Analysis conducted by Gain Theory

Why this is important?

In the last decade, marketing has changed beyond all comprehension.

The rise of digital, big data, programmatic, addressable et al have given marketers a multitude of opportunities, the number of which continues to dramatically grow.

Like an all you can eat buffet, the choice can be both exciting and overwhelming; it’s very easy to make rash, regrettable decisions.

INTRODUCTION

There has been a similar rise in marketing analytics techniques. It has never been easier to see how well your marketing investment is performing, in clicks, likes, sentiment, web visits, phone calls, applications, sales, profit. But too many of these techniques focus on easily measurable metrics, which often give an alarmingly short-term view.

To counter this, Gain Theory has run a study which looks at the long-term impact of marketing, across a range 7 key categories and 29 brands. The aim is two-fold: to show how marketing impacts business revenue and profit in the long term; and to show how marketers can make the right decisions to drive long-term growth.

We believe this is key to the future success of the advertising industry. If we continue to focus on short term metrics, we miss the full picture.

For instance, across the brands Gain Theory analysed, digital attribution was shown to measure only 18% of the full long-term impact of marketing on sales. Econometric techniques bridge the gap, but only get us 42% of the way there.

Only by looking at marketing through a long-term lens can we truly understand the full impact.

HOW DOES IT WORK?

The aim of Gain Theory’s Long Term analysis is to measure and understand the Long-Term Multiplier (LTM) to short term impact. To understand how it works, let’s run through an example, and say that a brand ran a £5m TV campaign. Econometric analysis could measure its short-term impact at (for example) £10m in value sales, thus giving a short-term ROI of £2 (£10m value sales divided by £5m spend). The LTM tells us how much this impact grows in the long term. If we measured a LTM of 3x, then this would be because the long-term impact of the campaign was £30m. Please note, this is total so the £30m includes the initial £10m short term impact. The overall long-term ROI is £6 (short-term ROI of £2 multiplier by 3).

The LTM is measured by analysing the base – i.e. the level of sales return in the long-term if a brand ran no marketing, which can be seen as a measure of a combination of mental and physical availability, or brand strength. Standard econometric practise is to use a flat base, which does not move over time. However, one of marketing’s functions is to change tastes and preferences in the long term. So if we allow the base to change in the long term, we can reflect these long term movements in tastes and preferences. And if we can understand how marketing impacts the base then we can show how many long-term sales were driven by marketing, giving us the long-term multiplier.

Gain Theory has run this analysis across 29 brands to understand the trends at a macro level. How do advertisers drive long-term sales? What media channels have the biggest impact on long-term sales, and thus the highest LTM? How can marketers use this information to their benefit, to drive long-term business health?

KEY RESULTS

1. TV has the greatest long term multiplier of all media channels

Across all categories, TV has an average LTM of 2.35. The only other channel with an LTM over 2 is Out of Home:

This persists across categories:

TV also has the highest efficacy, with its 25% point (e.g. the point at which 25% of LTMs are higher, and 75% are lower) being higher than all other media at 3.87; the next highest is VOD at 3.52.

2. Activation and direct response media can drive stunning ST ROIs but lack LT impact; whereas brand media have the best LTMs

As seen above, the LTMs for Search, Display, and Radio are at the lower end of the spectrum, whereas TV, VOD, Print, and OOH are in the top 4 across categories.

There is clearly important for CMOs and CFOs alike. If certain media are driving high short-term returns but have a limited long term impact, and if we’re only measuring the short-term impact, we are likely to be missing out on large potential long term revenue drivers, potentially causing harm to the business.

​3. What drives LTM?

The strongest drivers of LTM are levels of brand media investment, and the number of bursts of activity. Where we have seen brands invest in media such as TV, VOD, Print, and OOH, at a level which is over and above their competitive set, we have seen higher LTMs than where investment has been under that seen in the competitive set.

Additionally, there are benefits to persisting with a campaign. The LTM from running three bursts is double that of a campaign which only has one burst of activity.

4. Which factors indicate long term effect? What tools can marketers use to understand if their marketing is having an impact in the long term?

The greatest indicator of long term effect from media is the level of base sales, as Gain Theory has modelled here. However, this can take time to observe as base shifts are measured in months and years, and can often require advanced statistical techniques.

In lieu of a base modelling approach, there are three key ways in which long term effect becomes apparent and can be observed:

  1. Impact on brand equity metrics
  2. Impact on price elasticity
  3. Impact on activation metrics
4.1 Brand Metrics

Brand metrics often give a guide to long term brand strength. While the choice of brand metrics can be overwhelming, with many advertisers running surveys with hundreds of questions, it is normally a small range of metrics which provide this guide. In 65% of cases, consideration forms the closest link to base sales, where growth in consideration causes growth in the base. The level of impact form consideration differs from industry to industry and brand to brand, but a guide is that a 1%pt increase in consideration can be expected to drive a 0.5 – 2% increase in base sales.

A slightly more advanced method is to observe a small basket of metrics, generally comprising awareness, consideration, and those brand metrics which have a close link to base sales. These will differ by brand and industry, but commonly used brand metrics include value for money, trust, and service. Tracking a basket can give a business a ‘campfire’ number – easy to track and observe whilst indicating long term success. Indeed, for a number of large advertisers, while growth in brand metrics is always welcomed, a lot of advertising spend is aimed at maintaining the brand, the base sales, and ultimately the business. (see next section).

4.2 Price elasticity

Another way in which long term health can be measured is by analysing price elasticity over time. The theory is that consumers will overlook price differences for a brand which they believe is higher quality, or a brand in which they have more trust – e.g. Boots own-brand Ibuprofen vs Nurofen; the products are the same, the price points are vastly different.

This has been shown in a number of Gain Theory case studies. In one FMCG case study, the price elasticity went from -1 (e.g. a 10% rise in price causes a 10% drop in units sold) to -0.4 (a 10% rise in price causes a 4% drop in units sold). This happened over a three year time period in which the brand went from minimal brand advertising to a relatively consistent presence on TV & VOD.

It takes a significant amount of spend to shift price sensitivity, and this level of spend will depend on the category, the brand, the competition levels, and the quality of product. As a rule of thumb, share of voice is the best metric to consider – for every 10%pt of share of voice increased, we can expect a between 5%pt -20%pt reduction in price elasticity. However, there are diminishing returns to scale – if SOV is already at 50% there is a minimal impact of increasing to 55%, for example

5. If brand investment stops, things can go quickly wrong

It is rare, but not impossible, for brands to stop investing in brand media to save money. Below are three cases where this has happened and the warning signs advertisers can take from each case.

5.1 A retail bank stopped TV advertising

A retail bank had been advertising on TV & VOD consistently for two and a half years. In March 2013, they stopped and went dark for two years. There was an immediate short term impact as sales caused by TV dropped. But the long-term base impact was stark. Over two years their base dropped from 20,000 quotes a month to 11,000.

They were still able to generate quotes using other channels – but their efficiency reduced: e.g. generic paid search cost per quote increased by 20%, reflecting findings from section 4.3.

5.2 A financial services brand stopped TV advertising, when they returned it took 3 years to rebuild their base

A different financial services brand had been advertising on TV & VOD consistently, then stopped. They started advertising again after 2 years off air. Short term results were good: they saw the same cost per application and the same % uplift from TV. But their base had halved. It took 3 years to rebuild their base to pre-dark levels, using a continuous level of brand media to do so.

5.3 A travel brand went off air to protect profit; this had deleterious effects in the long term

A US-based travel brand took $3.4m out of their TV budget to save money. They lost 41,200 transactions in the short term, equivalent to $3m of profit. So the net impact was $0.4m profit added to the bottom line.

However, this brand did not account for the long-term impact. Taking base deterioration into account, the total long term transaction loss was 81,600, equating to a $4.5m loss in profit. The net loss from going off TV was -$1.1m.

CONCLUSION

As has been shown above, brand advertising can have a significant long-term impact, which is often missed by short-termism in marketing measurement. There are ways to understand the long-term impact, either by modelling, or by analysing brand metrics, price sensitivity, or activation media.

When undertaking this analysis, it can be shown that the media channels which drive long-term impact are those which have the time and space to tell a story and to embed themselves in consumer minds. Gain Theory’s analysis shows that, due to these features, TV is likely to be the best channel to drive long-term impact and, alongside it, business success.

In this world of multiple metrics and big data it can be easy to retreat into short-termism and easy to measure metrics. We encourage all advertisers to take a longer view to represent the full impact of marketing – otherwise we are doing the whole industry a disservice.

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Simply improving sales and showing you’ve done so is no longer enough, Marketing Managers must also be able to demonstrate greater value and prove the true impact of every element of their activity – from email campaigns and online banner ads, through to direct mail and TV advertising.

With marketing departments facing increasing internal pressure from their become vitally important to identify new mechanics that can meaningfully justify their spend to the Board, particularly as marketing is now being seen more as a cost that can be cut than an on-going investment.

So why not treat this spend as you would any other cost to the business, by relating it back to the bottom line and, more importantly, the share price? We all think about the bottom line, but share price isn’t normally factored in directly. Lately, I’ve started thinking that it should (and could) be.

Measuring the short-term effect of (for example) an advertising campaign is important. Among other things, it allows marketers to evaluate and amend what they are doing as the campaign progresses; however, short-term measurement doesn’t help when it comes to understanding the bigger picture. Even when long-term effects are measured under-reporting of the true financial impact is likely. Why? Because standard approaches fail to take into account the potential impact on a company’s share price. This isn’t because it’s not viewed as being important, it’s more that no one has put forward a method to measure it accurately.

Imagine the scenario; your Finance Director (FD) needs to cut back on spending. They identify the areas where they might be able to reduce costs and then stop and ask themselves, should I get the Marketing Manager to cut their budget? Now, on first reflection, it might appear to them that the risk of cutting this type of spend is comparatively low. Do this and the bottom line will instantly look a lot healthier.

But this got me thinking, is this really providing an accurate picture? Can this be properly evaluated? A simple mathematical approach reveals such measures to be a false economy.

We can add in additional detail like deleveraging and interest payments as well as the impact on investor sentiment, but these are details and don’t affect the thrust of the argument.

I think this method makes it possible to track marketing effectiveness back to the share price. If you consider that your marketing activity usually creates (for example) a 2.5 return in terms of margin, cost cutting of this type starts to look less appealing. If your annual marketing budget is £10m and you decide to halve it, that £5m cut may increase your cash flow in the short-term and win you favour with the Board. However, the long-term impact is a £12.5m drop in profit and a net loss of £7.5m.

Therefore, what seemed like a clever cost cutting mission to begin with actually costs the business money. Your business might end up losing more money than it saved.

Of-course, your FD might question the ROI calculation and on balance of risk, cut the budget anyway. However, the actual loss could turn into a much more serious mistake in the long run, having a huge impact on the profitability of the company and ultimately the share price. For this reason alone it will always be worth making the case against such measures being taken. The figures break down like this:

As the table shows, the potential loss working through a lower share price and market capitalisation is actually closer to £60m than £7.5m.

In addition, while the FD might still question the ROI calculation, the balance of risk begins to shift when you look at the numbers in this way

All other significant investments are evaluated in terms of their impact on profit, with calculated internal rates of return and the opportunity cost of the capital invested. Why don’t we look at marketing in the same way? Is this too much of a simplification?

Are there other variables to be looked at that I’ve failed to mention? I’d welcome your thoughts.

 

 

It was David Bowie who said, “you can’t stand still in one point your entire life.” And with Bowie’s words ringing posthumously in our heads, the same can still be said for marketers.

For several years now, we’ve been hearing about the so-called inevitable extinction of the CMO or how many are morphing into another alias – Chief Data Officer, Chief Customer Officer and more recently, the Chief Growth Officer.

Ever since the birth of mass advertising, arguably when the first advert popped up on Americans’ TV screen in 1941, advertising and marketing has constantly had to adapt and change to suit new mediums and an increasingly savvy audience.

Whilst it’s easy to veer into debate about a marketer’s alias, one thing remains constant: Marketing and marketers exist to drive growth.

The biggest headache for many marketers nowadays isn’t necessarily their job title or the hyperbole around it, it’s proving they are doing a great job at driving efficacy on their investments.

Brands and Marketing in 2018

We live in a world where profitable brand growth in some sectors has declined; economic and political uncertainty has kept us bracing for the worst; and there is an all-time low in trust concerning digital mediums from both advertisers and consumers. In this environment, many marketers are facing the same question:

‘What’s the single most important thing I need to think about when managing the efficacy of my marketing spend?’

With that question in mind, let’s start at the beginning…

Marketing Strategy = Business Strategy

With the foundation that marketing exists to drive business growth, we must consider our business strategy, goals and overall purpose.

Marketing strategy has to be synchronised with business strategy.

Whilst not rocket science, I believe this is why (in some instances) marketing fails to market itself and why some organisations have recently replaced the CMO with a ‘Chief Growth Officer’.. This shift is quite telling – in those cases it signals that the marketing function is not perceived as growth contributor or generating the required business outcomes by CEOs. Using the right language helps, of course, if your 2018 strategy is all about personalisation, storytelling, content or being data-centric, your CEO might think, “Great, but what does this mean to our bottom line?”.

As Manjiry Tamhane – Gain Theory’s Global CEO – recently said at the Advertising Association’s LEAD 2018 conference in London, “‘Marketing must be seen to be the engine of growth for businesses.”’.

As a senior marketer, being crystal clear on business strategy is imperative before embarking on any marketing strategy. This entails being clear on the answer to key business strategy elements such as:

  • What is our vision, mission and goal?
  • What is the five-year financial plan and where are we on that journey?
  • How are we going to get to our revenue goals – acquisitions, diversification, expansion, flotation, etc.?
  • What are the business priorities this year and next?

What are you trying to achieve?

The next question to tackle is: ‘What are our business goals, in the long- and short-term?’

Based on the purchase funnel, these can be broken down into two main areas:

  1. Demand Generation: what does your business need to achieve from an awareness and a perception point of view?
  2. Demand Conversion: following up on generation of demand, what do you need to achieve when it comes to customer intent and sales?

It’s incumbent on marketers to factor in the current state of the business. In other words, are you in growth stage like Airbnb is or do you need to maintain market position like Hertz?

How will you measure success?

Many marketers find themselves data rich but insights poor. During a CMO dinner with executives from several companies including Gain Theory and The Marketing Society, one marketer asserted, “Just because you can measure, doesn’t mean you can manage.”

To help drive the right insights, marketers must understand the metrics against which they will evaluate the success.

With measurement, there are two key considerations:

1. The ‘Right’ Metrics: Always link back to hard business data that ladder up to the business strategy and KPIs. For many companies, supporting data could point to sales revenue and profitability or a company’s share price.

2. Measure Holistically: Some marketing activity is demand generating while others are demand gathering. It’s important to understand how demand generating activity yields demand gathering activity in the future and how each channels contribution  to the path to purchase. Don’t just measure the short- term response to media – advertising seeks to change people’s tastes and preferences, and will have an impact on sales revenue for a much longer period.

Who else do you need?

Marketing is not just advertising and communications. We’ve moved on from the classic 4P model for quite some time and – there are many factors that impact growth and subsequently the Marketing Mix. In some companies, depending on the marketing organisation’s structure, some of these factors will lie outside of the marketing team’s ‘control,’ e.g. product, placement, process of delivery. So you need to think about who you will need to bring along in the journey to ensure a successful marketing strategy, that leads to business growth. Here are some thoughts to consider:

1. Organisational Alignment: It’s imperative to approach a marketing strategy consultatively, with partners who lead factors which will impact success. Smart questions to ask are: What can marketing do to help ensure success? What role can it play? Are we aligned on the same metrics that ladder up to business strategy?

2. Partner Alignment: Many CMOs and their teams lean on external partners to deliver their strategy including e.g. media agencies, PR firms, and specialists in content and , SEO. It’s incumbent on marketers to ensure full transparency on the goals, strategy and how you will measure success.

Close the Loop

As marketers we are constantly on a journey of re-invention in the face of consumer expectations, technology or market disruption.

What remains constant is that marketing has to be seen as the engine of growth so the choices we make along that journey, need to always come back ‘home’ to the core business strategy.

And as Bowie would say ‘The truth, of course, is that there is no journey. We are arriving and departing all at the same time’.

Originally published on The Marketing Society website here.

The raison d’etre for the majority of Market Mix Modelling agencies is to calculate the marketing return on investment, or MROI.  Gain Theory takes a different approach – knowing the ROI is nice, but does little to solve the pain points of our customers –how to optimize marketing investment, the allocation between media channels and to ensure that all touchpoints are working coherently.

As one Marketing VP recently said in an independent CMO survey: “MMMs provide some insight into making better investments, but that is still fairly one dimensional”.

Because we start from a different position – dynamic improvement rather than static reporting – our approach is also different.

The common approach to media impact

By far and away, the most common approach to estimating the impact of media is to use an ad stock.  This may largely be seen as taking the ratings that your target audience had an opportunity to see and then decaying them.  Using a decay allows the media to be tested for an immediate effect, as well as an impact over the medium and longer term.

Now, this approach is fine if you are only concerned with identifying the ROI.

But it says nothing about wastage and it gives little insight into weekly phasing or even where diminishing returns begin to set in.  This is because a rating has little definitive to say about the chances of your target audience hearing or seeing an ad.

Ratings are a trading currency.  Nothing more.

Consider a simple example.  What do 20 TV ratings actually represent from a viewing perspective?  It could mean that 20% of your target audience have had an opportunity to see (OTS) one exposure.  Or it could mean that 10% are at 2 OTS.  Or some other combination.  On its own, it is impossible to say.  As ad stocks are based on this rather ambiguous metric, they have little to say about the level of reach or frequency required to drive improvements in your ROI.

Our tried and tested AdModel approach is much more forward thinking and considers five key parameters that provide key information for all stakeholders.

  1. Effective Frequency    
    How many exposures need to be seen to trigger a response?
  2. Recency Frequency    
    How many exposures need to be close to the purchase?
  3. Recency Window    
    What do we mean by ‘close’ – a week? 2 months?
  4. Memory Decay    
    How long is the exposure remembered?
  5. Habit       
    Is there repeat purchase?

The fifth parameter – Habit – describes the long term impact of converting new users – basically a measure of trial and repeat.  They may be completely new to the brand, or they may be existing users for who marketing has helped them discover new opportunities for use.

Going beyond ROI to help marketers take action

Identifying the first four parameters defines the budget required, the phasing strategy, and optimal investment.  For example, knowing that for your brand consumers need to see 4 exposures, 2 of them in the last 7 days throws up a completely different approach than if consumers just need 2 exposures, just 1 of which can be seen anytime within 2 weeks of the purchase decision.

Planning on norms, benchmarks and experience can lead to some serious inefficiencies.  Let’s look at the following simple example.

base plan to optimised plan

ratings alternative plan

The base plan from the agency seemed OK – continuity was deemed important, and running with a broadly constant level of weight.  However, the AdModel tells us that, to trigger a response from those active in the market, we need:

admodel table

Using this insight we can deliver a 30% increase in the ROI.  Based on science, not hunch.

As you can see, some big improvements in efficiency, just by understanding how media is working for you.  And this is for just one channel – the same efficiencies can be seen across the media and marketing mix.

This approach has been tested across all verticals and across all continents.  If you want to move away from reporting just an ROI to dynamically improving your marketing investments, it’s time to rethink your approach.

We all thought Google had injured paid search as we know it.

The company rolled out significant changes to its desktop Search Engine Results Page (SERP) layout last year. Essentially, it removed the sidebar of paid search results to the right of the page, leaving paid search with up to four ads at the top and three new added ads at the bottom of the page, leaving organic search sandwiched in the middle.

The sidebar change caused much panic among search marketers, who anticipated an increase in costs due to the reduced inventory, but some months in, there seems to have been minimal impact in cost. However, there is a casualty: paid search’s overlooked counterpart, Organic Search (SEO). Now pushed further down the page, reduced and generally maligned, it’s caught between two big paid search slices.

The SERP changes were followed by the arrival of extended text ads, arguably the most significant change in many years, which gave advertisers double the characters available. It was designed for mobile experience and the name of the game is now making sure you are taking better advantage of the longer ads than your competitors. This often means knowing when not to use them, but generally speaking, more text should equal more information to searchers, more pertinent responders and thus better Click Through Rates (CTRs) and conversions.

The quest to improve paid search has diminished the real estate for organic search results. And there is a less noticeable consequence: as traffic through free Organic Search decreases and is replaced by traffic through paid ads, there is actually a decrease in the incremental impact of Paid Search.

What do I mean by this?  Paid Search incrementally is the proportion of visits to a site, coming through the paid search channel, which disappears if the search ad doesn’t run. Incrementality excludes visits coming from alternative channels. A large factor in incrementality is the likelihood of getting to a site in the absence of a paid ad.

Every action that Google takes to expand Paid moves traffic away from Organic. This is a zero sum game for visits: the same number of people are making searches, arriving at the SERP, but are ever more likely to click a paid ad. Marketers are paying for a proportion of clicks that would have come anyway via organic. Paid Search is cannibalizing clicks from Organic Search.

This cannibalization has always been happening, but it is a growing and becoming a bigger problem for the advertiser. Google has addressed this by suggesting the cannibalization is small. It calculates that only 8 percent of paid ads have an associated organic ad on same page, but that still doesn’t address a number of key issues.

Firstly, the scope for direct cannibalization may be smaller across all paid ads but it will be larger for the bigger brands that have a strong organic ranking.  Secondly, it does not take into account indirect cannibalization. Paid search is usurping more traffic from Organic on the whole.

At the individual advertiser and SERP level, one brand’s PPC ad is stealing clicks from another brand’s Organic ad, whose own PPC ad is stealing from yet another’s SEO. There are winners and losers, but indirect cannibalization is difficult to quantify. One thing for sure is Paid is improving at the cost to Organic and delivers “less bang for your buck.”

Search can be a zero-sum game. The silent decline of SEO is matched by an increase of Search Engine Marketing. It’s generating a revenue boost for Google, but at the expense of everyone else. The more paid search, the more advertisers will pay for what was once free.

Article originally published by Campaign here

 

 

Digital marketing channels today are divergent – search, video, social, display, email, mobile – the list goes on. Marketers have a myriad of options to choose from to reach consumers to hit KPIs. But the biggest challenge is understanding which digital media work best…and how to optimize those.

The holy grail of many brands today is establishing which digital investment gets the credit for delivering a conversion event. Where should we spend our money? What can we cut from the budget? How? When?

As more media is bought digitally, more data is produced and with that comes an ability to measure effectiveness at a granular level.

The future is increasingly connected and for some big digital advertisers, requires the right measurement solution.

Digital Attribution can provide the right measurement and optimization solution. But you need the right tools and conditions to do so and what’s more – it’s not for everyone.

We have compiled an 8 Step Guide to Digital Attribution to help navigate marketers through the subject and understand whether it’s a journey they want to embark on.

The 8 steps are:

  1. Significant Digital Media Spend
  2. A Clear Online KPI
  3. A Skilled Team of Data Scientists
  4. The Right Purpose
  5. The Ability to Optimize Quickly
  6. The Right Data Set-Up
  7. Unified Digital Tracking
  8. The Right Methodology

You can read the in depth article published in AdMap, by downloading the article on the top right hand corner of this page.

Or

Visit our digital-attribution.com website to view the video.

 

AI and voice recognition promise to accelerate consumer adoption of smart devices, writes the global CEO of Gain Theory.

Last year, CES was most aptly described as more of an evolution than revolution. The reverse is true in 2017. This year’s event was a complete game-changer. Behind the high-profile, attention-grabbing gadgets is a very clear commentary on how voice recognition, artificial intelligence and smart technology have combined to irrevocably change the relationship between brand and consumer for the better.

“Smart” was the prevailing theme at this year’s event—and I saw (and heard) it everywhere. From lightbulbs to toasters and TVs to vacuum cleaners, the devices on display didn’t just “do”—they thought. Smart devices themselves are not the real game changers here. It is AI and, in particular, voice recognition, which promise to accelerate consumer adoption.

Relevance, ease-of-use and trust have all been barriers to consumer adoption and, until recently, many smart devices were controlled by a smart phone. The ability to turn lights on and off via a smartphone has been around for some time but not necessarily widely adopted. Frankly, why get off the sofa to grab your smart phone to turn off the lights when there’s minimal additional effort to simply walk over to the light switch? Voice recognition was the crucial missing component—and it was all over CES.

So it wasn’t surprising that Amazon’s Alexa stole the show.

Next generation smarter devices
With seven microphones embedded into the Echo device and machine learning at scale with automated speech recognition, Alexa’s response is almost instantaneous in helping to control lights, thermostats, door locks, sprinkler systems and even order an Uber at the command of voice. Amazon has opened up Alexa for integration using a free API and, according to GeekWire, Alexa now has over 7,000 “skills” (Amazon’s word for integrations) from just a 1,000 in June 2016. With reportedly 5 million units of Echo sold to date and fast growing integration of Alexa with other devices, the ease of use and relevance of smart devices is likely to accelerate consumer adoption with some predicting that 2017 will be the year smart home goes mainstream.

On another front, traditionally non-tech brands are moving into the smart device market, partnering with tech creators to fashion an array of new products. For example, Hair Coach, the world’s first smart hairbrush, is a collaboration between Kérastase (part of the L’Oréal Group) and Withings, who bring sensor technology and app connectivity to everyday products. The brush has microphones that pick up on various audible cues on the state of your hair and shares its data via a mobile app.

There were also a multitude of toys and educational devices for children. Fisher Price announced its intent to launch a high-tech exercise bike for toddlers and Lego announced a robot-making toolkit for kids. Lego’s “Boost” toolkit enables children ages seven and up learn to code and build robots, bringing their creations to life by adding movement, sound and personality.

Manufacturers as maintenance managers
Until recently, retailers held the keys to unlocking direct conversations with consumers. Having a detailed understanding of customers purchasing habits and demographics have helped them to communicate one-on-one with consumers, build strong relationships and increase future sales.

Manufacturers, on the other hand, have remained relatively in the dark beyond the number of units distributed, relying on third parties to help inform them of the end sales volumes, pricing and demographics of customers. The advent of smart technology has the potential to change that by enabling the manufacturer to gain a deep understanding of customer behaviour after the product has been purchased (assuming the customer grants permission). Smart fridges will automatically reorder items when they run out. Automotive manufacturers will know when your journey cannot be completed with your current fuel levels and alert you when driving to your nearest/most convenient/cheapest gas station.

Implications to marketers
Smart devices with voice recognition and AI will not just dramatically change the way in which consumers interact with computers, but also the way in which brands market to and build relationships with consumers due to the vast increase in data and resulting insights.

Retailers of consumer electronics, manufacturers, energy providers, telco operators and others will have a real opportunity to build even stronger relationships with customers by helping them to navigate the smart home. Joining up all the devices, ensuring strong security, diagnosing and solving problems for consumers as they integrate new technology as well as providing on-going subscription based support will strengthen brand relationships if done at a level that results in surprise and delight.

Machine learning, the ability to process data at scale and make intelligent decisions and recommendations in real-time will require a different approach to marketing in the future.

On its 50th anniversary, CES has indeed (re)found its voice and it’s clear that there’s a major step change in the technology we interact with every day, with voice recognition likely to be the biggest revolution in our lives since the smart phone.

Manjiry Tamhane is the global CEO of Gain Theory.

Article originally published by Campaign US  here

 

 

The latest IAB digital ad spend results have been released. In it is revealed the fact that in the UK paid search is now the largest advertising sector, above TV and even programmatic display.

It appears as though the constant Google algorithm changes have managed to drive even more money into the pockets of Alphabet and their investors.

But is paid search really advertising at all?

In the old days, before the internet, if you wanted a pair of shoes you’d go to town, find a shop which sells shoes, and buy them. You might know you wanted a pair of Clarks shoes, or you might spend a bit of time to peruse a number of shops. Shops would spend money on rent, staff, store frontage, and a number of other tangibles to ensure they got your business. But this would never be included in a marketing budget.

Now, you go online, go to clarks.com or search for clarks, or you search for shoes (you might specify a colour, or a size, or a type… whatever). The point is, none of this is new, it’s just a way of doing online what we’ve previously done in the past. You either know what you want and go straight to it, or you shop around a bit and eventually get what you want.

The best advertising is about creating a demand for a product or a brand. Paid search does not create demand, it converts it. And whilst this is important, I would argue it’s not advertising.

With budgets about to be squeezed again in the UK due to Brexit bringing with it price pressure this could be an important argument for brands to have.

What do you think? Agree, disagree, or simply don’t believe this is important? I’d love to hear your thoughts – email me at matthew.chappell@gaintheory.com 

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