media.


© 2017 MASB 36

Product:

13. Quality affects brand preference, price and share, but investments take time to be fully realized.

PI: Invest in product quality as it will pay back on a long-term basis.

Placement:

14. In CPG categories, brand preference and market share increase with retail distribution, while out of stocks translate into lost sales and earnings per share.

PI: Invest/execute at retail to expand and maintain shelf presence.


© 2017 MASB 37

Price:

15. CPG products are generally quite price-elastic, becoming more so over time, with a predictable interplay between brand preference and price.

PI: Managing the interplay between preference and price affects level of market share versus level of profitability.

16. Price cuts not supported by retailer advertising (features) or in-store displays generate moderate to strong sales lifts short term but weaken brand preference long term as they train consumers to buy on discount

PI: Reduce unsupported price discounts (TPR Only) and shift funds to quality merchandising events like feature and display to increase short-term spending efficiency. Invest more in innovation and advertising to drive long-term brand cash flow growth.


© 2017 MASB 38

Brand Options with Increased Brand Preference

Un

it S

ha

re

Price PremiumLow High

Brand Preference = X

Brand Preference = X+Y

Grow Share

Increase Price

Mix Grow Share& Increase Price

© 2017 MASB 39

Un

its

(M

illi

on

s)

0

200

400

600

800

Duracell

Eveready

Battery sales began to take off in the late 1980s, with Duracell and Eveready starting the race at about the same place. They each sold millions of units more each year to

meet the electronics demand . . . but why did Duracell sell more in the end?How did they each manage the brand? What was it worth?

Case Study:Managing the interplay between preference and price

Source: Blair et al,2004

© 2017 MASB 40

Case Study Continued:Managing the interplay between preference & price

Duracell Eveready

Average APM Facts* 5.1 3.9

Study End (10th year):

Brand Preference 57% 37%

Market Share (units) 44% 35%

Sales (units) 715M 568M

Price per unit $1.02 $.86

Profit $609M $275M

Market Value $8 B $3 B

Source: Blair et al,2004*MMAP assessed 2007/2009; now owned by MSW∙ARS Research

Duracell managed the Brand by continually building brand preference high enough to charge a 19% premium price and still gain more than Eveready in both unit sales

and market share; and the prize at the end of the 10 years was nearly a 3 to 1 market value of the Duracell Company over Eveready.

© 2017 MASB 42

BIV Phase II Education Highlights

ARF Audience Measurement Podium: Kelly Johnson, Frank Findley June 13, 2017

© 2017 MASB 43

BIV Phase II Next Steps

Two additional principles under review

White paper on Principles & Implications then journal article

Journal article on updated wearout learnings (JAR)

Potential MSI Podium

© 2017 MASB 44

BIV Team Members

Team Leaders

Team Heroes

Tony PaceMAF/MASB

Staff

Erich Decker-Hoppen Communication

Karen Crusco Executive Assistant

Admin

Frank Findley MASB EDSponsor

Dave Stewart LMU

Peter CushingGM

Jim Meier MillerCoors

Edgar BaumStrata Insights

Mike DonahueANA

Tim GohmannBSL

Sunny Garga(m)PHASIZE

T TsvetkovNielsen

Vithala Rao SCJ/Cornell

Manu De LucaSC Johnson

Marketing Accountability Standards Boardof the Marketing Accountability Foundation

Thank-you!

© 2017 MASB 47

This presentation uses the APM Facts metric as the measure of brand preference change for TV advertising

APM Facts was MMAP assessed/audited by MASB in 2007 and 2009

MSW•ARS Research acquired APM Facts and corresponding IP in 2013

Since then APM Facts has been renamed CCPersuasion metric and is collected via an online instrument

The online collected MSW•ARS brand preference approach for tracking was MMAP assessed/audited by MASB in 2016

The CCPersuasion measure itself as applied to advertising is currently (2017) undergoing the MMAP assessment/audit

Note on the APM Facts and the MSW•ARS CCPersuasion Metric

© 2017 MASB 48

Persuasion Measurement Tool

Market Results

Change In Consumer Brand Preference

(Choice)=

The body of knowledge regarding “persuasion” is based on a specific behavioral measure of consumer brand preference where:

The behavioral nature of the measure relieves it of the effects from cognitive bias (Vakratsas & Ambler, 1999)

The work that follows will refer to measuring consumer “brand preference (choice)” rather than the broad concept of “persuasion”.

Persuasion(APM Facts*)

* APM Facts = ARS Persuasion Metric for ads that actually air versus the same methodology used at other stages of the advertising development process.

Source: MASB Measuring and Improving the Return from TV Advertising 2012

© 2017 MASB 49

Measurement Development & Management Determines Precision

The APM FACTS Metric has met the MASB Marketing Metric Audit Protocol (MMAP).

Its characteristics would deem it “ideal” for serving as a standard for measuring and forecasting the impact of TV advertising and for managing and improving the return.

Application of the metric during the advertising development and management processes has enabled improvement in return

greater than that needed to offset the rises in TV Media costs.

Note: While various metrics may be called the same and even look alike in many ways, specific methodologies within classes and types of metrics often yield very different levels of reliability and validity


© 2017 MASB 50

Note About Predictability, Reliability & Sensitivity (Precision)

What are the Financial Implications of Precision?

The APM Facts Metric detects about 2 points as significant at the 90% level of confidence…and a 2 point difference in results

(airing just one ad) is associated with a .004 difference in market share over a business quarter.

In a category with sales of say $500M per quarter using just one ad scoring 2 points higher

returns ~$2M more in sales for the same media costs and multiple ads return even more.


© 2017 MASB 51

Provider D APM Facts

Media .37 .40

Media & Message .54 .91

The relationship between Media and Sales Volume Impacted is very similar across the findings of two providers, indicating similarity in composition of the data sets as well as media metrics being standard/improved over time…

However, Provider D’s metric for the message has little precision with respect to explaining differences in actual Sales Volume Impacted from TV ads…

1 Determined independently by Market Mix Modeling

Metric Precision Example

Relationship of Pre-Market TV Metrics to Sales Volume Impacted by TV1


© 2017 MASB 52

Metric Precision Example Continued

1 Determined independently by Market Mix Modeling

Provider D APM Facts

Media

Message

Unexplained: including noise

in metrics

Less than 30% of the actual Sales Volume Impacted from the TV activity can be explained/predicted using Provider D’s metric for the Message, while more than

80% can be explained/predicted using the more precise APM Facts.


© 2017 MASB 53

Test-Retest Reliability of (APM Facts) r ~ .94

Relationship to Volume Impacted (APM Facts) r ~ .90

Correspondence between (D & APM Facts) r ~ .65

Same Call between Ads within Brand 29%

“While some metrics are called the same and look alike in many ways, they can produce very different results.”

(Plummer, 2007)

Metric Precision Example Continued


MASB Standards Project - Where marketing activities meet ...€¦ · Unit Share Gain Projected: 1.0...

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Transcript of MASB Standards Project - Where marketing activities meet ...€¦ · Unit Share Gain Projected: 1.0...