Peter Koeppel, the Founder and President of Koeppel Direct, was a recent guest on the Wharton Business Radio program Measured Thoughts hosted by David Reibstein, Professor of Marketing at The Wharton School. Koeppel, who is an alumnus of the Wharton School of Business, discussed several aspects of direct marketing and marketing ROI with Reibsten, whose program explores the metrics of success.
Readers who click on the link to listen to the program can expect to gain the following insights:
- Why marketing ROI is so important to today’s CMOs.
- How TV can drive sales and leads across all channels amid an omnichannel world including ecommerce and brick and mortar retail.
- What account drove Koeppel to abandon a traditional advertising agency in favor of direct response marketing and how that resulted in him helping the company experience an 80x increase in valuation.
- Why media attribution is so important in today’s complex, multi-channel world.
The program, which runs approximately 22 minutes, is heard on Sirius XM 111 and can be heard here.
If you prefer, a transcript of the interview is available here.
Interview on Measured Thoughts
Hosted by Wharton Business Radio’s David Reibstein
Female Announcer: Here again is David Reibstein.
Reibstein: Welcome back. This is Measured Thoughts with Dave Reibstein. I’m Dave Reibstein and you’re listening to business radio powered by the Wharton School on Sirius XM 111. I’m joined here with Bruce Brownstein, who is a Senior Fellow at the SEI Center here.
You know it turns out Sirius has changed their format just a little bit and so you can take business radio and Sirius XM with you outside the car. You can stream you favorite channels with the new and improved Sirius XM App. So you can find the new app at SiriusXM.com/app, and that way you’ll be able to find Measured Thoughts…
Reibstein: …that way, so that’s pretty good.
So that was a very interesting part of the business I never really understood is hearing about all the lengths and how it shortens us and what that adds to the value of a hot link that happened to be placed somewhere. So, umm, and I said a hot link but any link that happens to be in an ad or in social media or any other form. And he spent some time talking about direct marketing, but we’re going to talk to a guy who really understands direct marketing, and so let’s turn to Peter Koeppel who is the Founder and President of Koeppel Direct. Peter, welcome!
Koeppel: Well thank you.
Reibstein: So my understanding by the way is that you are an alum?
Reibstein: When’s the last time you were here?
Koeppel: Well, more recently I’ve been to the San Francisco campus – I think the last two years. We do a lot of work with online retailers so it’s easy to tie in a visit to the San Francisco campus and meet with some clients or VCs in Silicon Valley.
Reibstein: So I teach out there in the spring and one of these times when I’m out there you’re going to have to stop by and say hi.
Peter: Yeah, that would be great.
Reibstein: It’s a great facility out there, for sure. So tell me about your business. What is Koeppel Direct?
Koeppel: Well, Koeppel Direct is a leading direct response ad agency and we’re based in Dallas. We just celebrated our twentieth anniversary last month, and my firm specializes in generating measurable and profitable ROI for our clients’ marketing campaigns. We’re really experts at direct response media buying and TV drive-to-web campaigns for online retailers who are trying to generate leads or drive web activity and sales, maybe drive retail or app store downloads, and we have an advanced attribution platform that provides accurate tracking and analysis and campaign optimization in real time.
Reibstein: So you sound like the two hottest areas of marketing measurement which is marketing ROI and attribution so you’re in certainly the hot domain, that’s for sure.
Koeppel: Yeah, definitely and I was thinking of leading into this interview of a quote that you may have heard of – I’m sure you have – “Half the money I spend on advertising is wasted and the trouble is that I don’t know which half” and that statement was actually was made by John Wanamaker who is a pioneer of the department store and of advertising, and ironically enough there’s a statue of him in front of Philadelphia City Hall not far from the Wharton campus that commemorates him. Direct marketing really seeks to answer that question and we try to create an accountability model for advertising that identifies the effectiveness and ROI, and allows marketers to optimize their campaigns and their media spend. But many in advertising circles – to them direct marketing is thought of as a kind of stepchild to “real advertising” because it may not be as flashy as image-based advertising. Some people think of it as selling, but now CMOs are only in their jobs an average of two to three years, and they see they can get an ROI online and what we do is we can also provide them with an ROI with their offline advertising so they’re more interested nowadays in what we do.
Reibstein: So a lot of advertising is for image building and not selling, so shall I assume that most of the direct marketing is for at least, well, maybe not exclusively selling it is heavily weighted towards selling and less for image building?
Koeppel: Yeah, well, it actually can do both. You know a lot of our clients are looking at measurements like cost per lead or cost per registration or cost per sale or cost per app download, but it actually can build awareness at the same time that it’s selling and you can usually do it more cost effectively because the media costs are maybe 30 to 60 percent less than traditional advertising so you can brand and run more, build more awareness, more GRPs at a lower CPM which usually translates into the ability to sell more and drive awareness at the same time.
Reibstein: Say and when you mention that one of the primary things that you do is measuring marketing ROI – I’ve recently co-authored a paper about marketing ROI and what I’ve discovered is that when a lot of people refer to ‘R’, they don’t refer to it in the same way that finance does, and so when you talk about ‘R’, that is the return on investment, what kind of return are you referring to?
Koeppel: The people, the marketers that we work with are looking to generate more revenue then they’re spending on advertising and usually there’s a breakeven point they figure…
Reibstein: …depending on your margin that would make sense.
Koeppel: Yes. They’re trying to generate more revenue than they’re putting into their marketing spend, and so we measure that. We measure that everyday and we kind of optimize and provide them with reports daily, weekly, and almost in real time nowadays. We can provide reports so they know where their campaign is at any moment.
Reibstein: So when you were referring to the ‘R’ in ROI you’re referring to revenue?
Reibstein: Not impressions, not the re-impressions per investment, etc., but the revenue that is generated?
Koeppel: We also do look at impression delivery sometimes when we’re measuring – for instance if we’re doing a drive-to-web campaign we may be looking at the impression delivery of the campaign. We’re looking at an attribution window. For instance, say you run a TV spot, then you’re looking at a certain period of time when activity occurs online after that spot airs, you’re looking at various impression weights, and things like that. So we’re looking at a lot of different metrics simultaneously.
Reibstein: So why is it that today marketers are interested in ROI when in the past there was not always that emphasis?
Koeppel: I think that there is more pressure on CMOs nowadays. As I mentioned, I think they’re only in their jobs an average of two to three years and people – the CFOs and the CEOs of companies – they want the same set of ROI maybe they’re getting online with their offline media, and I think there’s more awareness nowadays that you can generate an ROI and I think that came from digital advertising where everything is measured.
Reibstein: Now you used to work for an ad agency, right?
Reibstein: And so today you’re able to look at the direct response rather than just traditional advertising. How’d you make that transition?
Koeppel: Well, I was a partner at a brand agency prior to forming Koeppel Direct, and I worked at another large brand agency prior that, and I felt that the people at those agencies were more interested in winning creative awards then generating results for our clients. When I started out in the direct response business I started out working with Hair Club for Men, which was a direct response client and the creative director at that brand agency didn’t want to include before and after photos in their TV commercial because he felt it would detract from the look of the spot, and the client advised against that, and the spot didn’t work, so at that point I decided to leave and start my own firm, and we turned around the business of some of Hair Club’s major franchisees, and they introduced me to Sy Sperling who is not only the Hair Club President, but also a client. (laughs) And the company was almost bankrupt and he had more than 50 retail locations, and he had been offered about $500,000 for the business, and we were able to lower their cost-per-sale by about 75 percent and the company became highly profitable, and five years later Sy sold it for somewhere around $40 million, and five years after that a private equity firm bought it for $200 million, so…
Koeppel: …that’s how I got involved in the direct response industry.
Reibstein: So when I think of direct response the most… I think in terms of direct mail. I think of catalogues. I think of email. You’re thinking even more broadly than that, aren’t you?
Koeppel: Yes. We use a lot of offline media like TV and radio. A lot of what we do is run offline media with online media. For instance when we’re running TV and we might be running a pay-per-click campaign simultaneously. We’ll get better conversion, so there’s definitely some synergies between offline and online media. Print media or catalogues really aren’t as effective anymore, as they were in the past. So we’ve found that TV is still actually the biggest driver of people online. We have worked with marketers more recently that are online retailers. For instance Match.com has a dating site called Our Time, which is the largest 50+ dating site, and for them we look at metrics like cost-per-visit, cost-per-registration and look at a baseline activity, then incremental lift. For them we restructured their buys and were able to reduce their CPMs by about 25 percent and doubled their GRPs at the same budget level using a direct response approach which improved their ROI by about 14 percent, while, at the same time, dramatically increasing their spend. So that’s an example of some more recent types of clients and we work with companies like Luminosity, WebMD and CheapOair and TurboTax who are all using this type of approach.
Reibstein: So there by the way I’ll just note that you were talking about ROI in terms of cost savings and not revenue, and delivering the same sort of impressions or acquisition with lower cost, rather than with the old cost. So as I say, that’s part of what I end up talking about in that article that sort of features how we deliver different ways of talking about ROI.
Koeppel: Yes. And another thing about TV – I think there’s a kind of digital bias nowadays, but people are still watching four hours of TV a day according to Nielsen, and it’s really still the primary device of choice for viewing video across all generations. I think like 63 percent of people say they prefer watching video on a TV platform. So what we’re finding nowadays is like a lot of people will be watching TV, but they’ll have a second screen device while they’re watching it — like a smartphone or a tablet. So they may initially go online say through their phone, but they’re not able to buy through the phone because the interface isn’t good. They can’t – it’s just more difficult so then they end up going to their tablet or to their desktop to make a purchase, so we try to track that activity and that’s the typical path. But I think some companies like Google and Facebook and Pinterest are putting in a buy button now to try to make it easier to make that transaction on your phone.
Reibstein: Right, yeah but trying to work across devices is what we were just talking about with the last guest, and it’s one of the difficulties that we have.
Let me remind our listeners you’re listening to Measured Thoughts with Dave Reibstein on Sirius XM 111 and it’s on business radio powered by the Wharton School. You can give us a call at 1-844-WHARTON. That’s 1-844-942-7866, and we’re talking to Peter Koeppel who is the Founder and President of Koeppel Direct.
I want to get back to this thinking about direct marketing TV, and when I think about campaigns that are direct marketing I think about campaigns where the advertiser knows whose receiving the campaign, and then we think of that as something being direct and we end up knowing then what percent of them end up actually buying. How do you – what’s it mean to do direct marketing on TV, so that we know whose receiving it and when it is that somebody who received it actually bought?
Koeppel: Well, there’s two ways to measure the response. You can look at how many people call in through an 800 number and we use separate 800 numbers for each network we’re running on so we can track it that way, and some of the telemarketing companies store data on consumers and look at past purchase activity and so when they call in they know something about them. But increasingly nowadays if you give them a choice of calling an 800 number or going to a website, much more people will go to the website. You know, at least 70 percent, and in many cases marketers aren’t even putting the phone number in the ad. So when someone comes through the web we actually put a watermark on the TV commercial and a satellite picks it up so we know exactly when the spot airs.
Reibstein: But you don’t know for what household do you, and that they were the ones that received the ad and hence bought which is what you do have with a direct mail piece per se?
Koeppel: That’s true. There’s more advanced models coming out that are kind of still under development where you know who you’re delivering the ad to, but you don’t know exactly who they are and AT&T U-verse has the platform. It’s small – I think it’s only in about six million homes now, and the CPMs are high for direct response, but that type of TV model might be expanded once they absorb DirecTV in their merger. So that would make it like 26 million households or more. So then I think we would have the scale to have a broader reach nationwide.
Brownstein: So do you find that different types of products or services or even charities do better on this direct marketing TV?
Koeppel: Yes. I think that products that are demonstrate-able, that solve a problem traditionally do better with direct response TV. We’ve worked with a wide range of products – financial products, insurance, medical type products, auto, dating, beauty, travel — so it’s pretty broad. If the product category is too narrow, then it won’t work as effectively, so it needs to be a product or service that is used by a larger percentage of the population.
Reibstein: Wow, I would think that if you’re really narrow you could target in on your specific audience and be able to be more attuned to what it is that they might want and you’re offering a solution that fits their particular needs.
Koeppel: Yeah, well you can – for instance – if you have a travel site and you advertise on the Travel Channel, you’re definitely going to hit upon people who are going to be interested in your service. But sometimes scaling it to become a large campaign – if it’s more a niche product than travel, might be difficult but campaigns can range where you might be spending $10,000 a week maybe with a smaller campaign, all the way up to maybe a million dollars a week for a large campaign, all the time delivering a ROI for the marketer.
Reibstein: So how do you help clients think about what is the best channel? Since you work across the spectrum of channels, I’m sort of curious how it is that you think about that.
Koeppel: Yes. So we’re media agnostic and we’re able to do something called media mix modeling where we can introduce various mediums like one week at a time and look at the cumulative impact. So we might look at a baseline of activity that the client had — say on their website prior to introducing various forms of media, and then so say we introduce TV one week, and we can look at the incremental lift from that, then radio, then email and so when we’re going forward and running all those simultaneously, it’s easier to discern them. But also by testing them separately we can look at which ones are going to perform the best for various campaigns.
Reibstein: And you run a lot of tests all the time?
Koeppel: We do. Yeah, typically, you know, unless were running a successful campaign in terms of profitability then the campaign is not going to roll out, so we’re continually testing and optimizing the campaign almost on a daily basis.
Reibstein: So we just got an email that came in from Jerry and it says, “I run a local gym in Tampa, and we just decided to create a website for our company. In all honesty, I’m not very tech savvy, but I was told it was smart to invest in a website. We we’re debating whether to invest in a web developer versus local TV ads. I’m curious if you have any advice as to how we can determine if my wife and I made the right choice” by creating their website. Any thoughts?
Koeppel: Nowadays I think your website is your storefront. If you don’t have a website that’s a quality website people won’t take you seriously, and so I think that’s a very good decision as a first step to try to attract new customers. It might be more cost-effective for him to start off with a local pay-per-click campaign and do search engine optimization in terms of starting to build awareness for his gym. Local television sometimes can be more expensive on a CPM basis than national television, but it’s possible to buy local cable sometimes and that could be highly targeted to certain zip codes so that might be a way to start testing TV once he can get traction online from some of the methods I mentioned earlier.
Reibstein: Sure. What advice do you have for maximizing ROI in the direct response space?
Koeppel: It’s all a matter of testing and optimizing continuously. You have to look at your overall campaign, look at the channels that are driving the best response and look at the measurements like, you know, whatever the measurements are for that campaign whether it’s a cost-per-lead or a cost-per-registration or cost-per-sale, and we can really optimize down to the spot level and figure out this spot ran on this network in this programming at this time of day, and it got this level of ROI.
Reibstein: I totally agree with you. I think testing is the solution. Sounds like you’ve got a great business going. I’ve got to thank you very much, Peter. It’s been wonderful. I’m Dave Reibstein. I’d like to thank both of our guests, and our emailer, and I’d also like to thank sound engineer Dan Baker, producer Matt Johnson, and program director Patty Hall. This has been Measured Thoughts with Dave Reibstein on Sirius XM 111, powered by the Wharton School.