Don Schultz explains at our iMedia Summit why consumer consumption is a key metric (last of three parts).

Read parts one and two.

Don Schultz is Professor Emeritus-in-Service of Integrated Marketing Communications at the Medill School of Journalism, Northwestern University.

He is an expert on consumer behavior and has written or co-authored 13 books on marketing, from branding to direct marketing. He recently traveled to Beijing, where consumer behavior is driving tremendous changes in a society where only six percent of the population is online. Those hundred million people who represent the six percent are rapidly changing how the rest of the society operates. So Schultz’s current focus is on analyzing what consumer behavior does to the whole media planning processes.

Schultz spends a great deal of time using cognitive psychology to examine what consumers are doing and how they are consuming media. At the iMedia Brand Summit in Deer Valley, Utah, in September, he explained why our antiquated marketing models need to be changed.

Here's more of his address…

Schultz: Let me try to tie these three pieces together. Today media advertising likely works based on consumer media consumption, not on distribution. It doesn’t really matter how many messages we send out. It’s how many are consumed. And we have pretty lousy measures of media consumption. We have very sophisticated measures of media distribution. Our definition of T.V. watching is that the set was on in the household at a particular point in time. It says nothing about people. And all the other media reports are pretty much the same. All we know is we delivered the newspaper to the home. All we know is we sent the magazine to a particular individual. We have no real clue as to whether or not they consumed any of the advertising that was in those media forms. 

Well, we also argue our media planning models need to be rethought, revised and revamped to deal with this simultaneous media consumption. How do we start to rethink how consumers are using media, not how we’re using media? We can do really sophisticated planning, but the consumer is doing even more sophisticated consumption. And that’s where the challenge is. So new media measurement systems are likely needed. And media pricing models need to be revisited. I don’t think there’s any question about that. 

Well, here’s our first attempt at a 21st century model of how media advertising really works. Starting with consumers over here, what we really are going to try to do is look at media exposure. To what media forms do they expose themselves? What media do they consume? Then try to look at this idea of foreground and background media and see if we can sort that out. And then go back and look at how much time is allocated to each of these media forms. Because remember the critical ingredient here, in all of this, is consumer time. It’s how they allocate the only finite resource they have, and that’s time. How do they use it in terms of media consumption, media attention, media focus? 

Well, that raises some questions then about potential fragmentation of attention that is media impact being deluded in some way. But it also has the potential synergy of simultaneous media usage that is messages being reinforced. And what we’ve really got to get to, I think, is some kind of media response model. How do consumers respond to media as a result of their media consumption? And that I think is the biggest challenge we face. 

We’re starting to work on that this fall at Northwestern. We’ve got the research data -- there’s about 320,000 surveys in the big research system. We’ve got about 45,000 of this simultaneous media stuff. That same data is at Syracuse University, and they’re going to be working on that as well. But we would welcome any input. We would welcome any assistance. We would welcome any help anybody could give us. This is not a minor problem and it’s not something that’s going to be solved in the next 30, 60, 90 days. But it really is critical, I think, to determine how and in what way media exposures have an impact for a marketer. We’ve simply got to solve that problem, at least in the U.S.  Because the problem is going to be solved elsewhere and if we don’t solve it here we fall behind. 

The difference is not how many messages you send out. It’s how much media is consumed by the audience. And I think this is the critical ingredient. We don’t know much about that. We don’t understand very much about it. We don’t have very good models for it. So we’re going to be developing this, this fall at Northwestern, so please stay tuned.

Summary … our media planning measurement models are broken and they have to be fixed. Consumer media consumption is one alternative. There may be others. I’m not saying that consumption is the only one, but it seems to be the one that makes the most sense. We’re going to continue to do research on multimedia exposures and those kinds of things. And we certainly encourage your help and support. 

If any of you would like to get -- there’s a paper written on this which I presented at the SMR Conference in Geneva last June. If you’d like to get that particular paper I’ll be happy to send it to you. We have an unlimited supply of electrons at Northwestern. 

[LAUGHTER]

Schultz: So we can send those out to you. Here’s my e-mail address. So if you want that paper; if you’d like copies of this thing; if you’d like a look at any of the other stuff we’re doing -- we’re doing ROI stuff; we’re doing branding stuff, those kind of things -- if want to start a conversation, we would love to have input from you.

So that’s all.  Box lunches … 

Audience: I’ve got a question …

Derek Hewitt: Actually we’re going to take some questions.

Schultz: Oh, we are?

Hewitt: Yes.

Schultz: Are you going take the questions?

Hewitt: No, we’re going to escort you to your car.

Schultz: Oh, okay.

Hewitt: Any questions?

Audience: I have one here …

Schultz: There shouldn’t be. This is terribly clear.

[LAUGHTER]

Schultz: Yes?

Audience: I do this at my own risk. But thank you. That stuff was very informative. My name is Jason Shulman and I work with Carat Interactive. I think all of us in the room, both on brand side and the agency side, we hear one thing constantly which is what is online or any form of media’s role in the overall media mass. And when I hear you saying you’re developing a model it really does peak my interest. I hope, because MMA, a company of ours, doesn’t have a lot of years of online data. Hopefully that changes in the future. Are you and Syracuse University really incorporating online metrics? Or are you running into the same problems as MMA?

Schultz: No, no. I think what we’re trying to do is, we recognize -- remember we’re collecting data from non-real people because we’re collecting it online. 

[LAUGHTER]

Schultz: But I think what we’re going to try to do is, we’re going to look at media consumption, and that’s I think the real area. How much time they’re using and what they’re doing with this and that, and so on and so forth. I think the really interesting thing that really comes out of this -- and Charlie Buchwalter from Nielsen//NetRatings and I were talking about this -- one of the things we’re going to be looking at which I think is an interesting area is understanding better the media audiences of retail supermarkets, chains, department stores, all those kind of things. Because we’ve done some preliminary work in this and the interesting thing is, there is a radically different media model, media consumption model, for a Wal-Mart buyer than there is for a Kmart buyer. And so one of the things you might start thinking about is not thinking about it from the manufacturer’s view, but thinking about it from the retailer’s view, about where their audiences are. And then how do we line up our advertising to reach certain audiences because we know that they have retail distribution and those kinds of things. So yeah, we’re going to do that kind of stuff. We’re going to put the online stuff on there. We’re going to look at primarily, how they're using media and what forms they go to. So we’re looking at all that kind of stuff.

Hewitt: We have a question back here from Scott Deaver. 

Deaver: Hi. I’m curious about one term that seems loosely defined to me which is “consumption,” when media is consumed. Isn’t there a question of how consumed is it? If they eat it? If they buy it? Do they smell it? I mean, it seems to me that the degree of consumption is a big key factor in everything you’re talking about.

Schultz: That’s absolutely true. That’s absolutely true. Media consumption is I think going to have to be defined, at least in my view it’s going to have to be defined by the consumer. Not whether or not I had my T.V. set on, it’s whether or not I was paying any attention to it. Because that’s media consumption. It’s not just availability. It’s whether or not they’re doing anything. And that’s going to be a difficult challenge. But I think we have to get to it because I think what’s happening here is: How do consumers allocate their time and what do they do with it? This becomes critically important when you start to look at how people allocate their resources. Time being the finite thing that they’ve got, how do they allocate their time? And we believe, at least in some of the preliminary things we’ve done, that the allocation of time … they understand that it’s a finite resource and how they allocate that has a great deal to do with the impact or the value or the use they make out of it. So that’s how we’re going to try to get at it. If you’ve got a better solution come on out. 

Hewitt: Question?

Audience Question: I would say that I agree and I think that people in the audience probably agree entirely that the model is broken. My question is really one of practicality. If you take the idea that we’ve got 50 years now of planning kind of built on these frequency models and those kinds of things, with some adjustment factors for adding other media into the mix. Rather than the assumption that we have to entirely reinvent it, isn’t there some way that we can work within the structure of some of the available data and tools and rework that to create new models?

Schultz: Well, I think that’s true. There are two major issues here. And I didn’t touch on them, but I think they’re critically important. Almost every measurement model we’ve got essentially is a historical model. It’s an accounting model. It’s what happened last year, last month, a year ago, six months ago, whatever it happens to be. That’s what the current model is, it's going back and trying to decompose what happened over the last two or three years and try and relate, and try to statically correlate and all that sort of stuff. What really is needed, and the real pressure I think, is: How do you develop forecasting models? Because the forecast is a whole lot more important than the history. Yet, we’re stuck with and we’re bound by historical models because even as current as well, overnight, doesn’t help you a hell of a lot because you can’t change anything. So you know what happened, but now what do you do with that?

So one of the things we’re focused on is trying to understand forward planning models. And trying to understand where customers or consumers are going to be, as opposed to where they’ve been. Now that creates an even bigger problem. These things are not without problems. The real challenge is short term vs. long term, because by-in-large almost all of our measurement tools right now look at, and are based on, incremental revenue increases. If you’re talking about a brand, brand value occurs three, five, seven, ten years out. You can’t measure brand value. You know, you can’t run a campaign and then 30 days later go say, did we move the needle? No, you’re not going to move the needle. But if you look at what we’re focused on, we’re focused entirely on measuring incremental revenue. We’re not focused on trying to identify what the value of the brand and the organization are going forward. And that’s where the real money is. The real money is the value of the brand, not the incremental sales in short term. So that’s another one of the problems. 

I’ll tell you what we’re doing, the way we’re coming at it. We essentially believe that the only way you can do this kind of stuff is to get to a customer income flow management program. That is: Put a value on a customer and then manage the value of that customer using a number of things in some kind of continuous cycle where you’re continuously trying to impact the consumer, measure that, and look at changes in income flows. Because what you are really talking about is managing money from customers. How much money are customers giving you now? If I do this do I get more from them? And if I do this and it costs me this much, did I get my money back? Because that’s really what the issue is, inside the organization. It’s all financial. That’s the problem. We can try to run away from financial models, but you can’t get away from financial models inside organizations today. There’s too much Sigma, balanced score cards, you know, you name it. It’s all management. And so we’ve got to find somebody to put financial measures on this thing.

Hewitt: One more question.

Audience Question: This is all fascinating and a little bit overwhelming. I basically want to go back to school. But at any rate, I live in the real time world and I was getting back to the question about maybe there's something we could do immediately if time is a matrix that we can measure on. I know I have been talking with advertisers, potential advertisers, about our model which incorporates time spent watching an ad or interacting with an ad. And it seems like something that would be pretty easy to implement. And I know at Ad:Tech recently for the first time someone was mentioning time spent. And I don’t know, it just seemed to me it would be pretty easy to incorporate real time in all these incredibly smart people. And you know, maybe that could be something that would play into your studies.

Schultz: Yeah that’s exactly right. Charlie Buchwalter is already … Nielsen is already starting down this road. And essentially they’re doing this. I think we’re on similar paths. At some point maybe they’ll come together. But the real issue, the real problem we have, when you get right down to it, is we’ve never figured out how to connect attitudinal data and behavioral data. We have never figured out how to connect those to. So we go off and we do behavioral data and come back and say, look what this is, isn’t this really neat? And they say yeah, but how do people feel about it? And we say we don’t know that. Or we go get their feelings and say how do they feel about this? And people say I love your company. Well, you know, you don’t buy my products. So how do we connect those two? And it’s interesting, you go to research meetings and they say, behavioral people go that way, attitudinal people go that way. And you never see each other again. Yet we’re talking about the same people. So I mean all of this stuff is disconnected. And I think it’s the silo mentality that we’ve created. I’ll recommend one other book if you really want to get into this stuff.

Audience: I don’t have time.

[LAUGHTER]

Schultz: You don’t have time? Well, there’s your problem. Go get a book called "The Geography of Thought: How Asians and Westerners Think Differently …and Why"  by Richard Nisbett. He’s a professor at the University of Michigan. And what Nesbit argues is that there is a radical difference between the way people in the west think and the way people in the east think. Because what he argues is that the western thinking is all categorization, separation, isolation because all of that came from the Greeks. He argues that what essentially happens in Asia is it’s all holistic, it’s all contextual. So as a result you don’t have to argue integration in China. They’re all walking around with an integration book in their hand because it’s all holistic. They all know that. It’s all related. It’s all somehow hooked together. And so they don’t have that problem. We have problems with it in the west. That’s one of the reasons I get concerned about the Asian impact. Because if they bring a holistic view and we bring an isolated, categorization silo mentality to it; we can’t win that way. They will whip us up one side and down the other. And I don’t come to try to frighten people about what’s happening. I just simply say I think we’ve got to figure out what to do and how to get there.

Thank you very much for your time. I appreciate it. Thank you.