Henkel study on advertising effectiveness

Prepared for: FIPP Research Forum Presented on: 30th May 2012 By Sam Fellows, Ohal, and Charlotte Danielsson, MEC www.ohal-group.com @Ohal_Group

What effect does magazine advertising have on sales and how can we optimise future media campaigns?

Introduction

•  Commissioned by Sveriges Tidskrifter in order to get a better understanding of the role of Magazine advertising on sales

•  Can magazine advertising be used to drive sales?

•  If so, to what degree and in particular how does it compare to TV?

•  How can Magazine advertising be used to get the most out of the

investment in it?

Introduction to Ohal: The World’s Local Econometrics Agency

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Econometrics Measuring advertising effects on sales

TV

Magazines

Sales

Availability

Price

In order to measure the effects from marketing on sales… … all factors that influence consumers must be accounted for

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Study data and background information (I)

•  Several different sub-brands under the Schwarzkopf umbrella, each with their own marketing plan

•  Objective —  Increase sales from marketing of the total portfolio —  Return on investment net of portfolio switching

•  Current Strategy —  Mainly TV and Magazines —  Pressure to run in the same weeks

The study is an analysis of hair care and colouring products in Sweden.

Study data and background information (II) Within the models all factors that influenced sales are accounted for

Sales

TV

Magazines

Online + Cinema

Leaflets / DM

Distribution

Pricing

Promotions

Competitor activities

Pay-days + Holidays

Climatic Factors

BasförsäljningPris i butikDisplay i butikDR (reklamblad)MediaKonkurrent pris i butikKonkurrent lanseringKonkurrent mediaLönehelg och helgdagarFörsäljning (volymenheter)

Example of an econometric model for Gliss Factors were identified that consistently influences sales over time

2008 week 21 2011 week 20

Base

Price / Promo

In store

DM

Media

Comp. Price / Promo

Comp. Launches

Comp. Media

Seasonality

Sales

Total ATL media accounts for c.10% of sales

Calculation of the Return on Investment for Schwarzkopf media

ROI = Additional sales (volume) x Price per volume unit

Cost of media

For each media channel

Price of incremental volume

Media Cost (excl. production cost)

For Gliss, magazines had a higher pay back than TV Magazines were the most cost effective vehicle per Kroner invested in Gliss’ media mix

Media budget (indexed SEK)

Sales effect (indexed SEK) ROI

Source: econometric model of weekly sales of GLISS shampoo w. 41 2009 till w. 20 2011, and sales of GLISS conditioner and treatment products for the same period of time

84%

13%

1%

2%

TV

Magazines

Online

Web TV

81%

18%

0%

1%

TV

Magazines

Online

Web TV

1.2

1.7

0.0

0.46

TV

Magazines

Online

Web TV

73%

64%

78%

60%

26%

29%

100%

77%

11%

19%

1%

8%

23%

7%

20%

4%

TVMagazines

Online

TVMagazines

Online

Magazines

MagazinesOnline

TVMagazines

OnlineCinema

TVMagazines

Online

Magazines gave high ROIs for Henkel’s established brands TV had the strongest impact of media during the launch phase of products

54%

49%

91%

84%

44%

45%

100%

68%

7%

10%

3%

7%

32%

0%

6%

1%

TVMagazines

Online

TVMagazines

Online

Magazines

MagazinesOnline

TVMagazines

OnlineCinema

TVMagazines

Online

2.3

1.0

2.2

0.6

5.3

2.0

0.9

0.5

1.2

0.2

5.7

1.2

0.8

0.1

0.1

0.6

TVMagazines

Online

TVMagazines

Online

Magazines

MagazinesOnline

TVMagazines

OnlineCinema

TVMagazines

Online

ROI Media budget (Indexed SEK)

Sales effect (Indexed SEK)

(Launch)

(Launch)

Source: econometric model of weekly sales of Henkel's coloration products w. 21 2008 till w. 20 2011, and SYOSS sales of shampoo w. 41 2009 to w. 21 2011 and conditioner and treatment products for the same period of time

Multimedia campaigns are perceived differently Some individuals have a different experience of the same campaign

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ctiv

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eigh

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ctiv

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Effe

ctiv

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eigh

t

TV

Magazine

Online

Cinema

Different Weights of Media

•  One Magazine exposure might have the same effect as one TV exposure •  Or is, One Magazine exposure worth one TV and two online •  Or, other combinations…

•  We use survey data which shows how individuals consume media and in what proportions

The way we combine media can have implications for the overall effectiveness of campaigns

inte

rnet

Out

door TV

Pres

s

Effe

ctiv

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eigh

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rnet

Out

door TV

Pres

s

Effe

ctiv

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=

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Out

door TV

Pres

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rnet

Out

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Pres

s

Effe

ctiv

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eigh

t

= =

Real World Survey Simulated World

Scenario Planning Using the results to help optimise future media campaigns

Simulated GLISS campaigns What media plan gives the highest sales effect for a fixed budget

Scenario 1 Scenario 2 Scenario 3

1 2 3 4 5 6 7 8 9 10

11

12

13

14

15

16

17

18

19

1 2 3 4 5 6 7 8 9 10

11

12

13

14

15

16

17

18

19

1 2 3 4 5 6 7 8 9 10

11

12

13

14

15

16

17

18

19

Budget Indexed SEK

129*

Budget Indexed SEK

129*

Budget Indexed SEK

129*

week

week

week

TV Magazines

TV Magazines

TV Magazines

129* = TV 100 + Magazines 29

Joint Exposure TV Magazines

W e e k

2

W e e k

4

W e e k

6

W e e k

8

W e e k

1 0

W e e k

1 2

W e e k

1 4

W e e k

1 6

W e e k

1 8

W e e k

2 0

W e e k

2 2

W e e k

2 4

0 5

10 15 20 25 30 35 40 45 50 55 60 65 70 75 80 85 90 95

100

S a l e s

e f f e c

t

Simulated effect on GLISS scenario 1 Total sales effect from the TV campaign with magazines following directly on from TV is indexed to 100

Sales effect Indexed volume

100

1 2 3 4 5 6 7 8 9 10

11

12

13

14

15

16

17

18

19

week

TV Magazines

Sal

es

Joint Exposure TV Magazines

W e e k

2

W e e k

4

W e e k

6

W e e k

8

W e e k

1 0

W e e k

1 2

W e e k

1 4

W e e k

1 6

W e e k

1 8

W e e k

2 0

W e e k

2 2

W e e k

2 4

0 5

10 15 20 25 30 35 40 45 50 55 60 65 70 75 80 85 90 95

100

S a l e s

e f f e c

t Simulated effect on GLISS scenario 2 Both magazines and TV within the same week lead to overexposure which decreases the sales effect by 4% for the same campaign budget

Sales effect Indexed volume

96

1 2 3 4 5 6 7 8 9 10

11

12

13

14

15

16

17

18

19

week

TV Magazines

Sal

es

Joint Exposure TV Magazines

W e e k

2

W e e k

4

W e e k

6

W e e k

8

W e e k

1 0

W e e k

1 2

W e e k

1 4

W e e k

1 6

W e e k

1 8

W e e k

2 0

W e e k

2 2

W e e k

2 4

0 5

10 15 20 25 30 35 40 45 50 55 60 65 70 75 80 85 90 95

100

S a l e s

e f f e c

t Simulated effect on GLISS scenario 3 The effect on sales increases by an additional 5% with the same budget by spreading out the magazine advertising over a longer period of time after the TV campaign

Sales effect Indexed volume

105

1 2 3 4 5 6 7 8 9 10

11

12

13

14

15

16

17

18

19

week

TV Magazines

Sal

es

1 2 3 4 5 6 7 8 9 10

11

12

13

14

15

16

17

18

19

Scenario 1 Scenario 2 Scenario 3

1 2 3 4 5 6 7 8 9 10

11

12

13

14

15

16

17

18

19

Gliss campaign The most cost efficient scenario was to prolong the media campaign with magazines following a high weight of TV

1 2 3 4 5 6 7 8 9 10

11

12

13

14

15

16

17

18

19

Budget Indexed SEK

129

Budget Indexed SEK

129

Budget Indexed SEK

129

Sales effect Indexed volume

100

Sales effect Indexed volume

96

Sales effect Indexed volume

105

week

week

week

TV Magazines

TV Magazines

TV Magazines

Summary of findings from the study

•  Ohal use econometrics to understand what drives products’ sales •  The results allow us to help Schwarzkopf generate a greater return from

their media spend, by:

•  Making recommendations on the how to allocate the media budget between different channels within the marketing mix

•  Providing assistance with phasing media to maximise the effectiveness of campaigns

In this study we’ve shown how econometrics can be used to isolate the impact of media activity on sales