Calculating conversion on in-mall advertising

On the 31st of March 2011 our CEO Sharon Biggar spoke at the ICSC Fusion Conference in Hollywood.  In this blog post we have reproduced her speech.

Times are tough.  Budgets are being tightened and resources are constrained.  Marketing budgets most of all are under pressure and in this environment being able to measure the return on investment in advertising spend is critical….and yet still difficult.  For most types of advertising it is not possible to identify how consumers are responding - we can't see how consumers react immediately to TV advertising, nor do we see their immediate responses to roadside billboards, or product placements in movies - but online advertising is different.

In preparation for this speech I looked up the Google Adword for 'Best Buy'.  Google estimates that if I was to purchase that Adword I would be spending approximately $400 a day and for that money I would be getting approximately 20,000 searches and about 840 click throughs.

By comparison if I was looking at an on-mall advert - such as the one shown above on an elevator door or in another such high traffic area - I would be spending about $66 a day.

Doesn't this seem wrong to you? Why would I be willing to spend 6 times more to advertise online? I'm getting about the same number of people 'past' the advert as it were, and I'm getting the same or perhaps an even better response.  And let's not forget that with on-mall advertising I'm targeting a group of shoppers who have pre-selected themselves.  They have physically left their houses and travelled to the mall and if they respond to this advert and visit Best Buy their likely conversion once they get to the store is approximately 20-30% as opposed to the 1-3% that online stores are achieving.

And yet here it is, here is how the advertising is priced today....it's 6 times greater for an online text advert.

I want to show you what this price differential can mean in terms of overall revenue to the mall.

Let's compare an online and an offline marketplace.  Ebay is perhaps a good example of an online marketplace.  Ebay is - by our calculations- earning approximately 7% of its total revenue from online advertising on the Ebay marketplaces site.

Lets contrast that with my local mall where the passing rental income last year was $27 million and where at most they are gaining $0.5 million in advertising revenue.  You can immediately see the gap -online 7% versus offline where we are at most at 1-2% of income. 

So let me ask you what would it mean to you if you were able to achieve another 5-6% of revenue off your existing assets?

So how ? How do mall owners achieve a similar level of advertising revenue to what online retailers are achieving?
Well let's imagine that you were that Best Buy Marketing Manager tasked with finding somewhere for the Best Buy advert.  Here's what you get when you log on to Google and consider purchasing an Adword:

1. You get a traffic estimator tool telling you how many searches you should expect for that Adword and how many click throughs are likely..so straight away you have an indication of exposure for your advert;
2. You get a heat map tool telling you which parts of the page are 'hottest' so you can think about paying more to be in those spots; and
3. Once you buy the Adword you get regular updates as to how your advert is performing and you only pay for performance.

Let's contrast that with what you get when you’re considering offline. 

The picture shown is a real on-mall rate sheet by the way.  What does this give the potential advertiser? That the mall has 120 stores and receives approximately 10 million visitors per year.  Ok so that gives us some idea of exposure but no idea on:

• seasonality effects;
• how many times the advert will be seen and where the advert should be placed within the mall; and perhaps most crucially no feedback on
• whether or not my advert is performing for me.

The contrast in the level of information offered is just quite simply staggering.

So why is online advertising so successful?  Because with online advertising I get information and data analytics that assist me to:

1. Set up the advert correctly to begin with (that is, I know where to place the advert and what sort of exposure I can expect); and perhaps most importantly
2. Calculate the return on investment (ROI) on that advertising expenditure.

Can we approach the selling of advertising for a mall in the same way it's done online?  Yes but it requires us to rethink how we collect information on the mall. 

At the moment - from my experience – data collection within the mall is achieved in one of two ways.  We either survey shoppers in the mall or we use counting devices over entrances to try to get an understanding of the total number of shoppers.  Neither of these approaches enables us to calculate the ROI on advertising nor emulate the approach of online sites.  The reasons are obvious – for surveys we have problems with sample size, and for cameras we have issues around the inability of cameras to distinguish the same person walking under the camera multiple times.  In fact the reasons are so obvious I am not going to dwell on that now, but rather I would like to relate a story about the usage of this data from our work in the UK.

I won’t mention the name but a research group recently attempted to conduct a survey of shoppers to identify the way that shoppers moved around the mall.  The purpose of the survey was to identify the best in-mall locations for advertising, so it was important to identify the path that shoppers had taken and how frequently they had walked up and down the same arcade areas.  What was incredible was that when the group reviewed the data 50% of the paths that shoppers had told the researchers were not physically possible.

So that's the bad news.  Traditional data collection methods on their own don't cut it.

The good news is, as technology advances new data methods are becoming possible, and the use of cell phone data is perhaps the most interesting here, in my opinion. 

Path Intelligence follows the movement of all cell phones within malls and retailers and aggregates that data back for the mall owner to assist them in leasing space within the mall and optimising the productivity of the mall.  The fantastic thing about cell phone data is that pretty much every shopper has a phone with them these days so the sample size is phenomenal and what's more you are no longer just interviewing shoppers at the end of their journey nor counting them at the beginning....now we get to observe their path around the mall.  The possibilities of how this data can be used is a topic in and of itself, but for the purposes of today I want to focus on how cell phone data can be used to generate an uplift in revenue. 

As you can see in the slide above, once you understand the path that shoppers are taking around an area all manner of things become possible.

• Traffic estimation - For a start we can now estimate the traffic to a site and we can predict accurately what sort of traffic levels a mall is likely receive.  So if you have an advertiser that is thinking about running a campaign in November, we can predict with a high level of accuracy what the traffic will be in November; 
• Heat map - Now we can produce heat maps of the mall and show advertisers where the premium locations are for their adverts and perhaps more importantly we can price the advertising differently at each location;
• Understanding of conversion - But finally - and this is perhaps the most critical point - we can estimate the conversion on that advertising.

So in conclusion what we have seen today is that there is a big disparity between what advertisers pay online versus what they are currently paying on-mall.  Why? Online sites provide significantly more information, sophisticated analytical tools to the advertiser and - most importantly -  because they calculate the return on investment on that marketing expenditure for the advertiser.  Once an advertiser has confirmation that an advert is performing for them they are likely to continue with that advertising.  If I know that I am getting 1000 people a day clicking through to my website because of my Adword I am likely to continue purchasing that Adword – wouldn’t it be great if I knew that an on-mall advert was driving an extra 1000 people into my offline store every day.  With Path Intelligence you can.

Back to list of Blog Articles