1. 1 Greg Stuart President & CEO, Interactive Advertising Bureau What Sticks: Why Advertising Fails & How to Guarantee Yours Succeeds Insights from Research against $1Billion in Advertising Spending

2. 2 All the News is the Same… Broadcasting and Cable Advertisers Think Twice, look for better return on investment. Investors Business Daily Death of The 30-Second Spot? AdvertisingAge “Cracks in the Foundation” “The business of advertising is under extraordinary pressure. Digital technologies, shifting consumer behavior and demands for accountability threaten – and in some cases already have damaged – decades-old business models.” FORTUNE Nightmare on Madison Avenue; Media fragmentation, recession, fed-up clients, TiVo—it’s all trouble AdvertisingAge “It’s Broken” P&G’s Stengel takes the industry to task for clinging to outdated media model Making Marketing Measure Up; The pressure is on to take the guesswork out of Ad Spending McKinsey “The average tenure of the CMO is less than 23 months”

3. 3 And, We Don’t Seem to Own Responsibility for a Burden of Proof Donny Deutsch speaks to 500 Marketers… “We did a wonderful spot…on the Superbowl… for Mitsubishi Gallant...that stops at the end and [says] go to “seewhathappens.com.” We got about 600,000 clicks. Was that great or that not great? We told the client it was great so it was great.” [nervous laughter]

4. 4 If Advertising (as a product) had a Slogan… Ads Work WondersHalf the Money is Wasted Courtesy of Erwin Ephron

5. 5 The Truth Is…Marketing is Hard Suppose you have 5 options: 5 Brand Positionings 5 Customer Segmentations 5 Ad Creative Approaches 5 TV Schedules/Plans 5 Online Plans 3,125 combinations billion combinations 10 to 10 th = 1 billion combinations

6. 6

7. 7 And The Future is More Chaos Broadband HH’s over 50 M (65%)  100 million streams/mo. DVR’s penetration 30 M in ‘08  85% claim to skip ads iPods owned by 12% Cell Phones ->130 M subs (75%) Games consoles -> 50 M Other media are challenged Consumers are changing

8. 8 So What is a Marketer to Do? The Following is One Model for Making Sure Your Advertising Sticks!

9. 9 $1 Billion Ad Spending Researched Against 30 Brands’ Campaigns 1.1 million consumers surveyed

10. 10 What Did We Learn? Over $105Billion of Ad Spending is wasted (1) What makes you think yours isn’t? (1) Of the $275 Billion in U.S. Advertising Spending

11. 11 So How Do You Guarantee Your Advertising Sticks?

12. 12 There are Only 3 Things to Get Right MotivationsMessagingMedia

13. 13 Motivations 36% Missed it

14. 14 Who’s Headquarters is This?

15. 15 An “Innovative” Financial Services Co. ING

16. 16 Did Jell-O get their Segmentation Right?

17. 17 Control (No Online) Consumers Exposed to Online Ad Avg Weekly Volume per 100 Households Measured in Ounces Sales Lift: + 7.5% Incremental Volume +.1 oz Online advertising resulted in a 7.5% sales volume lift The Online Ads Worked…But They Could Have Done Better

18. 18 Motivations: Insights 1.Insure universal agreement on success in Company  Why do consumers buy your brand?  Are you targeting a valuable customer segment? 2.Online research = ROI

19. 19 Messaging 31% Missed it

20. 20 How do Consumers See Your Ads?

21. 21 How Bad is Online Creative? Of the last 5 XMOS programs, creative testing was done prior to the study launch Only 1 brand’s ads required no adjustment 2 brands found 1/2 the ads were not effective Diluting the effectiveness of the campaign 2 brands discarded ALL ads & started all over Both developed better ads that scored much better Who were the 5 Advertisers? P&G J&J Kraft Nestle Ford Who were the 5 Advertisers? P&G J&J Kraft Nestle Ford

22. 22 Nothing Else Matters if Creative is Wrong B A

23. 23 Creative Makes a BIG Difference Better creative can make the difference between success and absolute failure Ad A

24. 24 What Made the Difference? Persistent Branding! B A Source: XMOS

25. 25 Messaging: Insights 1.Does your advertising pass the glance test? Online is NOT linear (maybe other media are not too) 2.Online creative testing is cheap – SO DO IT! Not Testing is REALLY expensive! By the way… 47% got either Motivations or Messaging wrong

26. 26 Media 83% Missed it

27. 27 10.0% 20.0% 30.0% 40.0% 50.0%60.0%0.0% When Does Your Medium Wear Out? Introducing New Menu Item: Grilled Chicken Flatbread Sandwich Budget % Aided Awareness 20% of Broadcast Budget Reinvested 13.6% in Online Point of Diminished Returns 5pt Gain! Cut 6.4%

28. 28 Also, No Medium Can Do it All TV Use Online Use Heavier Lighter Heavy TV Heavy Online Heavy TV Heavy Online Heavy TV Light Online Heavy TV Light Online Light TV Light Online Light TV Light Online Light TV Heavy Online Light TV Heavy Online 26% 38% 15%21% Media Usage among 18-49 year old target 34.3 Million!

29. 29 Figure Out What Works Better Lunch Average If Marketer had focused impressions on the 6 hours around lunch time, impact would have been significantly better Simple Timing Can Really Change Impact

30. 30 “Most Important Launch In History Of Ford” - Bill Ford

31. 31 Did Online Really Produce Sales? Online, therefore, contri- buted to 6% of sales, or $750,000,000 (1) in truck sales (1): 500,000 trucks sold a year, 6% equals 30,000 trucks x’s $25,000 per truck, or $750,000 +21% Increase in Sales 2.5% Online

32. 32 What is Impact of Increased Online? Online included Roadblocks & In-Market Plan would then sell +5%, or 25,000 trucks Results in additional $625,000,000 annual sales Optimization and Judgment suggested +6% increase in Online @ $25,000 per Truck

33. 33 Media: Insights 1.Measure, Measure, Measure Media is an investment 2.Mix MATTERS (It’s everything)  Get a handle on diminishing return curves  More than 50% of brands are over invested in TV 3.Online in 75% of studies was most cost effective medium in mix

34. 34 The 4 th M The 4 th M Maximization

35. 35 Maximization is Applying Classic Innovation Theory To Marketing 70-20-10 70% of budget to what you know works 20% to innovating off of what you know works 10% to new ideas

36. 36 The “Next” F-150 TV Ads

37. 37 The “Next” F-150 Magazine Ads

38. 38 The “Next” F-150 Online Ads

39. 39 Roadblock Trying Something Brand New: Home Page Takeover Ad Run On One Day on Each Portal

40. 40 Cost Effectiveness of Each Medium Cost to Increase Purchase Consideration Brand Metric: Purchase Consideration (top 2) Relative Cost Index Sample Cost TV2153$21.53 Magazine354$3.54 Roadblock196$1.96 Online100$1.00 Interpretation: If it cost Online $1 (indexed of 100) to increase purchase consideration, then it cost $1.96 for the roadblock, $3.54 for magazine and $21.54 to TV to achieve the same increase.

41. 41 Getting Each M Right Guarantees Your Advertising “Sticks” MotivationsMessagingMedia Maximization

42. 42 How Do we Know Advertising Succeeds? Accountability is not measurement, Accountability is doing something about it

43. 43 Greg Stuart 631.702.0682 greg@iab.net Thank You What to know more? Book is out this Fall