Too often, marketers take a schizophrenic approach to emerging media like digital out-of-home or mobility: On the one hand, dismissing the “emerging stuff” until they see it achieve a scale measured by reach or aggregate ad spend and, on the other hand, treating emerging media like an experimental toy — fun to play with in one’s spare time but not taken seriously.

In our view, emerging channels are so important that CMOs must treat them as a strategic part of their marketing mix — even possibly the core of their marketing plan — on an everyday basis, regardless of what metrics like reach or total line spend indicate. Leading automakers, such as Mercedes-Benz (a Razorfish client), demonstrate three principles of making emerging media rewarding.

In last year’s Digital Outlook Report, we discussed how digital media had outgrown the PC, amping up the magnitude and pace of change in the media ecosystem. A year later, the pace of change in the ecosystem refuses to slow. The global mobile phone subscriber base has reached 4.6 billion. By comparison, the worldwide market owns a mere 800 million cars, 1.1 billion PCs and 1.5 billion TV sets. Already, there are nearly 84 million American mobile web users who spend, on average, 2.7 hours per day using the mobile Internet.

When the Motor Trend application is launched, as it is loading, a full-page interstitial ad appears featuring the Mercedes-Benz E-Class. When users tap the ad, an embedded page within the application opens, letting them access a photo gallery of Mercedes-Benz E-Class vehicles. The Mercedes-Benz sponsorship of the app runs through early August.

Incorporating emerging media into the plan
Whether leveraging mobile, digital out-of-home or broadband video, some Razorfish clients are demonstrating how strategically important and effective it can be to make emerging media a core part of the planning process, instead of merely being an add-on. Here is a look at how Mercedes-Benz is doing this:

Brand: Mercedes-Benz
Program: Exclusive sponsorship of Motor Trend’s iPhone app
Beginning with the app’s Feb. 4, 2010 launch, Mercedes-Benz secured the only advertising presence on the app for the first six months. This included both a full welcome ad as the app loaded and a fixed homepage logo that allowed users to find a dealer. The app gave the brand 100 percent share-of-voice and a full interactive experience during key flight dates.

Assessment of program’s value: At one point,the Motor Trend iPhone app surpassed The New York Times as the No. 1 free news app. Because of its popularity, Mercedes-Benz got access to a large segment of its target audience. The sponsorship also had two other major benefits: It allowed users to access content wherever they were in a device-friendly format, and gave them the ability to juxtapose the brand against respected third-party content. Reviews and ratings have a significant impact on auto purchase decisions, and Motor Trend news and reviews on the app were enhanced with a vast library of videos and photos that interactively demonstrated the value proposition of Mercedes-Benz cars.

Do small dollars equal missed opportunities?
As the usage of new platforms by consumers explodes, it’s easy to see why old metrics to
evaluate them lead marketers astray. Tools such as financial analysis underestimate their actual
importance. According to Kantar Media, U.S. ad spending was more than $125 billion in 2009. With only $3.8 billion spent on mobile ads, per JP Morgan, and a mere $1.6 billion spent on online video, per Piper Jaffray & Co., it’s not hard to ask: And you’re saying these platforms should be central to the planning process?

But looking at those sorts of numbers misses the point. We’re not talking about a line item on a budget here. We’re talking about dramatic shifts in consumer media consumption, which requires a significant shift in planning, strategies and objectives. Obviously, even if the mobile web doesn’t command the money that the PC-bound web does, those 2.7 hours a day Americans are spending with it should be significant to marketers. And that’s just one example. Consumers have leapt well past the tipping point in terms of adoption of new platforms, but marketers have not. True, some marketers are already shifting huge portions of their budgets (e.g., Pepsi bowing out of the Super Bowl in favor of its social program, “Refresh Everything”). However, that’s more the exception than the rule. The point is this — whether or not large buckets of dollars are getting reallocated, new digital touchpoints demand to be an everyday consideration in the minds of CMOs.

To read the rest of this article, go to the Razorfish 2010 Outlook Report.

Related links:

• Razorfish 2010 Outlook Report
• Razorfish 2009 Digital Outlook Report (pdf)
• The Big Picture “All the Stats” Total View to Mobile Industry, 2010 Edition; Communities Dominate Brands, 2.05.10
• RF’s New Study Reveals ‘Intent’ Behind Mobile Internet Use; Ruder Finn Public Relations press release, 2.12.10
• Mercedes-Benz sponsors new Motor Trend app; Mobile Marketer, 2.04.10
• $3.8B on Mobile Ads This Year Can’t Keep Up With Usage; GigaOM, 6.04.10
• Pepsi’s refreshing new approach to marketing; The Vancouver Sun, 5.14.10

Earlier this year the Digital Marketing group at Mercedes-Benz USA, a Razorfish client, looked to maximize the online performance of its CPO program. Already reaching the target audience through a highly targeted media campaign, the next lever to pull was creative. Without incremental budget to support a heavy creative rotation of monthly offers, the Razorfish media team looked to third-party dynamic creative partners.

After reviewing several vendors in the dynamic ad space, Teracent was selected as our partner. Teracent stood out based on its previous experience with other automakers (including Ford, Honda, Scion and Toyota), quality customer service and proven ad-optimization technology. With the Teracent technology, advertisers can test various creative iterations and multiple variables within the banners. Not only does the Teracent technology do the heavy lifting by rotating all the creative combinations, but the system also optimizes throughout the campaign based on client-specific success metrics.

A few examples of the Mercedes-Benz CPO creative iterations that were rotated and tested from mid-September to mid-October this year.

Mercedes-Benz decided to begin testing with several different variables ranging from general copy testing along with varying background and call-to-action button colors.

After only a short test period, Mercedes-Benz CPO media has begun to see a significant lift in performance. The graph below, Figure 1, illustrates the trend of the overall click-through rate (CTR) performance. Because CTR rate was a secondary metric, Teracent was not prioritized to optimize to CTR.

Figure 1: Click-through rate performance: the solid black line represents the performance of the average automotive campaign; the dotted line indicates the performance of the Mercedes-Benz CPO media campaign during the initial one-month test period.

However, the primary success metrics — an action indicating buying intent — saw a significant increase over time, resulting in better-than-average performance over the past month (see figure 2).

Figure 2: Actions indicating buying intent: the dotted line indicates the performance of the Mercedes-Benz CPO media campaign during the initial one-month test period.

Based on the successful optimization of the creative, Mercedes-Benz is continuing to utilize Teracent to minimize creative production costs and to rotate in relevant CPO offers. As new offers come into rotation, Teracent technology will continue to optimize to the performance winners and reveal learnings about the Mercedes-Benz audience. Mercedes-Benz plans to continue this test through the end of the year.

GM has announced cuts across all media for 2009, refusing to exempt digital spend from its cuts, and Ford, for the first five months of this year, had cut spending by 35 percent compared to the same period in 2007.  Automotive dollars are running from the Super Bowl, the Emmys and the Academy Awards. With falling sales and rising financing costs, there may simply be no other choice but to cut budgets — including digital. Yet the growing share of digital in marketing efforts suggests an increase in the share of the total pie — even a shrinking one — with a decline among sponsorships and classifieds, and a marked increase in spend on search and digital video.

Auto marketers should consider three elements beyond the marketing mix: enhancing online ROI-based marketing optimization, digitally supporting dealers and embracing owners.

Augmenting existing ROI models for 2009
In the next year we can expect ROI-driven programs, such as search marketing, to continue.  As media prognosticator Jack Myers suggests, “marketers sense that less than 30 percent of their advertising works, and they are increasingly intent on identifying and eliminating the wasteful 70 percent.” While speaking last month at Interactive Advertising Bureau’s Mixx conference in New York, Chrysler CMO Deborah Meyer said that “Every dollar has to work 10 times as hard as it used to.”
While ROI models vary from firm to firm and their respective marketers will make their own judgments about the value of leads, there is no doubt the sales downturn will lengthen the time consumers will take to make a purchase decision. Deferring their new-car purchases will mean an increased need for parts and service to keep existing vehicles running longer.  Some ROI factors to watch and strategies to try:

• Identify strategic goals during the downturn that will put you out front of a recovery, such as increasing favorable opinions of product quality, bringing attention to new fuel-efficiency enhancements or determining a metric for “after the downturn” purchase intent
• Pay greater attention to parts and service, lease-end and CPO ad spend and monetization — find out what marketing efforts move the needle
• Metrics and weighting based on historical correlations — as pocketbooks tighten and, especially as credit dries up, review success measures and growth estimates so they remain workable as the economy sours.

Shrinking dealership network needs OEM support and expertise
The retail presence of major auto chains is experiencing a major contraction as a result of declining sales and the credit squeeze.  An estimated 3,800 dealerships will close this year, a pace quicker than originally forecast, according to Grant Thornton LLP. While domestic automakers probably benefit from some retail consolidation from a business perspective, the marketing problems are complex: loss of exposure from the tall sign next to the highway , loss of longstanding customer service and community relationships, and general loss of confidence in individual storefronts.

Automaker CMOs can help franchised retailers develop an integrated approach that applies search and video -– both paid and organic -– expertise to enhance dealership-marketing efforts and ensure the OEM’s presence as a steadfast partner in the local auto market. By aligning both the manufacturer and retailer online strategy, OEMs aren’t competing against their dealerships when it comes to bidding for keyword search terms, for example.  We can expect increased investment in search marketing to continue at the local level, where search spend, as a share of total marketing expenses, rose to nearly 17 percent in 2007, from less than 10 percent in 2006. The keys to dealership success in these efforts lie in digital targeting by location and some enhanced lead-capture techniques, such as those employed by Chrysler to improve retailer websites and the quality of Internet leads. As for video, a June 2008 eMarketer report revealed that 60 percent of dealers indicated they would be adding online video to their marketing efforts in the next year.

Better advice for an aging vehicle population
The median age of all cars on U.S. roads last year was 9.2 years old and 41.3 percent were 11 years or older, according to R. L. Polk. The average age of trade-ins in Q3 2008 rose to 5.9 years and has increased every quarter since Q3 2007.  With J. D. power predicting that new-vehicle sales will drop in 2009, the vehicle population is guaranteed to age further.  No one really knows the full extent of the impact the credit crunch will have on sales in the next few periods and even the effects of the $25 billion automotive industry bailout will be complex. However, an increase in the age of vehicles on the road is a virtual certainty.

Some of the first effects:  in the third quarter of 2008, down payments rose to the highest share of total deal value since the end of 2006 at 19 percent. Existing loan delinquencies are up, as is the share of loans made to borrowers with credit scores above 740.  Budgets are already tightening, consumer spending will likely be depressed well into 2009 and credit markets are a mess.

As consumers try to do more with less, coupons alone may not be sufficient incentive to convince budget-conscious drivers to perform needed maintenance. Education efforts may be needed to let customers know that preventative maintenance is the key to vehicle longevity. Further, dealers and OEMS would be wise to step up their efforts to match visitors interested in vehicle service with dealership service bays that are still open — and hanging on to those customers.  This gives owners a better chance of finding a complete service offering, but it’s also good for the bottom line.  According to Ronald A.J. Fortt, vice president of dealer development for OneCommand, “a five percent increase in service customer retention will increase the profitability of a dealership by 25 percent.”

Consumers will need enhanced maintenance advice to keep ever-older vehicles running longer. They’ll need instructions for how to make the car more efficient and how to find the best garages, whether branded or not. They’ll be energized by an innovation marketplace where the best ideas for tuning car performance, cleaning emissions and increasing vehicle mileage can be collaboratively delivered by your engineers, vehicle enthusiasts and tinkerers.   Become each owner’s best ally, and be the first out of the gate during the recovery to capture their new car dollars.

Given that cars will be on the road longer, the digital component of the ownership experience will have to respond — consumers will need more from the company that sold them their vehicle.  We’re coming to an Apollo-13 moment in automotive engineering — you won’t be going to the moon with this one, but everyone wants to keep the astronauts alive and get them back safely.

Steer the conversation to what you’re doing to help
Top of mind for every consumer right now, even during these last few weeks before the U.S. presidential election, is the economy. Every company, including the OEMs, will have the opportunity during this downturn to invest wisely in the opportunities of tomorrow, and to craft a story about their substantive response to the downturn. Marketing programs that embrace owners and make their experience better will be the key to retention for the eventual recovery.

Related links:

• GM to ‘pull back slightly’ on all media in 2009 (subscription required); Advertising Age, 09.22.08
• Ad spend predictions, already revised downward, sink a little further; MediaWeek, 09.29.08
• IAB Internet Advertising Revenue Report (pdf); industry survey conducted by PricewaterhouseCoopers and sponsored by the Interactive Advertising Bureau (IAB), October 2008
• How CMOs can boost their 2009 Plan with Search Marketing; webcast presented by the American Marketing Association, 09.16.08
• 2008 media economy not as bad as It looks, but no good news on the horizon; Huffington Post, 10.07.08
• Chrysler CMO: 30 Percent Goes to Digital; ClickZ, 09.22.08
• October auto sales on track to be as week as September’s; New York Times, 10.14.08
• Grant Thornton LLP says decline in number of car dealerships will accelerate; press release, 10.01.08
• Newspaper found dead — Internet suspected; Dealer Marketing Magazine, 06.28.08
• Chrysler LLC offers dealers all-new Internet approach; IT News Online, 09.15.08
• Automotive Marketing Online: Negotiating the Curves (subscription required); eMarketer, June 2008
• R. L. Polk & Co. reports vehicle age In U.S. on the rise; R.L. Polk & Co. press release, 02.15.08
• Average Down Payment Jumps Along with Age of Trade-Ins; SubPrime Auto Finance News, 09.30.08
• Experian Automotive Takes an In-Depth Look into Auto Finance Trends; SubPrime Auto Finance News, 10.09.08
• Focus On Service And Parts Has Never Been Greater; Dealer Marketing Magazine, 09.05.08

Image credit
Car dealerships image appears courtesy of Oakland Business Review

In this environment high CPMs aren’t going to cut it. Media buyers need to be aware of the most-efficient ways to target desired customer segments. Toward that end, here are a few tactics that can help automotive marketers stretch their digital media dollars and drive ROI.

Ad exchanges connect web publishers with inventory to sell with online advertising buyers.

Tap into advertising exchanges
Think of advertising exchanges as stock exchanges that trade banners instead of equities. Exchanges offer advertisers the opportunity to tap into an efficient marketplace that matches publishers selling display inventory with buyers. The two largest exchanges, Yahoo’s Right Media Exchange and DoubleClick’s Advertising Exchange, allow advertisers to directly access the inventory of thousands of websites and achieve massive reach that rivals the largest advertising networks.

Advertisers can cut their direct-response media costs by utilizing exchanges because these services cut out the middle men – advertising networks – by matching sellers directly with buyers. Furthermore, unlike networks, exchanges don’t charge incremental fees for advanced contextual, geographic, behavioral or demographic targeting because the price of any impression is always dictated by the exchange marketplace.

For example, an Avenue A | Razorfish hotel client that utilizes behavioral targeting heavily with networks has successfully used exchanges to get more bang for its buck. Earlier this year the advertiser paid a $4 CPM for behavioral targeting on networks and a $1.50 CPM for the same targeting using Yahoo’s Right Media exchange.

Utilize behavioral search retargeting
Search behaviors are incredibly valuable because they are one of the best predictors of a consumer’s future purchase intent. They are the primary reason that Google has a market capitalization of $120 billion dollars.

Despite the success of search marketing, it’s been difficult for display advertisers to directly tap into the power of search behaviors until recently. Search retargeting helps advertisers reach the majority of consumers who visit a site but leave without converting. It works like this:

• First, search engines drop cookies on users that make queries specified by the advertiser, e.g. “new sedan” or “Ford truck”;
• Second, the search engine serves relevant banners to the cookied user when he or she wanders into the engine’s network.

Search retargeting is cost efficient because advertisers only pay very low, advertising network CPMs (usually around $4). Furthermore, they can help advertisers combat the steady upward trajectory of search marketing CPCs.

You are probably thinking that these tactics sound too good to be true and you would be right. All of this efficiency comes with a big price: the quality of the inventory isn’t great and can often be pretty terrible. Search retargeting requires the use of an advertising network whose inventory is typically made up of unsold, remnant inventory from a handful of well-known publishers and the long-tail of the Internet.

Another drawback is that you won’t know where your advertising will appear. It might show up on NYTimes.com or it could appear on Bob’s Anti-SUV blog. Advertising exchanges have similar inventory-quality issues, but offer the advertiser more control over where the creative message appears.

Regardless, if you need to improve your ROI these tactics should help. Tough times are going to require marketers to roll up their sleeves and risk getting their hands a little dirty.

Related link:

• Top 10 Advertising Categories: Jan-June 2008 vs. Jan-June 2007; TNS Media Intelligence via marketingcharts.com, 09.24.08

Image credit
Advertising exchange image appears courtesy of DoubleClick.