My colleague Martin Dixon and I have recently passed our IPA Foundation Exam with Merit. The course, which took several months to complete, covered 6 different modules including advertising and communication basics, understanding client’s briefs, developing creative and media briefs, the different media channels available and how campaigns can be executed.

Behavioural Economics

One of the key subject areas on the course which interested me was Behavioural Economics. This is the study of how we as humans make decisions. Behavioural Economics challenges Classical Economics and it’s assumptions that we all act consistently and rationally. Although this is a simple model to consider when looking at our behaviour a lot of predictions haven’t become true. Why? Because people haven’t behaved as expected.

The two key points of Behavioural Economics look at how we as consumers think relatively: comparing the choices we have to get the best possible deal (this is not always price driven – for example offering a hotel deal which is £10 more expensive but offering breakfast in the price will win more business). Secondly, we are all lazy: making sure the consumer has the easiest possible route to sale will create more business.

Everybody loves a Freebie

One of my favourite case studies comes from Dan Ariely’s Predictably Irrational; in one of his chapters he looks at “the cost of zero cost”. Used wisely, FREE can become a very powerful tool.

For example in an Amazon case study, a single book cost $16.95 and the postage $3.95: a total cost of $20.90. When FREE shipping was added if the customer bought a second book, they found that the consumer bought the second book regardless of whether they wanted it or not.

£1 vs FREE – surely not a huge difference?

What is important to note is that people react to even the smallest of amounts. At the same time when Amazon’s French division rolled out the same offer but charged one Franc for postage they found they had nowhere near the same results. When changed to FREE the sales increase was dramatic all over one Franc!

In another Amazon experiment people were offered a FREE $10 gift certificate or a $20 gift certificate for seven dollars. You would be $13 dollars better off if you had chosen the second option but people didn’t. The majority of people chose the FREE certificate. What happened when they charged $1 dollar for the $10 gift certificate and $8 for the $20 gift certificate? Everyone jumped for the $20 gift certificate. People then thought relative when there was payment involved. FREE affects choice.

I have just touched on a couple of basic areas here; there is a huge amount of research to be read. If we can take Behavioural Economics onboard and adapt what we learn to specific individual campaigns we could heavily influence consumer spend.

Blog by Andy Wood

Customer engagement has changed significantly over the last 5 years, and a new report from the IPA could alter how we approach our future campaigns.

‘New models of Marketing Effectiveness – from Integration to Orchestration’ is the 3rd report from the IPA Datamine project which uses insights from the huge database of IPA Effectiveness Awards case studies. The report recognises and understands that as customer’s time becomes more valuable, brands are going to have to work harder to be part of their life.

Whilst the findings are sure to have a significant impact in the way that we approach campaigns, it is perhaps the potential effect that it could have on agency and client structures which is most interesting.

So what does the report tell us? That there are different ways that you can integrate your campaigns depending on your objectives – hard measures like profit and price sensitivity or soft measures like brand awareness and brand advocacy. Depending on your needs, this may range from no integration at all, a ‘matching luggage’ approach or participation-led orchestration where a common conversation is the goal. Some perform better than others, but all of them are strategically sound, depending on what you want to achieve.

On the surface it seems practical and logical until you start to understand the integration model which the IPA highlights as what will most likely become the key to effectiveness in the future. Called ‘brand idea-led orchestration’ it is a form of integration that is unified around a shared brand concept, idea or narrative.

In practice this means that campaign executions can play to the real strengths of a particular channel, without the handcuffs that the more frequent ‘matching luggage’ approach has. It will be the brand idea, usually borne out of a key insight, which will become the ‘glue’ that binds the campaign together, delivering a level of effectiveness that will outshine all others.

Examples

However, if this is going to happen, it means that agencies and clients alike are going to have to change the way that they work and how they are structured.

Brand-led orchestration principles are based on the foundation that all disciplines are equal, and that the insight which becomes the glue can come from anyone. This means that:

1. Agencies need to be able to offer channel neutral insight – this could mean re-structuring the agency itself, or changing internal processes to ensure that a discipline does not bias the outcome.
2. Specialist agencies need to be able to leave their ego’s and commercial targets at the door so that this does not cloud judgement
3. The client needs to re-think their department structure, removing the budget and experience limitations which happens when a department is split into ‘specialism’s’ such as advertising, media, digital, DM and CRM

The changes are significant, considering that over the last 5 years; the ‘full service’ agency was dying as clients leaned towards using individual agencies who could offer targeted services. According to ISBA, the latest research suggests that clients – pressurised by both cost and time – are now looking to resolve by narrowing this list to a feature a full service agency and a specialist media agency instead of a plethora of specialists.

A channel neutral insight has the power to change everything. One was created out of an understanding that the marketing landscape had changed forever, it was based on identical principles – that a discipline should not lead a client investment. That’s why our agency structure and processes are in place to protect and promote this principle.

It’s been our way of working for the last 2 years, so we like to think we are ahead of the game.

Blog by Tristan Morris