Online Advertising Effectiveness

Online advertising is at least as effective at driving consumer packaged goods sales as TV advertising, and may deliver more consistent success, according to a study conducted by comScore Inc. and dunnhumbyUSA.Because of the substantially lower costs of online advertising -- the result of both lower rates and increased targetability -- the study also implies that online is a far more efficient advertising medium than TV.Online ad campaigns examined in the study generated an average retail sales lift for the advertised brands of 9.0%. That result compares quite favorably to the 8.0% average sales lift driven by TV advertising that Information Resources Inc. identified in its seminal 1990 report, How Advertising Works. Conducted in 2008-2009, the study is based on an analysis of 200,000 consumers who are members of a Kroger supermarket loyalty program (see "Marketing at Kroger" in Related Articles), as well as participants in comScore's two million-member online behavior panel. Kroger's loyalty programs are managed by dunnhumbyUSA. By comparing the supermarket purchases of subjects who were exposed to 82 specific online ad campaigns with those who weren't over a 12-week period, comScore was able to isolate the impact of the ads on purchase of the advertised brands. (The control panel was selected to be demographically and behaviorally similar to the test group.)IRI had similarly used its BehaviorScan consumer panel to compare the purchase activity of consumers who were exposed to 73 TV ad campaigns versus those who weren't. IRI is able to control the ads viewed by its panel members, who at the time presented a card at checkout in participating stores to have their purchases recorded. IRI's study tracked behavior over a 12-month period.While the overall averages of 9.0% vs. 8.0% are relatively close (especially when standard deviation is considered), the comScore study found that 80% of the online campaigns that were tracked produced a "statistically significant" sales increase. In the IRI study, only 36% of the analyzed TV campaigns did the same. Those figures suggest that online advertising is a "substantially more efficient medium" at driving retail sales, according to comScore chairman Gian Fulgoni (who incidentally, was IRI's chief executive when How Advertising Works was released). An individual online campaign "is much more likely to work than an individual TV campaign."Adding to the efficiency of online advertising are the significantly lower costs involved in both ad production and placement, the latter of which results in part by a far greater capacity for targeting. "If your target is pregnant women, you can advertise only to pregnant women," Fulgoni says. "It's a more precise medium."In fact, that precision is what Fulgoni believes is the primary reason that online advertising is more effective. The more impressions that can be delivered against the target consumer, the more likely the ad will generate results, he says.Online TrendsThe comScore study covered a broad range of packaged-goods product categories, including cereal, cookie mixes, pizza, juice drinks, snack bars, pasta, tea, deodorants and toothpaste, and a variety of ad formats, such as static banner ads, rich media and search. Creatively, the ads featured both brand-equity ads and promotional offers.As yet, comScore hasn't identified common characteristics -- format, location, creative theme -- among the 80% of campaigns that proved to be effective -- or across the 20% that weren't. "We are trying to isolate some of the variables."What is clear is that there is "a lot of experimentation going on" among both packaged goods marketers and retailers, Fulgoni says. CPGs had been relatively slow to embrace Internet advertising, but now are engaging full force. The recession likely has accelerated the overall trend, but wasn't the sole catalyst for it, he suggests.The recession has, however, sparked a major surge in online coupon activity. Consumer-facing coupon facilitators such as Coupons.com and Eversave.com now attract an aggregate 30 million unique visitors monthly. Many retailers now offer downloadable coupons from their websites. The more advanced have contracted with or launched services that let shoppers download the offers directly onto loyalty cards for automatic redemption at checkout (see "Digital Shopper Marketing" in Related Articles), and are advertising the service in stores and circulars, as well as online.While many retailers are working to attract visitors to their sites, not all have been successful thus far. Traffic to Walmart and Target regularly place those chains among the top 50 most visited sites of any kind (Walmart drew 29 million visitors in October 2009, Target 27 million). In the CPG universe, however, there's a significant drop-off after that (Walgreens at six million), and only two supermarket operators -- Kroger and Safeway -- currently surpass one million. (See chart at right.) Fulgoni believes the primary reason for that is simple: supermarket websites don't sell products like walmart.com and target.com do. "If retailers aren't offering something to buy online, they're not going to get the same traffic."Supermarket retailers, then, should consider advertising on consumer sites that can help drive traffic over to their home pages or, perhaps, even directly to their stores.

Online Advertising Effectiveness

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