ADMAP April 1986

ADMAP April 1986


Advertising in action: theory and practice

Lord of the Replies: lessons from

direct-response advertising

Alan Phillips

 

 

Much has been written about the theoretical effectiveness of advertising, but not that much has been written about the effectiveness of response to direct-response advertisements. This article looks at how response data should be collated, analysed and used to best effect, and at a computerized analysis programme that permits the detailed measurement of the contribution each separate factor makes to the overall return, and how this can be used for budget and media planning. Most of the popular beliefs about the relative values of different positions in the book and on the page are seen to be myths, and it is suggested that this may be equally true in the wider advertising field: attention is also drawn to the enormous differences which different copy can make.

Direct response is a most rewarding area of advertising rewarding, that is, if you like all aspects of your decisions, strategy, planning, creativity, buying, etc. etc., being minutely examined and your efforts being judged accordingly. Of course, if you are of the bent that prefers awards to rewards then it might all be a little tedious.

For the response advertiser there is no esoteric delve into the mysteries of TGI and NRS to produce magical demographic weightings which (supposedly) have the power to transmute readers into purchasers. For him it is results, results, results. It does not concern him whether his market is one-legged Albinos living in H28s as long as they buy.

For an area of advertising that is so rich in data, it is rather surprising that a cause for major concern should be how the response is handled. Many response advertisers still rely on an intuitive interpretation of results rather than on hard analysis, and this can lead to inefficiency.

At Phillips Russell we have designed a computerized analysis programme (programmed by those delightful Adserve people) that eliminates much intuition and replaces it with hard information. The system, PRAVDA - Phillips's Response Analysis Vehicle for Direct Advertisers - has proved to be a powerful tool and our approach is expounded in this article. Here I examine some of the sacred cows of advertising, those myths which advertising men clutch onto as to a truncheon in a riot. Those truncheons however, may well be no more effective than if they were made of wet papier mâché.

My hypothesis is that response results are a strong indicator of, and analagous to, how all advertising communicates. I am of the view that response tells us more about the realities of the advertising environment than archaic mythology. In 1939 David Ogilvy said, "My first basic rule consists within this premise: that the proved principles of mail order advertising should be applied to all campaigns."

The other main area of discussion is a philosophy of response which takes account of forecasting results to maximize income. Where I quote actual PRAVDA analysis figures, in order to ensure confidentiality and also to maximize the sample size, the total database of some 750,000 replies from more than 100 titles has been utilized. The disadvantage is, of course, that the conclusions for one client may well be the opposite of another’s, but for the purpose of establishing general points I feel that this approach is valid. The analyses have also been based on rate-card prices rather than actual prices, as otherwise the efficiency of the buying will distort from "purist" results.

The truth about PRAVDA

In order to become the Lord of the Replies it is essential that data are handled correctly and I now expand some of the thinking behind PRAVDA.

There are five prime areas in the handling of a response campaign.

1) Logging the media booking data.
2) Logging data gleaned from the voucher copies.
3) Logging replies.
4) Matching conversions.
5) Analysis and interpretation of the data collected.

The first four aspects are, in a way, just check list headings for entering data into the system and the fifth, analysis, is all. However, if the relevant data are not logged, then clearly analysis is not possible. Because the analysis is ultimately the most important aspect I have listed, for interest, the cells by which data can be analysed (in no particular order):

Publications (also by type and publisher)
Circulations
Readers per copy
Colour/mono
Copy approach
Products featured
Size of ad
Actual cost
Rate card cost
Special position
Competitive activity (by number, position and share of voice)
Position of the coupon spread
Number of pages in publication
Name/address/post code of respondent
Date of birth of respondent
Geographical region of respondent
Telephone/postal enquiry
Products purchased
Turnover
Method of payment
Response date

Imagine, if you will, a system that can analyse all the data, filtering out for your attention those aspects that you particularly desire to investigate. Imagine a system that takes the major response variables and gives them an index of importance. Imagine a system that allows you to analyse the reply data any which way for mailings, for testing, for what you will. Imagine a system that matches subsequent conversions to replies and updates the efficiency of each insertion. Imagine a system that shows reply build-up over time in graphical form to facilitate gap analysis and forecasting. Add to that the ability to request any information from the system just by asking, in English, and then you are part way to appreciating the power of PRAVDA.

As well as the sheer depth of analysis possible we achieve the speed that only computers can give, resulting in up-to-the-minute data. The press is changing radically and it is important that the response advertiser keeps on top of these movements. The results and concomitant rules produced by yesterday’s analysis may not be applicable today. We must continually revise our view of what works and what fails. Historically logged data, finding out months after the event the true results, is not sufficient in today’s market-place: knowledge is survival, up-to-date knowledge is growth.

Response advertising is not about obtaining the lowest cost per reply or conversion. It is about maximizing a client’s business at a profitable level. Most response advertisers operate in an ephemeral market-place: if they do not advertise at a particular time they have (permanently) lost a segment of business. For example, if a holiday advertiser does not advertise, the competition almost certainly will do and once the customer has signed up with another holiday company, he is lost for a considerable period of time. The same is true of double-glazing, unit trusts, loans, trusses, or whatever once the customer is taken out of the market-place he is a long time in coming back.

Obviously, however, an advertiser cannot operate an ubiquitous advertising campaign. The secret is to maximize his volume (decided by him on the basis of his own costings) at an advertising expenditure level that provides him with a suitable profit margin. Response advertising is about optimizing the inefficient. The "bankers" tend to take care of themselves; it is the other publications and strategy that need careful analysis (although, of course, the bankers must also be analysed).

For example, if an advertiser considers that an advertising/sales ratio of 10 per cent will give him a suitable margin over a given time period (say a month), it is an objective to achieve that 10 per cent. While each individual insertion should be negotiated to give the lowest possible A/S ratio, there are activities which may well be prudent to examine even if they are, individually, in excess of the target 10 per cent.

There are three basic ways of increasing the volume of response, all of which tend to be inefficient.

1) Run the advertisements more frequently in the banker publications.
2) Extend the media list outside the bankers.
3) Increase space size or add colour.

These activities can be run in any combination and while they all usually lead to a higher A/S ratio, if they are balanced correctly and the overall target A/S is achieved, then the advertiser has maximized his volume at a profitable level.

To illustrate the point further I have taken some hypothetical figures and show the set of calculations that can be made. Let us assume that the advertiser’s schedule to date, within the month, is forecast to achieve an A/S ratio of 9 per cent, the target being 10 per cent.

Let us also assume that, due to media availability, timing and so forth, three basic options (see Table 1) are open to the media buyer.

1) An extra insertion in one of the banker publications. Analysis has shown the buyer that running consecutive weeks, as opposed to alternate weeks, for this advertiser, in the available publication, reduces turnover by 40 per cent from the normal results, thus enabling a turnover prediction to be made.

2) Adding a publication that is used occasionally. Again the buyer can estimate from the database the ultimate turnover with some degree of precision.

3) Increasing the space size from a quarter-page to a page in one of the publications. This, the buyer knows will result in only a 30 per cent increase in turnover despite a nearly four-fold increase in space cost.

 

Table 1: Example of options for optimizing turnover

 

Advertising Spend

Estimated Turnover

A/S

Base Schedule

£45,000

£500,000

9%

Options Available

     

1. Extra insertion in a banker

£7,000

£50,000

14%

2. Extending the media list

£12,000

£100,000

12%

3. Going for a bigger space in a banker

£15,000

£80,000

19%

Taking all three options

£79,000

£730,000

10.8%

Dropping option 3

£64,000

£650,000

9.8%

Dropping option 2

£67,000

£630,000

10.6%

Dropping option 1

£72,000

£680,000

10.6%

 

From this simple example it can be seen that if the buyer decides on option 1 plus option 2, the advertiser’s sales turnover increases by 30 per cent and at a profitable level (A/S ration 9.8 per cent). And it should not escape attention that the advertising spend is increased by 42 per cent, thus increasing the agency’s income. Contentment all round. It can be appreciated, therefore, that PRAVDA is more than just dry academic, analysis: it leads to profits.

Media myths

According to the popularist version of the advertising bible (last revised edition circa 1920) all publications are read in a precise and similar manner. Firstly, only the front halves are read: of these, secondly, only the right-hand pages. So strong is this belief that media buyers spend much of their time howling at media owners demanding that their client’s ads appear in that "read" section of the publication. Some of the atavistic specimens of the buying department, horror of horrors, actually pay premiums for the privilege of satisfying this craving.

Table 2 gives cause for reflection. After looking at these figures it takes a real diehard to believe that right-hand pages are better than lefts, that first quarters of the book are worth pursuing, and that a "two-cut" position for the coupon increases business. While I would not propose that these indices be used as the base for the New Testament (because of the distortion inherent in mixing all the advertisers into one databank) the general picture shown does, nevertheless, hold true.

 

Table 2: Efficiency of ad/coupon positioning

Position

Index (100-normal)

Left-hand page

119

Right-hand page

81

1st Quarter of book

83

2nd Quarter of book

100

3rd Quarter of book

62

4th Quarter of book

155

 

 

Position of coupon on page: (double page spread view)

 

53

 

 

58

 

72

 

20

 

65

 

24

 

46

 

 

158

 

35

 

37

 

55

 

153

 

14

 

 

333

 

239

 

31

 

318

 

82

Another interesting analysis that we do from time to time is to correlate response results with readership by the target group. We have yet to find any correlation. Why should this be? My own belief is that, for many response advertisers, the main target audience at any point in time is a small fraction of the defined target group (assuming that the definition is accurate). A response advertiser might well be delighted with 500 responses out of a 10,000,000 readership, and so the chance of any standard target market definition representing a conformity amongst his actual customers is unlikely.

Of course, for the mass-marketeer, current audience definitions may well be adequate, but for specialist areas - and for the response advertiser - there is no substitute for analysis of actual data. So now having thus given you good cause for apostasy, I look at some creative aspects to complete the conversion.

Creative caprices

Visualize those meretricious creative teams, resplendent in permanent 5 o’clock shadow and pre-pressed crumpled garments, desperately emulating the mind of a 28-year-old housewife with 1.8 children, convinced in the power of the pun or some other equally riveting device that usually requires the reader to be knowledgeable of contemporary art forms, fashionable typefaces and the complete works of Marx (Karl or Groucho).

Needless to say, in response advertising punny advertising becomes puny advertising (they are not the only ones who can do it) and clever-clever approaches provide no rewards.

To demonstrate the range of results that different creative approaches may provide Table 3 shows, in index form, for one particular advertiser (unspecified) the results from 13 pieces of copy, with all variables except the copy effects taken out.

Table 3: Efficiency of different copy approaches

Copy

Index

 

1

110

 

2

136

 

3

51

 

4

49

 

5

43

 

6

404

 

7

55

 

8

169

 

9

38

 

10

70

 

11

105

 

12

47

 

13

27

 

With a factor of 15 between the best and worst ads, this is clearly an area where whims and opinions must be backed by data.

From analysis it can be shown, time and time again, that there are key elements in a press ad that are sine qua non for efficient response. The one golden rule, however, is that it must be immediately apparent to the reader by the mechanism of headline and/or visual what product category the advertisement is for. In this way those readers in the market are instantly caught. If the advertisement is clever but obscure, then a proportion of the red hot prospects have been turned away before they have discovered the purpose and content of the ad. Obviously others might be attracted: the curious, the advertising aficionados, but if they are not prospects then the communication is wasted.

Taking the argument further and comparing press with TV, one might easily come to the conclusion that for normal product advertising TV is successful because the audience tend to be captive and see the resolution of the creativity: in the press it is all too easy to avert one’s gaze.

I find this argument more plausible than the standard theory that the combination of colour, movement and sound is the reason behind TV’s advertising power. It appears more likely that TV works by dint of the way it is viewed rather than by any intrinsic communication ability over that of the printed word. There are too many good books with unmemorable cinematic treatments for one to be entirely convinced that TV works by some strange and subtle psychological process.

Perhaps that is why some creatives do not like response advertising; they would sooner argue with passion in support of their erroneous ways than be hit with an unpalatable truth.

Advertising is about commercial communication, and the best way to measure that communication is by profitable sales. All else is illusory; generally research is just a methodology from which inadequate data and dubious assumptions are extrapolated to achieve a calculated truth (truth defined within statistical limits, of course). And to understand response is to begin to understand advertising.

ADMAP April 1986




20/7/2001 ABP