Case synopsis----quick finish in 4 hours
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PROMOTION, VIRAL MARKETING, AND ADVERTISING FOR START-UP VENTURES
LECTURE 6
CHAPTER 5: PROMOTION AND VIRAL
MARKETING
PROMOTION, VIRAL MARKETING, AND ADVERTISING
AN EXAMPLE – THE COOLEST COOLER
Coolest Cooler A Kickstarter campaign promoting a newly designed cooler
> The first time Ryan sought funding on Kickstarter in November 2013, the campaign failed to raise the targeted $125,000.
− The video
> The second time in August 2014, the campaign was one of the most successful Kickstarter campaigns ever, having raised more than $13,000,000.
> Why?
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PROMOTION, VIRAL MARKETING, AND ADVERTISING
AN EXAMPLE – THE COOLEST COOLER
Coolest Cooler A Kickstarter campaign promoting a newly designed cooler
> August vs. November − Supporters were more receptive to a summer “fun” product in August
> The second video − demonstrated the product
− communicated the benefits: all about fun—a “party in a box”
− connected with the target audience
> Simple viral tools used in the second video − to encourage supporters of the product to spread the word
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PROMOTION, VIRAL MARKETING, AND ADVERTISING
METHODS FOR PROMOTING PRODUCTS AND ENGAGING CUSTOMERS
> These promotions should be tested and adapted to focus more resources on those that yield the best results— adaptive testing and experimentation
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PROMOTION, VIRAL MARKETING, AND ADVERTISING
GIVE IT AWAY
> Netscape Navigator − freely downloadable for non-profit users
− 90-day free trials for other personal or corporate use
> The strategy – aiming virality! − College students Professors industry and the press!
> Profits? − Monetize the user: space on the user’s desktop revenue
selling advertising and other items on their home page
− Netscape’s winning position Internet servers business
What has happened next?
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PROMOTION, VIRAL MARKETING, AND ADVERTISING
GIVE IT AWAY
The Internet browser story
> MS Internet Explorer – completely free
> Netscape – completely free
> Mozilla – a spin-off foundation from Netscape: Firefox, free!
> Google Chrome – free!
How do they make money now? Directing searches to providers (Google, Bing, and Ask, among others)
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PROMOTION, VIRAL MARKETING, AND ADVERTISING
GIVE IT AWAY
When can “free” work?
CLV = M × L − CAC
M x L >> CAC !!
> e.g., “Free” Gmail service with 15G free space − Ads being shown
− searches coming from mail
− more than paying for the costs of providing the service
> The key is − the ability to generate revenue through another means
− ad, paid account, data, cross selling, etc.
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PROMOTION, VIRAL MARKETING, AND ADVERTISING
GIVE IT AWAY
When can “free” work?
CLV = M × L − CAC
M x L >> CAC !!
> e.g., “Free” Gmail service with 15G free space − Ads being shown
− searches coming from mail
− more than paying for the costs of providing the service
> The key is − the ability to generate revenue through another means
− ad, paid account, data, cross selling, etc.
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PROMOTION, VIRAL MARKETING, AND ADVERTISING
FREE TRIALS
> To overcome the perceived cost of switching − Making it easy to try a product or service is a key factor in creating demand
− Ensure the user realizes the true value • doesn’t perceive the product as one that should be free
> Hybrid models − Limited usage is free, unlimited or professional versions not
− In-app purchases
> The key metrics to consider
CLV = M × L − CAC
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PROMOTION, VIRAL MARKETING, AND ADVERTISING
WHEN DOES “FREE” WORKS?
> The four key elements needed: − Low product cost
− Low switching cost
− Easy distribution
− High customer lifetime value (CLV) relative to customer acquisition cost (CAC)
> The critical thing is to constantly measure the metrics of every stage of the consumer adoption process.
− What fraction of users who see your product downloads the app?
− What fraction opens it for first use?
− What fraction uses it more than once?
− …
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PROMOTION, VIRAL MARKETING, AND ADVERTISING
VIRAL MARKETING
> Can be as simple as a short sentence: − Hotmail: “P.S. Get your free email at Hotmail,” to the bottom of every e-mail
sent through its service
> A viral situation: − Each user tells her friends to download the app or visit a website
− Each new user “infects” many of her friends with the product,
− The company offering the product may achieve exponential growth
Why viral? − e.g., because the app will enable them to communicate, share experiences, or
work together (LinkedIn, Facebook, WhatsApp…)
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PROMOTION, VIRAL MARKETING, AND ADVERTISING
VIRAL MARKETING
> Key metrics: − Viral Coefficient = the number of new users who sign on (or download the app)
for each additional user
− If 1 new user sends a new Instagram photo to her friends who are not on, and 2.5 (average) download the app, Instagram would have a 2.5 viral coefficient (2.5/1 = 2.5)
− “> 3” indicates potential explosive growth and can be conducive to raising investment capital
> Some non-organic ways − Dropbox; offering 250MB space for referrals
− Airbnb: discount coupon for the user and the referred new users
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PROMOTION, VIRAL MARKETING, AND ADVERTISING
VIRAL MARKETING
> Using Social Media for Viral Marketing − Ice bucket challenge
> But what types of messages are viral? − 10 points you need to know…
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PROMOTION, VIRAL MARKETING, AND ADVERTISING
VIRAL MARKETING
1. Keep it Short − people do not want to read/watch long contents
2. Have an interpersonal, human angle − you need to start the conversation
− “traits in your boss you don’t like”
3. Rough content that feels genuine to them − highly produced stuff is not authentic!
4. Create something people can engage with − People want to engage with content, not just consume it
− creating quizzes or games with your content
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PROMOTION, VIRAL MARKETING, AND ADVERTISING
VIRAL MARKETING
5. Offer the ability to react / comment − Good comment community viral contents
6. People like lists / images − Lists are easy to understand
− images are way more viral than video
7. Give up page views − Contents on one page
8. Compelling headline, a call-to-action or a list
9. The content isn’t stupid and embarrassing to sending around
10. Appropriate format
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An example
PROMOTION, VIRAL MARKETING, AND ADVERTISING
EVENT MARKETING
> The goal − to have the press use editorial ink and space to promote a product, rather than
paid advertising
− not only write about the product, but also about the level of excitement surrounding the event — convince skeptical users to try
> Create your own events − Apple’s World Wide Developers Conferences (WWDC) or iPhone launch
> Use a third party event − Name a stadium
− Sponsor local and charitable event
− Industry conference
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PROMOTION, VIRAL MARKETING, AND ADVERTISING
PRODUCT PLACEMENT
> The organic ways: influential people using your product, consumers should follow
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£8.50, from various independent coffee shops, Oxfam or Amazon
SIZE: 340ml or 12oz.
WEIGHT: 128g.
HEAT RETENTION: Temperature 20 minutes after cup was filled with boiling water
was 69c.
LEAK WHEN FULL? A little.
LEAK WITH DREGS? No.
Made by Ecoffee Cup — which produces a large range of stylish designs (including
William Morris prints) — it looks good and is lightweight. The eco-credentials are
decent, too. ‘Made from one of the world’s most sustainable resources — naturally
organic, rapidly renewable bamboo fibre,’ the firm boasts.
The rubber toggle that you push into the sipping hole stops dregs leaking, but it loses
heat rapidly, making it uncomfortably warm to hold initially.
PROMOTION, VIRAL MARKETING, AND ADVERTISING
PRODUCT PLACEMENT
> More frequently: − In a movie: the Italian job – mini cooper
− In TV series • Apple has a policy of lending Macs to any TV program that will show an office to be an
all Mac office.
− In computer/video games
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PROMOTION, VIRAL MARKETING, AND ADVERTISING
SMALL FREEBIE
> Getting your company’s name, logo, and message into the mind space of as many people for as long as possible
> A small freebie will work
> When it has: − Longevity (your information on an ice cream?)
− Visibility (screen cleanser?)
− Cleverness (only logo on smart phone case?)
− Usefulness (smart phone handle?)
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CHAPTER 6: ADVERTISING
PROMOTION, VIRAL MARKETING, AND ADVERTISING
ADVERTISING: AN EXAMPLE
> Synygy, Inc. an entrepreneurial company that does administration of complex incentive compensation plans.
> The first version: − Used an advertising agency in the traditional way.
− The advertising was run for a period of six months in print media
− target audience—senior sales force managers and administrators
− The objective: bring good leads for their sales force to follow up
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PROMOTION, VIRAL MARKETING, AND ADVERTISING
ADVERTISING: AN EXAMPLE
> An ad that was typical of the ads the agency ran
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This ad campaign brought in from 2-5 leads per week either over the phone or to the company’s website.
PROMOTION, VIRAL MARKETING, AND ADVERTISING
ADVERTISING: AN EXAMPLE
> One of the company’s employees brought a mock-up of a very different print ad. The ad was tested by running it once in place of the old ad.
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• The ad was much better than the old ad in that period of time.
• Synygy began using the new ad exclusively
• With no change in media budget or media plan, the new campaign was at least 15 times more productive than the old campaign
Adaptive experimentation in advertising can provide large returns for modest investments!
PROMOTION, VIRAL MARKETING, AND ADVERTISING
MOVING TO MORE EFFECTIVE ADVERTISING
> Entrepreneurs − believe that advertising is too difficult to evaluate on a cost-benefit basis
− often adopt approaches to advertising that large packaged-goods companies use
> Certain rules are dominating − If you want to achieve a market share of x%, you must maintain an advertising
budget that is greater than x% of the amount spent by all the competitors in the category
− If an area or market segment has x% of revenues, it should get x% of the advertising exposures—its “fair share.”
− …
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PROMOTION, VIRAL MARKETING, AND ADVERTISING
MOVING TO MORE EFFECTIVE ADVERTISING
> This rule might be fine with large firms
> Entrepreneurs can’t run their businesses on faith − They must allocate scarce capital resources to maximize the value
− Advertising is only one alternative use of scarce resources.
> Entrepreneurs have to improve the productivity of advertising
> How?
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PROMOTION, VIRAL MARKETING, AND ADVERTISING
HOW ENTREPRENEURS CAN IMPROVE THE PRODUCTIVITY OF THEIR ADVERTISING
> The key advertising decisions are − budget (how much should I spend?)
− media planning (where and when should I place the advertising?)
− copy (what should I say?)
> Entrepreneurs usually get ideas from someone (agency, friends, partners, parents, etc.)
− e.g., “Let’s e-mail an ad with a discount to promote trial of our new app”
− Then what?
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PROMOTION, VIRAL MARKETING, AND ADVERTISING
HOW ENTREPRENEURS CAN IMPROVE THE PRODUCTIVITY OF THEIR ADVERTISING
> Entrepreneurs need a way to evaluate the campaign − the incremental margin contributed by that new revenue will more than cover
the expense.
− and this return is better than other uses
− If yes, continue the campaign; otherwise, use alternatives…
> Continuously improving the campaign and re-evaluate the improvements
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PROMOTION, VIRAL MARKETING, AND ADVERTISING
IMPROVING CAMPAIGNS
> How to improve campaigns? 1. Every campaign is consistent with your positioning
2. Generate a number of very different campaigns
3. Evaluate the potential incremental revenue of each
4. Run only the best one
> Generate a number of very different campaigns ? − Increasing the variability of the creators
− Encourage option ideas from everyone who possibly can help in the creative process
− Do not make advertising perfectly artistically beautiful!
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PROMOTION, VIRAL MARKETING, AND ADVERTISING
EVALUATING CAMPAIGNS
One possible way:
> Watching the daily revenues
> Estimate “what revenue would have been without the advertising or promotion campaign.”
> The best comparison to use for evaluating a campaign − the difference between revenues per week during the campaign versus before
the campaign started vs. the same numbers for areas in which the campaign was not used over the same time periods
> A better way …
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PROMOTION, VIRAL MARKETING, AND ADVERTISING
EVALUATING CAMPAIGNS
Planned Market Experimentation using a sample of the market
The five characteristics: − The assignment of which areas or subjects will get the campaign or the control
(nothing different) should be random
− Nothing else could have caused the results observed except for the campaign you are testing
− The results can be logically projected to the firm’s real marketing situation in which the campaign would be used
− The experimental campaign must precede the sales effects it is supposed to cause
− There must be a comparison group that did not receive the campaign or received a different campaign
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PROMOTION, VIRAL MARKETING, AND ADVERTISING
MEDIA PLANNING
> The key: − Finding the media option that has the most likelihood of generating
incremental revenue per dollar spent
> Media option needs to be − consistent with the firm’s strategy
− directly related to the campaign
> A sample template for media evaluation …
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PROMOTION, VIRAL MARKETING, AND ADVERTISING
MEDIA PLANNING
> Step 1
> B: “How valuable to me is reaching a person in one segment versus another?” (subjective judgment)
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PROMOTION, VIRAL MARKETING, AND ADVERTISING
MEDIA PLANNING
> Step 2
> E: the fraction of audience members who will actually be exposed to your ad.
> F: How much do I care to have a good potential customer be exposed to my ad in one media vehicle versus another?
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PROMOTION, VIRAL MARKETING, AND ADVERTISING
MEDIA PLANNING
> Step 3
> G, H, & I: The fraction of each segment that is counted as being “in the audience” of each of the media options being evaluated.
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PROMOTION, VIRAL MARKETING, AND ADVERTISING
MEDIA PLANNING
> Step 4
> M: the total audience of each media weighted by the importance of that segment to the firm
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PROMOTION, VIRAL MARKETING, AND ADVERTISING
MEDIA PLANNING
> Step 5
> M x E x F: combining the media audience potential, ad exposure probabilities, and the relative media values into the “bang.”
> Then divided by the costs per insertion of the media to get a relative “bang per buck.”
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PROMOTION, VIRAL MARKETING, AND ADVERTISING
THE DIGITAL MARKETING REVOLUTION
> Digital marketing: − Focus your ad spend much more specifically to market segments
− Two trends: digital and mobile
> Advantages − precisely target market segments
− learn about customers via readily observable online behaviors
− engage with customers
− test campaigns cost effectively
> Display Ads
> Search Engine Optimization
> SoLoMo
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PROMOTION, VIRAL MARKETING, AND ADVERTISING
THE DIGITAL MARKETING REVOLUTION
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PROMOTION, VIRAL MARKETING, AND ADVERTISING
SUMMARY
> Promotion and Viral Marketing
> Advertising − Again, adaptive testing!
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