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Steve
Warshaw
VP, Business Development
ACNielsen
Phil
Cara
Director
Yahoo!
Inc.
A woman goes online to research a question about her
dog’s health. While surfing Yahoo!, she sees a dog food
ad. Later that week, she goes to the store and encounters
the same brand of dog food. She buys it.
Breakthrough stuff? Absolutely. It may sound ordinary: Consumer
sees ad; consumer responds. Yet in the world of e-commerce,
manufacturers of consumer packaged goods have never been sure
how often exposure to a product message online translates
into a product purchase offline.
Now they can be. Since 2002, ACNielsen and Yahoo! have been
working together on a measurement tool to assess the correlation
between a person’s surfing and shopping habits. This
joint effort is called Yahoo! Consumer Direct—powered
by ACNielsen, and for 18 months, Consumer Direct has combined
the reach and technology of Yahoo! with the analytical tools
of ACNielsen Homescan. The program evaluates the effectiveness
of online advertising and promotions by consumer packaged
goods (CPG) companies like PepsiCo, Kraft, Unilever and Nestlé.
The study results are consistent—and satisfying. They
indicate that online promotions can lift offline sales time
after time, whether the item in question is a food, personal
care or household product. Furthermore, each campaign has
typically brought in more than twice the amount that the company
paid to advertise online, with short-term sales increases
of more than $3 million.
As Charlene Li, an advertising analyst with Forrester Research,
said in a The New York Times report on Consumer Direct, “This
is pretty darn cool.”
It is—and it signals that now could be the best time
ever for consumer package goods companies to start advertising
online.
Historically Cautious
Traditionally, the makers of laundry soap and facial tissue
haven’t found Internet advertising an attractive investment.
In 2003, while banks devoted more than 12% of their total
advertising budget to the Internet and moviemakers over 6%,
consumer package goods firms spent an average of 1.5%—or
less—on Internet promotion [See chart 1].
They have reasons
for being Internet-averse. Many consumer goods firms invested
in web sites and e-commerce when the Internet first emerged,
thinking they could sell products online. Most didn’t
see a gratifying return on that investment and backed off.
At the same time, it’s been difficult to tell what the
money they did spend on Internet promotion bought them. Compared
to TV, radio and print, online promotion has had few tools
for tracking effectiveness in driving offline purchases. Service
providers like Yahoo! have been able to measure “clicks”
on a site. However, knowing if clicks translated into follow-up
action was difficult.
Growing Internet Usage
The days of being able to sidestep the Internet as a medium
for one’s message are dwindling, though.
For one thing, the Internet today is second only to TV and
radio in usage. A 2003 survey by SRI-Knowledge Networks indicates
that the Internet has become a mainstream communications vehicle.
With a 14% share of voice (compared to 52% for TV and 27%
for radio), people now spend more time with the Internet than
with newspapers or magazines [See chart 2].
Internet reach is growing. In February 2003, 181 million Americans
were Internet users, according to ACNielsen research. By February
2004, that number was 208 million—a 15% increase in
one year.
Where do Internet users find the time to surf? A 2003 poll
by Forrester Research says 21% watch less TV now, and 10%
listen to less radio. Thirteen percent or more report they’ve
cut time spent reading magazines and newspapers.
Companies ignore this growing power of the Internet at their
peril.
Encouraging Results, Big Wins
To begin tapping the potential of a growing online population,
Consumer Direct has run a number of Internet-based programs
during the past year. Clients were well-known consumer packaged
goods firms that offer products ranging from health and beauty
aids to snack foods to toilet paper.
Consumer Direct tapped a volunteer base of 19,000 ACNielsen
Homescan panelists to test the ads. This group agreed to be
tracked on the Yahoo! Network.
Target households for each campaign are chosen based on their
purchase behavior. Surfing behavior of these households is
compared to surfing behavior of all other visitors to Yahoo!
web sites, and households with surfing patterns that best
match those of the target households are chosen to receive
the media event. Advertisements and promotional offers are
served directly to Yahoo! target consumers as they travel
through the Yahoo! network.
After the campaign, Consumer Direct matches back the Yahoo!
users who saw the ad and are also Homescan panelists. Their
store purchases during this period are then logged and compared
with those of another group that was similar in prior purchase
behavior and demographics, but not shown the ad. Success is
measured by sales growth of the advertised product within
the exposed group during the promotion vs. the unexposed group.
What Consumer Direct and its clients are finding is that Internet-based
advertising works. Every program has shown sales lift, with
the average lift being 15–20%. Some gained as much as
35%. Growth came from attracting new customers as well as
stimulating existing customers to buy more of an item. The
campaigns also reported improvements in awareness, purchase
intent and equity.
Pepsi was one program participant. “This has been a
terrific win for us,” said John W. Vail, director of
digital media and marketing for Pepsi-Cola North America,
as quoted in The New York Times. In the Pepsi market trials,
the soda manufacturer departed from their standard promotion
format of focusing on one small test market at a time to sample
a more diverse audience.
“ With Yahoo!, we can get a broader, national footprint,”
Vail said. “Just having the ability to get a read on
sales was a tremendous leap forward. And in both cases, we
did see a sales volume lift.”
Another company that partnered with Consumer Direct was Purina,
which ran three different campaigns. In a statement, Purina’s
director of interactive marketing, Michael Moore, said, “Conventional
wisdom has been that the Internet is not an effective marketing
tool for consumer packaged-goods companies. Consumer Direct
turns that on its head.”
Why Now?
The Internet has seemed to offer promise before, only to frustrate
companies trying e-commerce. Why should it be any different
this time?
One reason is that marketers better understand the Internet’s
potential and pitfalls now. For certain sectors—like
travel—the Internet functions well as a commerce channel.
Not so for consumer packaged goods. Thirsty customers aren’t
likely to go online and purchase soda the way they might go
online to book a flight when they want a vacation.
Rather, for the makers of everyday household items, the Internet
may serve best as an advertising vehicle. And key to that
capability is the rise of broadband. According to a Nielsen//NetRatings
report in 2004, just under half of all active Internet users
enjoy broadband service. With its vastly greater bandwidth,
broadband offers features and content galore—streaming
video, rollovers, intense graphics and the like. That heightened
interactivity isn’t just cool. It sells. The richer
the medium, the more exciting the content. And the more exciting
the content, the more likely the audience is to engage with
the message and act upon it. Broadband permits companies to
go far beyond a simple banner ad to create promotions that
stand out from their competition—and get results.
From Measuring to Targeting
The standard approach to targeting is to focus on either audience
demographics or editorial context. In other words, find people
to test who resemble your ultimate consumer, or post your
ad in a related editorial environment, such as a flu medicine
posted on a healthcare web site.
Both methods have drawbacks, though. Demographic targeting
assumes that everyone within a certain group—for instance,
women ages 18 to 35—reacts the same way to soup or music
or aspirin. Needless to say, this is wishful thinking. Contextual
targeting assumes that people who come to your site come in
a need state or mood to buy. But that precept doesn’t
hold water for many consumer packaged goods; the man who comes
home from running is unlikely to log onto the Gatorade web
site to quench his thirst.
Now, Consumer Direct offers a third option to support the
others—behavioral targeting. Behavioral targeting makes
the case for advertising a product to the people who buy such
products. In other words, if you make soft drinks, position
your promotion where you know that people who buy lots of
soft drinks go online. Experience shows that behavioral targeting,
combined with other approaches, offers better lift than straight
demographic targeting alone.
Seize the Moment
The growing momentum of the Internet, the new capabilities
of broadband and the favorable prices available for online
advertising all make Internet promotions an exciting and cost-effective
option. Consumer Direct proves conclusively that advertising
on the Internet, done right, works perfectly—and there’s
never been a better time to start than now.
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