The ROI study Methodology

Analysis conducted by Sally Dickerson, managing director of effectiveness consultancy The ROI study Part of the Omnicom Media Group A graduate in Mathematics from Oxford, Sally joined Mars UK as a market research analyst, later joining their Management Science division. She co-founded The Decision Shop, part of Bates/Cordiant then in 1999 joined the then OMD group and set up ROI (Return on Investment) focused on market mix modelling, which became OMD Metrics, then BrandScience, and is now Annalect Marketing Sciences. In 2016 Sally created a new consultancy business, Benchmarketing, running strategic quantitative consultancy projects using meta analysis. She has also contributed to over 30 IPA advertising effectiveness awards, been an IPA effectiveness award judge, and run marketing effectiveness masterclasses for the Marketing Society and Chartered Institute of Marketing. She was a judge on the inaugural Cannes Creative Effectiveness Lions panel, in 2011 and again in 2013.

1 Advertising spend data 2 A meta analysis of econometric models 3 Budget optimisation The ROI study: methodology

1 Advertising spend data The ROI study: methodology

SMI data provides a representative picture of actual media mix Actual media spend from booking data provided by 65% of UK agencies Data across all above the line media Detailed breakdown of digital spend across display, video and paid search Breakdown of newsbrand spend across print and digital Source: SMI (Standard Media Index)

2 A meta analysis of econometric models The ROI study: methodology

Advertising x medium and message PR, Media mentions, Buzz Pricing vs competitors Store universe changes Product/Range changes Brand awareness/perceptions Competitor marketing Competitor routes to market Technological change Seasonality Economic change Econometrics – identifying and assigning a weight to the ingredients driving sales

Calculating revenue return on investment (RROI) Spend £m Sales £m due to spend RROI Channel 1 Channel 2 Channel 3 Channel 4 Channel 5 Total £2.5 £0.5 £1.5 £1.0 £0.5 £6.0 £3.0 £0.5 £3.0 £1.5 £0.6 £ Calculating Revenue Return on Investment (RROI) We isolate and quantify drivers of sales. This chart is a very simplified illustration of that, showing the sales pattern over time broken down by the different drivers, in this case a combination so enabling calculation of Revenue return on media investment

A meta analysis of econometric models Meta analysis is analysis of analysis results – the “meta data” It’s common in pharmaceuticals, clinical drugs trials One trial isn’t enough, you need hundreds so as to be sure of your results If all the trials come up with the same answer, that’s a very strong result If the trial results are different, then being able to explain robustly why they are different – different dosage, different demographic sample - is again a result and new learning Using our cake analogy – we can work out whether better tasting cakes always use butter rather than margarine in the recipe, and whether using three eggs works better than two

Defining the relationship between spend and revenue return This is an example chart, not real data Scatter graphs allow us to see relationships in data. Here in this example chart, used for illustration, we can see the relationship between media spend and revenue return. Specifically looking at print newsbrands Percentage of total comms spend and the revenue ROI. Each dot on the graph represents an econometric model case in the Results Vault. Here the data suggests as the % of print newsbrands in the mix increases, so does effectiveness

Creating tertile groups of cases shows the revenue return for low, medium and high spend levels Tertiles of % of total communications spend This is an example chart, not real data In order to see the relationship more clearly, we create tertile groups of case, according to their print newsbrand spend as a % of the overall media mix. This creates robust groups, on which we can report the average Y axis score for each group - i.e. the average Revenue ROI

So to see this in action, let’s look at the retail category. In this case we have added a fourth group – no print newsbrand spend. We can then compare the three tertiles of newsbrand spend to the group with no spend. In Retail: Print newsbrands boost total campaign ROI by 2.8 times, with the optimum return when they are 20% to 31% of the mix. In all cases it is always better to have print newsbrands in the mix. £9.08 £25.18 £18.82 £18.25 Total campaign revenue ROI Low 2-20% Medium 20-31% High % Print newsbrand % of total campaign spend in retail No print newsbrand spend 2015 spend levels 16.5% Retail Source: Benchmarketing/Brand Science Results Vaults 2011 to 2015 – excludes outliers and incomplete models

3 Budget optimisation The ROI study: methodology

Source: Benchmarketing/Brand Science Results Vaults 2011 to 2015 – excludes outliers and incomplete models The data from the meta analysis allows us to build response curves for each media channel This works by analysing ROIs across data points in each category to generate average response curves Curves that “go flat” suggest high diminishing returns and no benefits to spending, unless that curve is flat and above all others We can take an annual budget and optimise the overall ROI for the spend, by changing the mix It’s a simple hill-climbing optimisation that picks the highest and the slopi-est points by medium From the curves we can calculate the optimum media split for any given budget Budget optimisation 1 Revenue £m Media investment £m Online Display TV Online Search Newspapers VOD Outdoor Magazines Radio TV Sponsorship Cinema

20% 16% 13% 12% 11% 10% Annual spend £m Recommended print newsbrand % for optimal campaign ROI Recommended spend in print newsbrands would be double current FMCG level of 5% for food and drink brands Budget optimisation 2