Taken from ogilvyinsight: “the top 10 digital questions every marketer wants answered”

What Percentage of Budgets are Spent Online Taken from OGILVYINSIGHT: “The Top 10 Digital Questions Every Marketer Wants Answered” Jim Dravillas ( OgilvyOne worldwide - New York ) Namita Moolani ( OgilvyOne worldwide - New York ) Rori DuBoff ( OgilvyInteractive - New York ) Sean MacDonald ( OgilvyOne worldwide - New York ) What percentage of budgets are spent online, per industry? What kind of media spend do you have to put behind online advertising for it to be effective? Referencing the percentage allocation of media budgets as a measure to determine optimal online spending can be tricky, because marketing budgets vary greatly by company and industry. For example, top automotive online advertiser, General Motors, only allocated 3.5% of their total budget online (Jan-Nov 2005), but this translates to $86 million for this auto giant27. On another note, while GM continues to cut its offline ad budgets, its allocation to online will increase, clearly pointing to the effectiveness of the medium for this company. Understanding appropriate online budget allocation often means benchmarking your business against the big players in the category, and understanding the role online is playing in the overall marketing and communications strategy. The following chart is based on Jupiter Research numbers and forecasts28. Industry categories are grouped based on online media allocation as a percentage of offline spending. Traditional Giants: • Includes auto, CPG and health. These categories tend to use online as a branding medium. They are also heavy search spenders. While online media spend is a tiny fraction of their huge offline budgets, the dollar equivalent provides a strong online footing. Auto is poised for the fastest growth online over the next 5 years (24.3%). Health and CPG categories are also poised for double-digit growth in the same time period. In the pharmaceutical category, A AstraZeneca has been a leader in transferring marketing money online, currently earmarking 8% of its budget to the web.29 • This category features several top online spenders. Includes financial services, apparel, toys, games, travel and telecommunications. These verticals tend to allocate a greater percentage of total media dollars to online. Double-digit growth is expected from the travel and toys/games categories. The financial services category was the second-highest online spender in 2005. • Represents historically big online spenders; media and entertainment companies, computer and software industry and consumer electronics. They account for the largest amount of money being spent online. The media and entertainment category was the largest online spender in 2005. FACTORS THAT IMPACT ONLINE MEDIA EFFECTIVENESS: • The question of effectiveness is not necessarily tied to media spend. Factors such as program goals and target relevance come into play. For example, small amounts of money invested in paid search or a highly-targeted online display ad program coupled with a large TV budget can drive significant numbers of qualified traffic to a website. Once at the website, any number of measures of effectiveness can be established, from sales to information gathering to engagement. A relatively small online media budget can easily generate a positive ROI, and while this may not substantially impact the company’s bottom line, it does create an opportunity for marketers to engage with potentially high-value consumers. • Competitive strategies also play a key role. For example, for Famvir, a herpes medication, key competitor and category leader Valtrex was massively outspending Famvir in TV and print. However, Valtrex was spending almost no money online. Famvir decided to employ a reverse competitive strategy by owning the online space. This strategy resulted in its website traffic consistently outpacing Valtrex. Famvir used the web to generate NRx (New Prescription) sales and repeatedly met 2:1 ROI goals on new prescriptions. • The nature of the product, whether it is a high-value complex purchase with a long information-seeking cycle in the customer journey or a low-involvement purchase consideration, greatly impacts budget decisions, since the online space is increasingly the primary medium of choice for product research and seeking out information and reviews for high-involvement purchases. • Typically, it takes more media weight to have a successful branding campaign versus a direct response campaign. For a branding campaign, the aim is to have as many people as possible see the ads four+ times, in order to get the best impact. That takes more money and more impressions to achieve than a direct response campaign, which generally requires a lower frequency. Program Considerations• Benchmarking against leading players in the marketer’s category, and understanding the overall role online plays in the marketing mix are critical first steps in online budget allocation. • Understanding the key business objectives, target audience, nature of the product/purchase and evolving consumer behavior is fundamental to media allocation strategy. • The competitive landscape and media spending strategy play a critical role, as competitors may advertise more aggressively online, necessitating higher online allocation of budgets, as is seen in the media and entertainment category. On the other hand, competitors may not be focusing their efforts online, which creates unique opportunities to reach new audiences and maximize effectiveness. • The objective of the campaign, whether it is branding or direct response, will drive media allocation, as well. Branding campaigns which require maximum reach and exposure will necessitate a relatively higher online investment. 27. emarketer, tns media intelligence report, january 2006 28. jupiter research‘us category advertising forecast, 2005 to 2010’, november 29, 2005 29. adweek, ‘ big pharma seeks closer consumer ties online’, january 6, 2006 For more information, contact us: 15/F Philamlife Tower, 8767 Paseo de Roxas, Makati City, Philippines 1200 T (632) 885-0001 loc 101

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