Question

Topic: Research/Metrics

Problem Measuring Roi On Newspaper Inserts

Posted by Anonymous on 7/29/2014 at 3:12 PM ET 250 Points
We've been analyzing the ROI on our circulars (newspaper inserts) for the last year. The way we've done it is to calculate incremental margin for the same period year over year. Did that incremental margin cover the cost of placing the inserts across our territory? The answer has consistently been "no". However, we do see a significant lift on the weeks we put out the circulars (about 2 per month) however it is never enough lift to cover the costs. As marketers we know that there is intangible value to this form of advertising as it is really the only form of mass media we can afford. However when our finance folks see a negative ROI they ask why on earth we continue to do this and not put our money where we have positive ROI (direct mail). We explain the difference in the reach of those two channels, how on a per customer basis circulars are significantly less expensive, but we still struggle with gaining acceptance of this view. If we were to cut circulars our store managers would throw a fit.

I'm really looking for any feedback on different ways that we could analyze this or approach the problem. Our CMO argues that by showing only incremental we are selling the circulars short. I tend to agree but incremental lift is what makes an ROI calculation valid and we are not sure what other metrics we could apply that would be more nuanced. We've done coupon testing and other traceable direct response strategies but they only make the numbers worse.

Any thoughts on this issue would be most appreciated! Thank you!
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RESPONSES

  • Posted by Gary Bloomer on 7/29/2014 at 3:57 PM Accepted
    What are you offering in the circulars that you're not offering in your direct mail, and vice versa? Have you used deadline driven, high value offers to encourage use of the circulars? Have you used coupons on the circulars that must be redeemed in store?

    if all your circulars are doing is promoting name, rank, and serial number style messaging (this is who we are, this is where we are, this is what we sell), then your ROI will remain low for as long as you keep running this particular message, simply because general, straightforward promotion like this doesn't provide enough of an incentive for people to get their backsides to your store.

    So, to see ROI, you may want to reevaluate your overall offer provision AND the speed at which people are encouraged or incentivized to respond in terms of value gained and the things they'll lose if they ignore this offer, this time around.

    The other thing you can do is to speak of your NEXT offers in your current circulars. This primes the pump and builds anticipation of the offer, so shopping becomes a date on the calendar and therefore, something to look forward to.

    Coupons that offer a gift with a purchase, or that offer two for one sales, or that offer premium upsells (spend x dollars and receive an XYX% discount on your next purchase of abc$ value) can also increase responses.
  • Posted on 7/29/2014 at 6:05 PM Accepted
    I've been through this issue more than I care to remember. Here's what I've learned:

    The value of newspaper inserts is that it gives your salespeople (or store managers) a reason to step up in-store merchandising in support of the insert. In CPG situations, it's a reason to ask for, and secure, secondary displays in the retail outlets. Those secondary displays, or in-store merchandising, generate impulse purchases (from consumers who are in the stores). It's the impulse purchases that create the lift that generates the incremental profit.

    If you are not getting the displays or in-store merchandising you can't expect the lift ... or enough incremental profit to payout the cost of the inserts.

    (And don't forget to include the post-promotion dip in sales because some of your incremental volume during the promotion period was just from customers who would have purchased anyway a week or two later.)

    If your store managers want the inserts badly enough, challenge them to create strong enough in-store merchandising to generate greater incremental volume (and profit). Otherwise, they and you should probably kill the inserts and redirect that marketing budget to something with a positive ROI (or let it fall to the bottom line).

    Newspaper inserts don't usually payout (i.e., generate a positive ROI) on their own unless you have manufacturer co-op you can collect to offset most or all of the cost.

    I know this isn't the answer you wanted to hear, but it's a familiar situation that often warrants this kind of hard-nosed approach.
  • Posted by koen.h.pauwels on 7/30/2014 at 2:36 AM Accepted
    Dear Greg,

    thanks for one of the best-informed questions on this forum! As Gary focused on the message and Michael on the integrated communications the inserts can provide, my 2 cents relate to demonstrating synergy. In each company i investigated ROI for, there were such actions that do not have a (strong) positive ROI by themselves - including catalogs for an online furniture company (see the practice prize paper by Wiesel et al. 2011, Marketing Science), advertising to business-to-business companies etc.

    Often, these actions focus on a specific part of the purchase funnel (top-funnel for catalogs and advertising) and help make a higher-ROI action (such as the sales force) even more effective. To show this, I include interactions in the sales model (e.g. sales = f(sales force, advertising, advertising x salesforce). Whenever such synergy is present, you spent more on the less-effective action (e.g. advertising), becomes it makes the more-effective action even more impactful (see Naik and Raman 2003 for the specific calculations).

    Accounting for such synergy can dramatically alter the marketing budget allocation. For 1 company, we halved spending on the highest-ROI action to give to 2 actions that gave it high synergy. For another, online-only company, we hiked TV spending from 13% to 50% because it fed the purchase funnel, monetized by online marketing.

    Cheers

    Koen
  • Posted by telemoxie on 7/30/2014 at 8:41 AM Accepted
    thanks for asking a great question. Also, thanks for all the great responses above.

    This is way outside my personal experience and expertise, but I would like to offer a perspective anyway. Maybe one advantage of circulars which is difficult to measure is the lifetime value of new customers. If someone moves into your neighborhood, they might make an initial visit to your store based on a circular. They may become regular customers of your store for the next five or 10 or 20 years. The ROI related to the first transaction is essentially irrelevant.
  • Posted on 7/30/2014 at 1:49 PM Author
    Thank you all so much for these great responses. A lot of things to think about!
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