Collegiate Athletic Success as Advertising: Is it Effective?

Harvard Business School Professor Doug Chung has written a new working paper titled, "The Dynamic Advertising Effect of Collegiate Athletics."  He explores the impact that athletic success impacts the quantity and quality of a university's applicant pool.  Here's an excerpt from the abstract to his paper:

I estimate the impact of athletic success on applicant quality and quantity. Overall, athletic success has a significant long-term goodwill effect on future applications and quality. However, students with lower than average SAT scores tend to have a stronger preference for athletic success, while students with higher SAT scores have a greater preference for academic quality. Furthermore, the decay rate of athletics goodwill is significant only for students with lower SAT scores, suggesting that the goodwill created by intercollegiate athletics resides more extensively with low-ability students than with their high-ability counterparts. But, surprisingly, athletic success impacts applications even among academically stronger students.

The findings surely will provoke some interesting debate.   Note that Chung finds that going from good to truly great in NCAA football, for instance, can cause applications to rise by nearly 20%.   It takes a significant move in other areas of a university to achieve a similar impact.  For instance, Chung estimates that a college would have to reduce tuition by nearly 4% to get the same rise in applications, or it would have to recruit higher-paid, higher-quality faculty.  What's interesting about this analysis is that some will say that the cost of athletic success outweighs the positive effect on applications.   That's potentially true.  However, Chung shows that there is a cost to other ways of driving applications higher as well... so it's not immediately clear what methods are most cost effective to increase application quantity and quality.  Of course, we have to remember that athletic success can be very difficult to achieve, and it can be fleeting at times.  Schools may spend a great deal of money and never get to the "great" level required to get this type of increase in applications. 

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Oreo: The Power of a Nimble Social Media Strategy

By  now, many of you have heard of Oreo's social media grand slam during the Super Bowl.  While all of us sat through that lengthy delay due to the power outage, Oreo's social media team unleashed the tweet heard round the world.   The tweet read:  "Power out, No problem."   The tweet included the photo shown here.

15,000 people retweeted that simple message.   More than 20,000 people "liked" it on Facebook.   Oreo's Instagram followers mushroomed from 2,000 to 36,000.   

Forbes reports on the most interesting part of the story - namely, how they managed to engineer such a rapid and highly creative response.  Apparently, Oreo's brand team had set up a "command center" at advertising agency 360i’s offices in New York City.    All of Oreo's advertising agency partners set up shop together at those offices, with Lisa Mann, an executive from Oreo's parent company on the  phone.   Mann explained how they moved so quickly:  “Because everyone was together, they had everyone in place to jump on a real-time marketing opportunity, which was, how would Oreo see the blackout? And Oreo saw the blackout as an opportunity to dunk in the dark.”

What a terrific story!   I love the fact that preparation yielded such a great result.  They knew that the Super Bowl represented a unique opportunity.  While so much attention is focused on the television ads, social media represents a huge opportunity at low cost.  With the blackout, everyone took to Twitter.  The volume of tweets exploded.  That posed a challenge for many firms though. How do you stand out when the Twitter world suddenly became so crowded.   Being prepared and ready to move so quickly turned out to be a tremendous advantage.   

Notice that Oreo did not try to be controversial or outlandish.  They stayed true to the brand.  So many social media and television advertising efforts associated with the Super Bowl yield poor results, because they emphasize being funny or controversial at the expense of communicating an authentic and consistent message about the brand.  Think about some of the ads you saw this weekend.   How many times did you think to yourself:  While that ad was funny, I'm not sure I know what it has to do with that product or brand.  

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User-Generated Content: Engaging Customers, Enhancing Brand Authenticity

Leading edge companies leverage user-generated content to bring their brands alive, engage some of their biggest fans, and emphasize the authenticity of their brand.  They don't just solicit customer reviews, collect likes on Facebook, or ask customers to vote on items that they should sell.  They actually encourage customers to help them tell their brand story.  Paige Beaumont, Assistant Editor of the Post Advertising blog, writes about the impact of user-generated content:  

Great user-generated content (UGC) should not exist in a vacuum—it should be reused, when and where appropriate, to bring color and authenticity to a brand’s marketing.  As brands expand their social-media footprints, many have also (smartly) placed more emphasis on engaging with their fans. As a result, they’ve begun proudly featuring selected consumer contributions in print, TV and online advertising. Dedicated fans often create a gold mine of content that’s just waiting to be explored, and in due course, brands have begun to dip into this resource. It’s the easiest and most direct way to build relationships with customers, because their passion for their favorite brands makes them happy to respond and share their stories—messages that are infinitely more compelling than what the brand might say.

Paige offers some terrific examples in this blog post.   For instance, she highlights an advertisement by Target that features real home videos of high school students opening their college acceptance letters.  The ad clearly evokes an emotional reaction, and Target appropriately makes a connection to their own efforts to donate a portion of revenues to schools throughout the country.  

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Johnnie Walker: The Man Who Walked Around The World

My good friend, John Crosby, sent me a link to this video this morning.  The brilliant and creative short film features Scottish actor Robert Carlyle telling us the history of the iconic whiskey brand Johnnie Walker.   The short film offers some fun facts about the company's history, such as the rationale for the square bottle and the slanted label.   Moreover, the constant walking, use of props, and beautiful scenery truly are captivating.

To me, the short film demonstrates the creative way in which companies can use lengthier web videos, on platforms such as YouTube, to do things that you cannot do in a brief 60 second television advertisement.  Sharing the history of a brand in a creative manner can be a wonderful way to reinforce its authenticity.

The genius of this "Keep Walking" brand campaign by Johnnie Walker is that it is wrapping the brand in history and nostalgia while simultaneously offering a message of progress and hope for the future.  That can prove to be a tricky proposition.  No brand wants to be "your father's Oldsmobile" when it comes to categories such as whiskey.  Yet, the history and the roots of the brand are a key part of the image and positioning that make it iconic.   This short film threads the needle beautifully, bringing together past, present, and future in an authentic way.

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How Do Sexy Ads Affect Consumers' Desire for Immediate Rewards?

Wharton marketing professor Gal Zauberman and USC Professor B. Kyu Kim, have written a working paper called "Can Victoria's Secret Change the Future? A Subjective Time Perception Account of Sexual-cue Effects on Impatience."   The scholars conducted a series of experiments in which they showed "sexually suggestive and non-suggestive photographs to self-identified heterosexual male students."  The suggestive photos came from the Victoria's Secret catalog.  Geesh... I imagine that students flocked to sign up for this study!  

After seeing the images, subjects had to assess the value of items, such as a $65 Amazon gift card, that were received immediately versus a year later.  The research found that viewing the suggestive photos tended to enhance the value of the immediate reward and diminish the value of rewards provided a year later.  In other words, the subjects' discount rate rose substantially. 

Zauberman argues that, "Part of the reason why people discount future events, more or less, is their perception of duration [of time]."  The suggestive photos may "lengthen the perceived temporal distance to delayed rewards. That is, sexual cues make the wait seem subjectively longer, resulting in greater impatience."  In other words, consumers may not only be compelled to buy an item, but they may be much more likely to buy NOW even if it is not the most prudent financial decision. 

The scholars conducted other experiments as well.   They also showed subjects photos "designed to elicit physical symptoms similar to arousal -- increased heartbeat and respiration, for example -- that weren't actually sexual in nature."  Interestingly, people showed the same impatience that occurred when they had viewed the suggestive photographs.   In sum, "Sex may not be the only driver of this temporal response."

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What's Wrong with Lifetime Value of a Customer Models?

Bill Gurley, a partner at Benchmark Capital, has written an outstanding column for Forbes which is titled, "The Dangerous Seduction of the Lifetime Value (LTV) Formula."    Lifetime value, of course, is the net present value of the profits that will be generated by a particular customer over time.   As Gurley points out, many companies, particularly of the consumer internet variety, use the LTV model to argue for "get big fast" strategies in which a firm spends aggressively to acquire customers today in expectation of healthy future profits.   Unfortunately, many companies use the tool to justify wildly excessive marketing spending in the near term.  Moreover, as Gurley points out, the people who "own" the tool within a company often are the very same individuals who are petitioning for bigger marketing budgets.  The advocates are the analysts, and their calculations are clearly biased.   Gurley also explains some of the common mistakes people make in their calculations.  Here's an excerpt:

As an example, marketers often divide spend by total customers to calculate SAC rather than just those customers that were “purchased.” If you have organic customers, they shouldn’t be included in the spend calculus. They would have arrived regardless of spend. Also, many people discount “revenues” rather than marginal cash contribution. It is critical to bundle all future variable costs of supporting the customer in order to fairly estimate the future contribution.

I cannot stress this last point enough.  I see students make this mistake a great deal.  For instance, they conduct a break-even analysis, and they divide a fixed cost investment by the revenue per unit that will be generated in the future.  No! That's not right.  You have to divide by contribution margin, not revenue.  For every dollar in revenue that will come in the door down the road, there will be some variable costs.   You have to deduct those variable costs when thinking about value. 

Gurley makes one other key point that cannot be stressed enough.  He explains that, "Organic users typically have a higher NPV, a higher conversion rate, a lower churn, and more satisfied than customers acquired through marketing spend."   Many companies fail to acknowledge that key point. I've hit on a few key points here in this post, but I strongly encourage you to read the entire article.  It's filled with great points about this widely used, and widely misused, analytical tool. 

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Is YouTube An Oppportunity For Terrific Advertising Experiments?

Alex Konrad has written an article for Fortune titled, "Pepsi, Brewing up viral magic."   The article describes how Pepsi debuted a new "Uncle Drew" ad for Pepsi Max on YouTube.   According to the article, "In the five-minute clip, 'Uncle Drew' amuses, then mesmerizes, a pick-up basketball game and its fans with crossovers and dunks unbecoming of a white-bearded, paunch-carrying old man, and only possible because the true identity of 'Uncle Drew' was a carefully disguised young basketball star, the clip's writer-director Kyrie Irving."  (Irving is the former Duke player and current NBA Rookie of the Year who plays for the Cleveland Cavaliers).   What's interesting is where the ad went next... it is now appearing on television as a 30-second spot during the first few games of the NBA Finals between the Miami Heat and the Oklahoma City Thunder (go Thunder!). 

That progression is somewhat unique, going from YouTube to television.   I find it very interesting though, and I think more firms should emulate this strategy.  This story proves that firms can and should use YouTube not just as part of a social media marketing strategy... They should think of YouTube as a land of experimentation.   YouTube offers an inexpensive way to experiment with new ad strategies.  The cost of failure is minimal, and even the ads that don't become viral sensations can be "useful failures" in that they may provide powerful learning opportunities.  

If firms are to use YouTube as a powerful mechanism for low cost, low risk, fast experimentation, then they need to have clear methods of evaluating these experiments.  Konrad's article explains that Pepsi had just such a method of evaluation:

"Pepsi Max brand team member Sam Duboff, who led creation and development of the piece, says 'Uncle Drew' had to satisfy three major metrics in order to justify its adaptation into a television segment. 'Uncle Drew' had to keep viewers engaged, hit the brand's target demographic, and generate its own legs through word of mouth. With 80% of viewers watching through the 4-minute mark, a 82.1% male viewer group that skewed towards the brand's core 25-44 age group, and over 5 million views from embedded YouTube players suggesting the viewer watched over a media site or Facebook, Duboff and his team hit all three." 

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Old Milwaukee: A Low-Budget Super Bowl Ad?

Companies spend enormous sums of money advertising during the Super Bowl.   If you are Budweiser, you can afford to invest in this type of marketing.  However, if you are Old Milwaukee beer, it becomes more difficult to justify that type of marketing expense.   The firm simply doesn't have the scale to support that type of advertising.  Moreover, it's not a premium beer; the firm has a simple, low cost strategy.  Old Milwaukee came up with an ingenious solution though.  They developed a simple TV commercial with Will Ferrell, who happens to love their beer.   It didn't run nationally though.  The firm ran the commercial in only one market - North Platte, Nebraska.  The town has approximately 15,000 homes.   It's the second smallest TV market in the country by Nielsen standards.  Why run the ad in this market?  Old Milwaukee actually leveraged that low-cost TV ad to create excitement via social media.   Boston-based advertising agency Mullen has reported that the Old Milwaukee ad generated more mentions on Twitter Sunday night than many nationally aired Super Bowl ads.  Moreover, a user uploaded a low-quality copy of the ad onto YouTube.  Old Milwaukee set up a link to YouTube on its official Facebook page.  Soon, the ad had been viewed more often than Budweiser's primary Super Bowl commercial!

What's the lesson here?  If your firm has a low cost strategy, it must think creatively about how to market its products.  Social media offers an opportunity to promote a brand at very little expense.  However, many firms are blitzing social media platforms these days.  It's become a cacophony at times.  Therefore, you have to think about how to emerge from the clutter.  Old Milwaukee did just that with an ad that not only generated buzz initially on Twitter and Facebook, but that also had a second life as a story picked up in the mainstream media about an innovative marketing strategy.  That story, of course, will live on far longer than the immediate surge of interest generated on Twitter and Facebook Sunday night.  After all, look at this blog and many others which are writing about it!

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Sponsored Search: Do You Want to Be Listed First?

You might think it's obvious that a firm should seek to have its advertisement ranked first in a list of sponsored search engine results.   Being at the top of the list of sponsored search listings ought to be desirable, right? Well, not so fast!  Wharton Professor Kartik Hosanagar and his co-authors Ashish Agarwal and Michael D. Smith examined online ad auctions in some recent research.  They found that the ads in the top position do generate the most clicks, but that doesn't necessarily turn into the most revenue or profit.  The scholars found that ads in the 2nd, 3rd, and 4th positions seemed to have higher conversion rates (% of clicks turning into purchases).  That's interesting, of course, since it is more expensive to be placed in the first position. 

Why might that be the case?  The researchers offered two potential explanations.  First, many consumers clicking on the top ad might not be serious buyers.  They may just be looking for information on a particular product or service, and so they click on the first ad as part of a broad information gathering strategy.  Second, consumers may be exhibiting what psychologists call the recency bias.  In other words, they click on the top ad, and then click on the next few sponsored search ads to compare pricing or product features.  However, they don't return to the top ad in many cases before making a choice.  According to the researchers, consumers tend to "purchase from the most recently evaluated advertiser if all evaluated options appear reasonable." 

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Making Cadillac Cool Again

Source:  Michael Edward, Fast Company

Fast Company has an article this month about Cadillac's attempt at reviving the brand and becoming more appealing to young people.  The article describes how Cadillac hired the Fallon advertising agency to develop its current campaigns.  The agency promptly put 28 year old Veda Partalo in charge of remaking Cadillac's image.  Putting someone that young in charge certainly takes guts, but of course, she understands what makes young people tick.  

I found one particular element of her strategy quite interesting.   Partalo describes how she chose not to focus on specific models, but instead tried to emphasize the brand as a whole:   "Sometimes you want to communicate to each buyer based on his individual needs.  But the luxury buyer is different. He's more concerned with the brand's overall background, its heritage. So we wanted to do two things.  First, bring Caddy back to its original standing. Second, do it through a campaign of substance."

In this case, I think the emphasis on the brand, rather than specific models, makes a great deal of sense.  First of all, it's a much more efficient way to spend advertising dollars - no more mini-campaigns for each model.  More importantly, Partalo has to get Cadillac into the consumer's consideration set.   Customers won't examine a particular model if Cadillac isn't even on their radar screen.  Therefore, she has to make them willing to be open to the idea of purchasing a Cadillac.  Once she achieves that, Partalo can sell consumers on the attributes of particular models.   Many firms make this mistake, thinking that they can sell consumers on a great new product without confronting the reality that the brand as a whole may simply not be a viable option at the moment for many individuals.  

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How Twitter Generates Revenue

Business Insider CEO and Editor-in-Chief Henry Blodget conducted this very informative interview the Twitter's Chief Revenue Officer Adam Bain.  Check it out to learn more about how advertising and sponsored tweets work on the Twitter platform.

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Advertising: The Value of Celebrity Endorsements

What's the value of a celebrity endorsement for your brand?  Harvard's Anita Elberse and and Barclay Capital's Jeroen Verleun examined this question recently.  They looked at how a firm's sales change as they sign a star athlete, as well as how revenue changes with major accomplishments by the athlete.  Elberse and Verleun found that a firm's sales do rise with the signing of a star athlete - on average by approximately 4%.  Moreover, revenue increases with each subsequent major accomplishment by the athlete.  In other words, winning helps drive the firm's sales.  However, they found decreasing returns to winning.  In other words, sales increases tend to diminish in size as the athlete racks up subsequent victories (the first Grand Slam victory by a tennis star yields a bigger jump in firm revenue than the fifth Grand Slam victory).  The researchers argue that firms need to keep these decreasing returns in mind as they contract with star athletes.  For instance, providing bonuses of equal size for each major victory would not necessarily make sense, since the associated economic benefit for the firm falls over time.  Moreover, the decreasing returns might suggest that long term deals should be negotiated with caution. 

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Could Skechers Shape-Ups be what society really needs?

I highly recommend this blog post from my colleague, Keith Murray, regarding Skechers' marketing campaign for its new footwear line. 

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