By Sam Ruchlewicz—Today’s world continues to become increasingly digital. Today’s consumer can do everything from job hunting to food shopping to home buying completely, blissfully, online. But the pendulum is swinging back. Frustrated by ad blockers and flummoxed by increasing costs and diminishing returns, brands have returned to an old friend: experiential marketing.
The concept is simple: in an increasingly impersonal—and I daresay artificial—world, an experience that creates a real, tangible, meaningful connection between a brand and its target audience is exceedingly valuable. It cuts through the clutter. It creates an emotional connection. It inspires consumers. It resonates.
Experiential Marketing Works(?)
And, according to proponents of experiential marketing, it actually works. Advocates claim that experiential marketing can successfully integrate digital advertising and social media with real-world interaction, creating durable connections quickly and laying the foundation for scalability, brand loyalty, and advocacy.
Most experiential efforts use variants of the same playbook:
- The brand creates an “amazing” or “memorable” or “engaging” experience in a prominent location.
- Consumers, who may or may not be the brand’s target audience, inevitably pass by the location on their daily travels.
- Those who choose to engage with the experience are so impressed/amazed with it that they proceed to:
- Share it on their social media accounts (so their friends see this incredible experience),
- Provide the brand with their contact information (to get other offers/deals/information/marketing messages), and
- Leave the experience with a more favorable impression of the brand and a higher likelihood of making a purchase at some point in the future.
Here’s the million-dollar question: do these things actually happen?
Measuring the Value of M&M’s ARcade
Unfortunately, most experiential marketing events aren’t designed to measure success in those ways. A good example is a recent, high-profile experiential marketing implementation highlighted in Adweek: the launch of M&M’s new caramel-flavored candies.
To announce their new confection, M&M’s parent company Mars designed an augmented reality experience in Times Square called “The M&M’s ARcade.” (AR, clever, no?) As part of this one-day experiential marketing effort, the brand rented a dozen billboards in Times Square and transformed them into an AR arcade environment that users could interact with through their mobile devices. A cool concept, to be sure. They paired that with a few giveaways (including one of those claw machines, see the image below), a photo booth with the Caramel M&M’s candies, and a hashtag (#UnsquareCaramel). Experiential marketing was off to the races (or pinball).
Presumably, the company had several goals for this, which I think could be fairly articulated as the following:
- Introduce the Caramel M&M’s to relevant consumers,
- Improve favorability and preference of the M&M’s brand, and
- Persuade people to buy the new candies.
This is not to say the above is an exhaustive list; I’m sure there are plenty of other goals (like “bring joy to people” or “do something cool”) that may have also been discussed. Those, however, are far more subjective than is useful for organization evaluation purposes.
Based on campaign data collected by Adweek, the results of this effort were as follows:
- 466M impressions to date,
- 147M “earned media” impressions,
- 6M+ social media impressions,
- 26,000 consumer interactions from passersby in Times Square, and
- 2,200 hashtag uses.
Regular readers will anticipate my criticism of the above “results”: they fail to provide a reasonable basis by which to evaluate the efficacy of the campaign relative to the goals set for it. What is an impression—or any of those other measures—worth? Is there a measurable difference in impression quality between “earned media” and “social media?” Did using the hashtag—or any of those other measures—positively (or negatively) correlate to purchasing behaviors for everyone’s favorite caramel candy bites? Would Mars have been smarter to take all of the money they spent on their experiential marketing effort and throw it from the top of the Empire State building?
Unfortunately, it does not appear that Mars/M&M’s (or their agency partners) collected any of this information, so we shall endeavor to persevere and evaluate their effort using the limited (and imperfect) data we have been provided. In a perfect world, we would have answers to the above questions (and more!), which would enable us to conduct a far more scientific and comprehensive analysis of the campaign. This provides an interesting challenge, which I hope may help and inspire readers facing similar challenges to begin to unravel them and understand how effective their own campaigns are at achieving their goals.
Speaking of Money…
Let’s (try) to break down the costs involved and get an idea of what Mars got for its investment. This will be a fun but very rough adventure in post-hoc measurement; an amusement rather than a proper or recommended measurement technique.
There are plenty of ways Mars (or its agencies) could have put better measurement in place, like for instance by:
- Tracking activity within the AR app, or
- Counting the number of app users who purchased M&Ms using a coupon code or followed the brand on social media, or
- Even a simple “with or without” analysis in the Manhattan area.
If they had, then they would have had much more concrete measures of success to report. But then we wouldn’t have the fun of this after-the-fact measurement exercise.
So let’s estimate the costs. The AR takeover was one-day only, although the prep (and agency hours) for it likely took months, which is why I have used day metrics for billboard rates but total metrics for everything else.
Billboard Rentals. A single billboard unit in Times Square costs between $1.1M and $3.4M per year. Based on this chart I’m going to assume that the market value of the billboards rented is about $34.5M per year.
That’s about $95,000 per day (on average), though the actual costs are likely higher, as M&M’s doesn’t have the ability to take advantage of yearly pricing rates. So let’s tack on a 25% premium, which would also cover set-up fees, taxes, administrative expenses, etc. That’s $118,750—just for the billboard rentals for one day.
Agency Fees. This experiential event was conceptualized by NYC-based agency Weber Shandwick and brought to life by Synergy Interactive. Approximating the amount of time it would take to pull all of this off is difficult, but after a few conversations with agency executives, AR developers, and experiential designers, we settled on a range of 1,250 to 1,750 hours. Most the variability involved in this estimate is due to a few factors: time spent creating initial campaign concepts, the number of revisions made to various components of the creative, and the level of difficulty involved with integrating the AR app with the various billboards.
In order to calculate the hourly rate for this work, I used data provided by a recent article in PRWeek (since picked up by NPR and the NY Daily News), which showed MSU paying Weber Shandwick $517,343 for 1,440 hours of agency work. That breaks down to a blended hourly rate of $359. I was not able to find rates for Synergy Interactive, so for our purposes here we’re going to lump them in with Weber. And in order to be extra fair, I’m going to reduce the hourly rate by 15%, as the MSU work performed involved a crisis event and likely was charged at a premium. That leaves us with a blended hourly rate of $305 for between 1,250 and 1,750 hours, or $381,250 to $533,750 in agency fees. Ouch.
Equipment Rentals. Finally, there is the equipment (A/V, vending machines, photo booths, photography, video, AR, etc.) cost to bring this all together. Again, these are a bit tricky to approximate, so I relied on the expertise of an AR developer based in Baltimore. He estimated that just the technology involved in this type of experiential event would cost $25,000 for a day—in Baltimore. For NYC, he advised that the cost could be as much as double that figure, depending on the day and the exact setup used. For the sake of simplicity, I’m splitting these estimates and assuming a technology cost of $37,500 per day. And let’s tack on an extra $20,000 for event signage, other arcade machines, photography, giveaways, etc. So that’s $57,500.
This all comes with the caveat that, from the information we’ve been provided, we have no idea what equipment was already owned by Synergy Interactive, what equipment model(s) were used, if the equipment had to be transported (and if so, from where), how many photographers/videographers were hired, what the tech stack actually looked like, etc. This is a rough, conservative estimate, and the actual bill is likely to have been significantly higher.
Let’s summarize our cost estimates:
- Billboard Rentals: $118,750
- Agency Fees: $381,250 to $533,750
- Equipment Rentals: $57,500
For a total investment of $557,500 to $710,000.
Where Else Could They Have Invested Their Marketing Dollars?
So, what marketing alternatives could M&M’s have purchased for their $557,500 to $710,000? Here are a few:
- About 17,000,000 30-second advertising spots on Hulu,
- About 170,000,000 digital marketing impressions on Google Display or Facebook, or
- They could’ve sponsored about a months’ worth of HQ Trivia Contests, plus given every participant a coupon for Caramel M&M’s and still had about $50k left over.
And that’s using the low side of the estimate.
Was Mars’ Investment Worth It?
Whether Mars’ investment in the M&M’s ARcade event was actually worth it depends upon a number of factors, from how effective the event was at creating a meaningful connection and how durable that impression was overall (i.e., did it come to mind when the consumer was face-to-face with a packet of M&M’s at Whole Foods the next week? The next month?) to how effectively social media and earned impressions translated to buyer behaviors.
Based upon industry research and our research/data collected at Warschawski, we have good reason to believe that the average consumer will click on about three of every 1,000 display ads served by the average advertiser (which is about what a social media or earned media impression amounts to these days). We know that of those users who click (or express interest), about 2 percent will complete a conversion that’s attributable to the campaign shortly thereafter. And we know that the impact created by most advertising impressions has a relatively short half-life of decay. That is, people don’t remember seeing ads for very long, and the impact they have is not particularly durable.
So, let’s approximate how effectively the M&M’s event may have performed, using some real dollar figures:
466,000,000 total impressions from the event,
…times 3 clicks out of 1000 views = 1,398,000 “clicks” (which I’m using as a proxy for an individual expressing some interest),
…times 2 percent conversions per view = 27,960 “conversions” (purchases of a bag of M&M’s attributable to the campaign)
…times $1.99 (the average price per single-serving pack of M&M’s I saw at my local grocery and convenience store) = $55,640.40 sales revenue. (I also found them for $1.29 on Amazon, but I don’t think most people in the mood for a snack are buying M&M’s on Amazon, though they may be buying in bulk online).
The one exception here is the “experiential” conversions, which seem to be much higher. Of the 26,000 passerby impressions, about 2,200 used the hashtag (for the purposes here, I’m assuming that only people who saw the hashtag in person used it, which is likely a flawed assumption, though the outcome is favorable to Mars).
So, let’s increase both the interaction rate and the conversion rate for in-person engagements to 8.46% (2,200/26,000). That’s 186 sales at $1.99/unit, or $370.14. That brings our total revenue to $56,007.44 (I removed those 26,000 impressions from the 466M to avoid double-counting) – and this is before the COGS is taken into effect. For retail candies, the actual producer (Mars, in this case) pulls down a gross margin of about 45% on the wholesale price, or about $0.63 in profit on a $1.99 bag of M&M’s, assuming that wholesale sells at 70% of retail. That means Mars actually made about $17,730.99 in profit (before advertising costs) on a spend of $557,500 to $710,000. Or, lost $539,769 to $692,269, after the advertising/event costs are included.
A Very Expensive Day at the ARcade
That translates to a net loss of between $539,769 and $692,269. Which is one very, very expensive day at the ARcade.
(Yes, this has been a very rough and incomplete estimate. I’m sure some of you will (rightly) point out that the effects of this experiential marketing play may persist for some time: days, weeks, months, even years. It may have introduced some customers to caramel M&M’s who will go on to buy a bag every single day for the next year (though there would need to be 2,385 people who did this in order for the campaign to break even). And maybe Mars saved money with a deal on signage, or by doing some design work in-house. Maybe their revenue got a boost from people who bought M&M’s ice cream or t-shirts. Times Square had about 270,000 pedestrians that day, and no doubt some of them got an urge for candy-coated chocolate after passing through. Fine; it’s a rough estimate.)
But wait, here’s what’s really interesting: If every impression generated by the campaign (since this is the unit of measure we actually have) drove the same expected revenue ($0.0142/impression) and profit ($0.004495/impression) as the in-person impressions, this campaign would’ve actually been profitable: at 466M impressions, that translates to $6,617,200 in revenue and $2,094,892 in profit. After deducting the costs of the campaign, Mars would be looking at an ROI of about 276% (on the high end) to 195% (on the low end). Not too shabby.
A Sweet but Cautionary Tale
This isn’t intended to be a criticism of experiential marketing events, but rather a cautionary tale. Mars (and their agency partners) clearly did not think through how the impact of this event would be measured, or the bottom-line impact this event was expected to deliver. Rather, they created an exceptionally “cool” event for the sake of doing something exceptionally cool. And in the process, their client likely lost well over half a million dollars (by my admittedly conservative estimations).
Had I been tasked with this project, I think there are many, many more interesting ways of measuring the impact of these events. A mixed-markets test comes immediately to mind:
- How much more likely were those individuals who “experienced” the event to buy a bag of M&Ms?
- How much did it improve their favorability of the M&M’s brand?
- How “memorable” was this experience for those individuals vs. a traditional ad vs. a digital ad?
These are questions that can be answered, and that can provide tangible insights into how effective these events can be for brands like M&M’s.
But the tough questions have to be asked up-front and built into the design of an events. And then the insights uncovered from those answers have to be put to use moving forward. If not, companies like M&M’s will continue to spend untold millions on events that simply are not effective at driving new customer sales, fostering brand loyalty (and with it, lifetime value), and ultimately, delivering profitability. ∞