Its All About The Pact - Final

It’s all about the Pact: What Consumers Really Look for in Advertising Practice Stephen D. Rappaport, Howard R. Moskowitz, Roseanne Luth, Simon Chadwick1 Presented to: Empirical Generalizations of Advertising Conference The Wharton School University of Pennsylvania December 4-5, 2008

Introduction In this new advertising era of digital media and mobility, communication professionals have the opportunity to observe consumer behavior, gauge impacts of digital media, and create and evaluate strategy. Never has the ‘material of advertising practice’ been so amenable to measurement, control, and modeling as today. Professionals are taking full advantage of the chance to learn. Through their pilots, campaigns and experiences, practitioners inevitably develop new mental models that provide working guides for this changing world. I, Rappaport, searched for an authoritative catalog of these models, but none exist, they are scattered about in the occasional article (Wind 2006, Rappaport 2007), book chapter (Plummer et.al. 2007), or blog post (Haque 2008)2. Experience as a student of new media and astute listener of industry conversations suggest some working notions:      

Media and audiences are fragmented Interrupt-and-repeat advertising giving way to brand experience Consumers are in control Word-of-mouth is most important Relevance is king Advertising as service

Mental models like these drive advertising today. They lead to specific actions, based on the way practitioners perceived the world to work. Those in charge of the media compete mightily to find willing audiences. Advertisers create events and websites focused on experience and interaction. They figure out how to cope with fast forwarding. They 1

Authors affiliations are, respectively, Advertising Research Foundation, Moskowitz-Jacobs, Luth Research, and Peanut Labs. 2 Wind, Yoram, “Challenging the Mental Models of Marketing,” in Jagdish N. Sheth and Rajendra S. Sisodia, Does Marketing Need Reform?, M.E. Sharpe, 2006; Rappaport, Steve, “Three Emerging Models for Advertising,” Journal of Advertising Research, Vol. 47, Nr. 2, 2007; Joseph T. Plummer, et.al., The Online Advertising Playbook, John Wiley & Sons, 2007; Umair Haque, The New Economics of Brands, Harvard Business Publishing blog, “Edge Economy,” February 29, 2008, accessed November 23, 2008). ©2008. The ARF. All rights reserved. DRAFT – NOT FOR CIRCULATION OR DISTRIBUTION.

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promote and listen to consumers’ brand conversations. They try to crack the code of advertising in social networks. With so much industry talk and media coverage of these topics, I started questioning whether this matched up with how consumers felt about these newer advertising practices. I wanted to find out and enlisted the help of research leaders – Howard Moskowitz, Roseanne Luth and Simon Chadwick to help me do so and collaborate on the research. They are co authors of this paper. Howard contributed his Ideamap.net technology and sample. Luth Research and Peanut Labs contributed samples, described below. Our ‘team’ created a knowledge base. I’m only going to scratch the surface today. There’s a lot more to be mined, but time is short, and the big story is beguiling.

Research Objective We set out to answer three questions: 1. How do consumers view advertising practice today? 2. What would consumers like to see more of? 3. What would consumers like to see less of? Answering these questions gives us a sense of What IS and What SHOULD BE. Our aim was noble: to identify consumer mindsets regarding advertising professional’s mental model. The application, or so we thought, was quite simple. The advertising community might hear us, and perhaps take these consumer mindsets into account when thinking about what and how to communicate. We found something else.

What the Study is NOT ABOUT This study is about how consumers feel about the practice of advertising. It is not concerned with frequently research topics, such as whether consumers like advertising, advertising effectiveness, consumer response to advertising, nor did we research different media to predict winners and losers.

Research Description The study employed Ideamap.net, a patented experimental research protocol invented by Howard Moskowitz, which borrows from conjoint analysis and takes it much further. In a nutshell Ideamap.net takes individual statements about a topic, systematically combines them on the fly, into groups of three or four statements called “vignettes,” and then asks survey takers to rate them on one or two scaled questions. No two consumers see the same set of vignettes, making it impossible to game the system. After the survey ©2008. The ARF. All rights reserved. DRAFT – NOT FOR CIRCULATION OR DISTRIBUTION.

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completes, programs kick off in the background that run analytic routines. The processed data is available within 24 hours or less. The approach has been written up in dozens of papers, presented at conferences, and most notably explicated in a recent Wharton book, Selling Blue Elephants: How to Make Great Products that People Want Before They Even Know They Want Them. Ideamap.net was co-developed with Wharton. For this study, we employed 36 elements. Each consumer saw 48 different vignettes. Using three different panels we acquired 1,114 survey respondents from Moskowitz Jacobs (214), Luth Research (405) and Peanut Labs (495). Each company filled its quotas within 24-48 hours. About 80% of logins completed the study, confirming that survey takers found both the topic and Ideamap.net approach engaging.

The Research Stimuli We identified six silos that capture most features of advertising practice today: A. B. C. D. E. F.

Media Environment Reaching Consumers and Targeting Ads Advertising Creative Consumer Behavior Brand Advertising Advertising Industry

Each of these silos provides a different part of a snapshot about advertising practice, and reflect the structure used by professionals. The silos are general, and probably don’t convey much meaning to a typical consumer. Consumers think in specific terms, in word pictures, which have concrete meaning and evoke feelings. Each of the six silos comprised six different elements. It is the elements which talk about the specific experience of advertising, and which have concrete meaning. These elements are the heart of the project. They move beyond generalities to specifics, to phrases that consumers find meaningful because of the fullness yet simplicity of the idea. Appendix I presents the six elements in each silo. When we talk about the results we will show impact or utility values of different elements. Although we have lumped together six elements in each silo, the analysis treats each of the 36 elements separately, as independent predictors of the consumer response. This approach of treating elements as independent means that the structure we impose on advertising practice need not be correct. The silos are merely bookkeeping devices, to ensure that mutually contradictory elements, or elements that carry the same type of message but with different content, never appear together in a single test stimulus.

Running the experiment: We invited respondents to participate. The respondents received an email invitation, clicked on a link and were directed to the interview.

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Respondents need to be oriented regarding the task they are to perform. The more information of a general, task-related nature one provides to the respondent, the better the interview will be in terms of a motivated respondent who knows what to do. On the other hand, it is vital not to set up expectations about what is right or wrong. We presented the respondent with an orientation page, describing the general nature of the study and the scales to use.

Fig 1. Survey Orientation Page

Afterwards, the respondent went through 48 test screens, rating each one on two attributes. Although this type of study may seem long, in fact most respondents enjoy it. The stimuli are ‘assembled’ on the respondent’s computer very quickly, and change automatically after the respondent assigns the ratings. Thus the task is quick, engaging, not boring. The test stimuli comprise short, easy-to-understand phrases, in bullet form, as we see below in the figure. The respondent reads the combination, and assigns a rating to the combination. The set of 48 combinations is unique for each respondent, ensuring no bias due to creating just a few, representative stimuli that may incorporate unexpectedly strong performing or weak performing combinations. Finally, each respondent evaluated an individual set of stimuli, sufficient to create a ‘model’ for that person.

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Fig 2. A vignette with the first rating question.

Fig. 3. A vignette with the second rating question.

Setting the Stage: A Summary of the Sample: Demographics, Media Behavior and Psychographics At the final part of the survey we asked our respondents to profile themselves. Our participants were media-experienced; a good number seem quite savvy. Brands are part of consumers’ psychology and social fabrics. People like to be current on their favorite brands, talk about them and share their experiences with those near or virtual. Advertising remains an important source for consumer consideration, when they buy goods and services. Our respondents trust their information finding skills. This admission of trust suggests that they ‘vet’ and validate the advertised claims against knowledgebases the consumer constructs in his or her own mind. Finally, consumers are not alltrusting. They are somewhat leery of the way companies use their personal information.

Sample Recruitment and Size The sample totaled 1,113 people aged 16 on up. These individuals were recruited through the Luth Research (vSavvy panel), Peanut Labs (Sample 3.0) and Moskowitz Jacobs panels. Each panel company employs different methods for recruiting, validating and rewarding participating panelists. Descriptions may be obtained from each company.

Demographics Compared to the population as a whole, our sample was generally proportional on key demographics like gender, income and education. Across generational cohorts, Gen M was about 10% over its incidence in the general population, and Baby Boomers were about 10% under. See Appendix 2 for the data tables.

Media Behavior The sample is media-involved: watching, listening and reading offline and online, creating and contributing content, and controlling media with TiVO and DVRs. Blogs are often sources of product news and opinions. In our sample 40% of the respondents read blogs, and about 40% of the sample read blogs, and 31% contribute to them regularly. ©2008. The ARF. All rights reserved. DRAFT – NOT FOR CIRCULATION OR DISTRIBUTION.

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Which of These Activities Do You Do Regularly? Watch, Read, Listen Contribute Content Watch TV 80% Chat Listen to the radio 61% Upload photos Watch video online 59% Update your profile page Read books 58% Upload music Text 55% Post or comment to blogs Read magazines 53% Upload video Listen to music online 52% Use a file sharing service Read a newspaper 48% Manage a blog Read blogs 40% Create music or video Other Control Viewing Record or watch 32% TIVO or DVR

52% 51% 46% 36% 31% 23% 22% 19% 16% 12%

Psychographics We asked participants a series of questions about their information needs regarding brands, the place of word-of-mouth, and community participation. Here are Top 2 box scores (Strongly Agree and Agree combined) that portray them as brand involved and availing themselves of a variety of information sources. “I like giving my advice on products I know well,” “I ask people for their advice on products they know well,” “I need to be in the know about products I care about,” “I like being part of a community ... that cares about brands I'm passionate about,”

68% 61% 56%. 36%

Our surveyed group displayed interested in brand knowledge and exchanging it with friends, family, colleagues and communities. These conversations, combined with tools like search and blogs are an important source for learning about new products. “I mainly learn about brands ... from friends, searches, blogs, posts, websites, etc.”

55%

They have confidence in the information they gather from all their different sources. “I trust product information I find myself ... more than from any other source”

53%

Advertising is one of those sources – an important source – that consumers factor in. About one-third of the respondents felt that advertising will become less important, whereas roughly equal numbers see advertising maintaining its importance or express neutral views. So we found no consensus here. “I expect that advertising will become less important to me” ©2008. The ARF. All rights reserved. DRAFT – NOT FOR CIRCULATION OR DISTRIBUTION.

37% 6

Consumers express concern over the ways advertisers use their personal information “Companies collect and use my personal information to benefit me”

24%

Only one in four consumers agreed that they benefit from the personal data companies collect on them. Half of the respondents disagreed.

Key Findings of the Total Sample With this context, knowledge about WHO we sampled, we now move to the meat of our presentation … consumers views of advertising practice.

Consumer-Perceived Advertising Practice Today After each vignette was shown, we asked respondents to rate them: “How does this vignette match your view of advertising in today’s world?” Answers ranged from “Not at all” to “Perfectly.” If thinking about advertising practice today were compared to a fast moving packaged good, then our data suggest that advertising would be rather unremarkable, sit innocuously on a lower shelf, often passed by and seldom examined. Consumers scored most elements around neutral which surprised us. That is, they did not see the element as being a general description of advertising practice today. Given their experience with media and advertising, we expected to see some of the elements reflect one or more of the mental models we noted at the top of this paper. However, two elements did stand out for what advertising today is NOT like. The new digital technology is not confusing, and people don’t pay for content. Consumers don’t see themselves as paying more frequently for the programs, videos, articles, postings and entertainment they enjoy today. And they feel that they are pretty comfortable using digital media, which makes sense given the levels of media consumption and production we reported above.

F5 F3

You find new digital technology ... CONFUSING You PAY-FOR-CONTENT ... more often

-8 -7

What Do Consumers Want “More of” and Want “Less of”? Consumers may be sanguine about today’s practices, but what would they really like advertising to be? We thought, almost certainly, that consumers would express some clear, perhaps even strong preferences. In order to make the preferences as sharply ©2008. The ARF. All rights reserved. DRAFT – NOT FOR CIRCULATION OR DISTRIBUTION.

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express-able and as unambiguous as possible, we recoded the “more like this, less like this” ratings into two groups, so that the strongest values appeared as positive numbers. That is, we did two analyses – one looking at what the consumers said they definitely wanted, and the other looking at what consumers said they definitely did not want. Given all the professional focus on advertising, we expected to see strong consumer feelings. We were surprised again by the amount of neutrality expressed towards most of the elements. Where we expected to see strong preferences for elements concerned with one or more of the newer mental models such as consumer control, the desire for relevant ads, engagement, advertising as service, and so forth, we didn’t find any. Instead consumers felt very strongly about more conventional concerns. Here are the details.

Want Less Of This analysis looks at the bottom of the scale. So, the numbers in the body of the table reflect the conditional probability of a respondent saying ‘I want LESS of this’. Consumers are saying: don’t make me pay, don’t make it hard or confusing, don’t interrupt me, and give me some alternatives to big media. The consumer wants LESS of this

F3 F5 E1 A1

You PAY-FOR-CONTENT ... more often You find new digital technology ... CONFUSING Advertising INTERRUPTS you ... to get noticed Big media companies CONTROL ... what you watch, read and listen to

10 9 7 6

The ‘less’ doesn’t only appear in the quantitative portion of the interview. Participant verbatims3 reveal how aware they are and how clearly they know what they want: It is important that it doesn't take my personal time, doesn't make me pay for it (text messages and phone calls). Be more direct and clear about what your selling. No more pop ups online. Advertising is so dense right now that it's almost suffocating. when i watch tv, i get about five minutes of whatever show i'm watching, then i have to wait another ten minutes through commercials before it comes back on. it's VERY frustrating. I would like advertising to not appear as advertising. I like it better when advertising is done within the media content so that one doesn't have the blatant interruption of the show you are watching.

3

All verbatims in this report are replicated as they were entered by the respondent. We did not modify spelling or grammar in any way. ©2008. The ARF. All rights reserved. DRAFT – NOT FOR CIRCULATION OR DISTRIBUTION.

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I do not like when advertising and content seem to mix too much. It is irritating when all tv shows are filled with product placements. I really dislike when it interrupts me. If I am already online looking something up, advertise on the side and I will look at it, pop it up and I will never look at it.

Want More Of What consumers want more of is simple -- advertisers should be forthright, honest and good stewards. The consumer wants MORE of this

F4

You expect advertisers ... to BEHAVE responsibly in all ways

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The following verbatims give considerably more texture to the meaning of this notion of ‘responsibility’: All the facts and no false advertising makes me want to read what they have to say. Advertisements that are completely clear of any spyware or malware. Truthfulness in advertising. It's especially annoying when advertisements incorporate blatant lies in order to exaggerate their image. quality & trust of a product. Based on ads I want the product to work/ do what the advertisement states. That it is responsible and located in appropriate places. Also, remove all billboards they are inappropriate and only pollute the sky. Advertisers should be ethical and not infringe on privacy without explicit permission Advertising more of "green" products. need to reach more people and let more know that there are green alternatives to a lotta the wasteful stuff we use in everyday life

The Advertising Pact When we began this research we thought that we could easily measure the consumer interest in the newer advertising practices. We believed that consumers were as aware as we were about what was happening, and that they would be strongly involved, with great emotion. We as professionals were witnessing a revolution, where control was being handed over to the consumer, or so we believed.

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Frankly, we were surprised that we didn’t happen upon a group of excited, vocal, opinionated consumers, ready to ‘spill their guts’ and ‘tell us how it is’. Again we repeat our surprise to discover that consumers in our study were so indifferent about newer advertising practices. Of course the participants were not totally indifferent. They were vocal on a handful of elements that had to do with THEIR ability to watch, listen or read and enjoy it. That is, it’s about THEM, not about ADVERTISING PRACTICE, per se! Perhaps this is the most important finding of all. It’s our mental models, but it’s about the ‘THEM’ that resides far away from our rarified, intellectualized abstractions. We reconsidered our thinking, after pondering the data, and turning it upside down. It became increasingly clear that there may be a ‘transaction’ going on, and that we had happened upon a quid pro quo situation, unbeknownst to us at the start. Consumers understand that content in any medium costs money to produce and distribute, and that advertising support makes it available for consumption in almost any form. Ed Keller, currently the boss of Keller Fay, but formerly head of Roper Worldwide, told us that “most consumers consider advertising a fair price to pay” for media – a Roper finding that’s held up for 30 years. Notice the word ‘pay’. It’s not about wanting to be involved. Involved -- that’s our language. It’s about paying with their time to get something. That something is content. It’s all about homo economicus, economic man in a new situation, with a new technology. The elements consumers want more of and the elements that consumers want less of create, in ePoll CEO Gerry Philpott’s phrase, a “Pact between advertisers and consumers.” The Pact governs the implied contract: “I’ll give you my time, attention and money so long as you respect me and act honorably.” What does the Pact sound like? Our respondents vividly expressed the Pact in replies to the open-ended question. It’s important to note that the majority of writers offered constructive comments, relating their issues and suggesting ways that advertising practice could be more acceptable to them. They did not trash advertising nor did they say that advertising has no value. “What is important to me is that they are considerate, they don't "interrupt" but incorporate products into life as it is.” “It is important that I retain control over what I watch, read, and listen to. I don't mind advertising if it is interesting to me and gives me enough information to make informed decisions.” “I do not like ads that use personal information to tailor ads to me. Ad tailoring should be done in the same way it is on TV. By studying the target market of a Web page and using that information, not by going through the type in my e-mail, etc.” ©2008. The ARF. All rights reserved. DRAFT – NOT FOR CIRCULATION OR DISTRIBUTION.

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What happens when the Pact is broken? Here’s one outcome: “Advertising is so invasive that it has become annoying. I find myself NOT buying products because of ad campaigns. I especially resent PAYING to see ads. For example I get extremely irritated by the ads at the beginning of movies. I don't hate advertising but I see it as something unavoidable like taxes and death. I do feel that boundaries have been crossed about where and when ads displayed. I also feel that many ads are sexist.’”

Is There a Single Way to Describe Advertising Practice? To be honest, the Pact is a nice story. But we’re dealing with aggregated responses, and these may mask segments or differences. This raises the question: do consumers look at advertising practice the same way? If not, then how do they (segments), and do the segments look differently at what they want more of or less of? Is there a single Pact, are there multiple Pacts, or perhaps something else?

A Tale of Two Segments Rigorous statistical routines power Ideamap.net’s analytic capabilities. These routines are stock, they are not customized nor tweaked to fit the data. If segments are discovered, they have mathematical and research integrity. The methods use conventional regression to identify the individual-level coefficients for the model, principal components analysis to reduce the redundancy across the 72 elements (two sets of coefficients, one for ‘is’ and one for ‘want’), quartimax rotation to ensure simplicity, and finally k-means clustering to divide the 1112 respondents into a limited number of groups. No fudge. We looked at the most parsimonious segmentation, based upon the inputs. We segmented the data and found two groups. Based upon the elements that ‘float to the top’ across the set of 36, we called these two groups: 1) Advertiser Control (~70%), and 2) The Indifferent (~30%)

Segment 1: Advertiser Control In today’s world of advertising practice, this segment sees advertisers controlling the agenda, interrupting content and using whatever means necessary to reach consumers. Segment 1 expects advertisers to behave responsibly, ostensibly to make advertising practice more acceptable.

E1 B6

Segment 1 (Advertiser Control) sees this happening today Advertising INTERRUPTS you ... to get noticed 10 Advertisers target SHOPPING ROBOTS ... you use 9

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B1 F4

Advertisers want their ads seen ... by the LARGEST 7 AUDIENCES You expect advertisers ... to BEHAVE responsibly in all 6 ways

Three verbatims essentially reflect consumer views in this segment: “I hate ads! If I am interested in a product, I'll seek the info I need...STOP BOMBARDING ME WITH BULL!” “i'd like advertising to be less ubiquitous-- i am really fatigued with not being able to walk down a street without being bombarded not just by ads, but by MOVING ads (tv screens on every subway entrance et cetera). PLEASE let's tone this down a little!” “Basically I think our lives are controlled by advertising because we adversise for houses, foods, and even school. TV is just a list of advetisements …” In other words, this segment perceives being in the sights of a commercial onslaught and wants relief. But they’re also saying something very important: I’m going to buy products, maybe yours, but please reach me and talk with me in ways agreeable to me. “It is important for advertising to be relevant to my interests, but not suffocating in its presentation or integration in content.”

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Segment 2: The Indifferent We called this group Indifferent because they do not express any clear tendencies like the Advertiser Control segment. About two-thirds of their scores are squarely in the neutral range, with the remainder describing advertising practice as “not like this.” The Indifferent discriminate ads from content; they don’t see advertising as tailored or personalized to them, nor do they see the capabilities to control their advertising experience. Advertising is background to daily experience. Segment 2 (Indifferent) sees this happening today

Nothing – they are indifferent to what’s happening! Segment 2 (Indifferent) sees this NOT happening today

A5 B5 C3 C6 D5 F1 B2 B6 D3 D6 F3 F5

You use PROFILE PAGES as media centers You CONTROL the information advertisers use ... to communicate with you Brands PERSONALIZE their ads ... to you It's hard to tell ads ... from CONTENT SOCIAL NETWORKS and advertising ... don't mix Madison Avenue ... CENTER of the advertising industry Most ads you see ... relate to YOUR interests Advertisers target SHOPPING ROBOTS ... you use You expect that most advertising you see... directly RELATES to your interests You control the ads you see ... through SOFTWARE and PERMISSIONS You PAY-FOR-CONTENT ... more often You find new digital technology ... CONFUSING

-5 -5 -5 -5 -5 -5 -6 -6 -6 -6 -6 -8

These verbatims give a bit of insight into the Indifferent: “all advertising does for me is show me what the world has created, some of it is interesting but most of it seems quite boring to me” “there is a wide variety of advertisements. It seems that a lot of the advertisements are similar and by the same companies” “most ads are boring i really don't pay attention to most of them...i either leave the room, talk to friends or family...i buy what i think i want for me and ads do not influence my mind”

What do the Segments Want “More Of” and “Less Of”? With segments in hand, we now ask “Do they differ in what they want in advertising practice?” We broke out what they wanted more of and less of. We were stunned: both segments want the same things. And both perfectly mirrored the elements we observed ©2008. The ARF. All rights reserved. DRAFT – NOT FOR CIRCULATION OR DISTRIBUTION.

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among the total sample in the “more of” and “less of” categories. This is a very important result. It means that there is probably a single, general Pact, even if the respondents come to that Pact from different mind-sets.

Want Less Of Consumers reveal more range when it comes to practice they would like to see less of. But, here too, the segments agree – as did the total: keep it simple, keep it free, don’t interrupt me and give me some options. The Advertiser Control segment does not want advertisers interjecting themselves into their conversations, which adds some dimension to the desire not to be interrupted. The Advertiser Control segment wants less of

F3 F5 E1 A1 E6

You PAY-FOR-CONTENT ... more often You find new digital technology ... CONFUSING Advertising INTERRUPTS you ... to get noticed Big media companies CONTROL ... what you watch, read and listen to Advertisers join the CONVERSATIONS ... you have with friends

14 13 8 7 5

The Indifferent segment wants less of

F3 A1 E1 F5

You PAY-FOR-CONTENT ... more often Big media companies CONTROL ... what you watch, read and listen to Advertising INTERRUPTS you ... to get noticed You find new digital technology ... CONFUSING

6 5 5 5

Want More Of When it comes to wanting more of certain practice, both segments agree on just one – advertisers should conduct their affairs with a high level of integrity. The Advertiser Control segment wants more of

F4

You expect advertisers … to BEHAVE responsibly in all ways

F4

You expect advertisers … to BEHAVE responsibly in all ways

8

The Indifferent segment wants more of

7

Across both segments, every other element not mentioned above came up with neutral values. We interpret this to mean that whereas our study participants accept current advertising practice, they don’t feel strongly about them.

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Two Routes Lead to the Same Destination: The Pact For some time we were puzzled: why didn’t the segments express differently? We looked into the data, re-ran the segmentation routines, and so on. We went through a lot of back and forth. Every time we did, we got the same results. Then it dawned on us: asking about advertising practice is not at all like studying taste, product features or package design. In those areas sensory preferences vary, product features appeal to different to people, and package designs are in the eyes of the beholders. Satisfying difference is what that game is about. In this case, people want the same “product” but take different routes to get there. The segmentation shows the route, not the goal. In some ways this is like a sister and brother who want to visit grandma. Sis likes to drive, brother likes to fly. Each uses different means and has different experiences – Sis the road, with its routing, accommodation and hospitality options, Bro with the choices available to the jet traveler. Yet both share the goal of not just reaching grandma, but enjoying the shared time together which is independent of their travel. The same is true for advertising practice.

The Pact for Advertising Practice: A New Mental Model Articulating a handful of straightforward but profound ground rules, the Pact is the consumer’s mental model, and different from those used by practitioners. The Pact doesn’t start with content. Instead it says, “assure me that you’re a good brand and company, and I’ll consider your offering and enter into a relationship with you … as a customer, supporter of your cause, etc. Be as creative and innovative as you can be with my interests at heart. But violate the Pact and I’ll turn away.” The Pact goes beyond the transactional contract inherent in the “fair price to pay” exchange of advertising for content. That contract – “we’ll give you popular content, and you’ll tolerate the advertising,” reflected a simple seller-buyer relationship from an earlier era. The Pact upends this old contract. The Pact, we feel, teaches that practitioners can use most of tactics to get their sales messages across. Consumers will listen, they may become convinced, they may get involved, they may even buy. Occasionally they will shut out the advertising with technology, or simply tune it out psychologically. Yet consumers are clearly aware that there is a Pact. Consumers simply want to know. Consumers ask only that most content be free and that they be allowed to enjoy that content in exchange for the most precious possession they have – the moments of their lives.

Implications for Practitioners The Pact provides new guidance for practitioners. Let’s consider five: 

Companies should clarify their values and practices

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Although this may sound boilerplate, clearly, consistently communicating a stance helps consumers understand the brand and company, and help them identify where the common ground is. In one respondent’s words … “[I want to know] The company's social responsibility and the ethics involved in their advertising campaigns.” 

Ensure that the values and practices are aligned with those of the target consumers The Pact provides guidance but isn’t generic. Brands need to understand the “terms and provisions” best suited to their customers and prospects. Brands may need to create a “portfolio” of Pacts that address different products or segments. A soft drink company might have different Pacts for its flagship brand and youth brands. Similarly a H&BA company might have versions for its female-oriented and male-oriented brands. Contrast these two statements. Each statement can become one “term” of a Pact for a particular product. We are talking here of two Pacts. “I would prefer to see advertisments that are able to get their point across without using sexuality. For me, it distracts from the selling of the product, rather than enhances it.” “The people that is used during the advertistment MUST BE EXTREMELY SEXY”



The Pact guides new advertising practices Innovating new practices – like advertising as service, enabling consumer control, promoting word of mouth, tying into the green movement, for example, make sense when informed by the Pacts brands form with their customers and prospects. Practices serve by furthering the Pact. “i would like advertising to be more open and truthful lay the product out there for all who are interested in buying what ever is being advertised” Or practices may be ‘dead wrong’, as this verbatim shows: “I really detest "green washing" in ads. We all know this type of advertising is hogwash, very untruthful and disgusting … A lot more actual fact and truth in advertising would be a blessing.”

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

Consumer research must listen Understanding consumers in light of the Pact expands the research agenda and broadens its scope. Research ought first to define the Pact. Then Research might do well to monitor adherence to the Pact. It’s here that traditional marketing research might work. But, its also here that the emerging discipline of ‘listening’, using socalled listening tools, can monitor, dissect, and provide action-able insight from the conversations people are having about brands and companies. And what is the objective? Listening tells you whether the Pact is working. Armed with that knowledge, brands can calibrate and adjust their plans and programs to consumers in a true strategic context with high confidence.



Pacts are direct investments in customers Clearly stated, monitored and enforced Pacts reduce the costs consumers “pay” for poor advertising practice in frustration, wasted time, and so on. Rooted in listening, Pacts potentially offer strategic advantages to brands, because they will be able to identify and use whichever practices provide the greatest benefit to consumers while reducing unwanted costs that may drive them towards – or keep them with – a competitor.

Howard would like to add a final note: “The Pact will be the North Star, the guide, even when the road is hard to follow, difficulties hard to anticipate.”

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Acknowledgements The authors wish to thank Stacey Hall of Peanut Labs, Becky Wu, Corey Kucera and John Alston of Luth Research, and David Moskowitz of Moskowitz Jacobs for their assistance in fielding the research.

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Appendix 1. Category and Element List Category1: Media Environment A1 A2 A3 A4 A5 A6

Big media companies CONTROL ... what you watch, read and listen to All media seem like TELEVISION You spend most of your time ... with ONLINE media You read, listen or watch ... whatever, whenever and wherever YOU WANT You use PROFILE PAGES as media centers MEDIA IS MEDIA ... offline or online doesn't matter

B5 B6

Category2: Reaching Consumers and Targeting Ads Advertisers want their ads seen ... by the LARGEST AUDIENCES Most ads you see ... relate to YOUR interests Advertisers reach you ... EVERY WAY and EVERY WHERE Advertisers show ads to you ... based on YOUR searches ... behavior... friends ... psychology You CONTROL the information advertisers use ... to communicate with you Advertisers target SHOPPING ROBOTS ... you use

C1 C2 C3 C4 C5 C6

Category3: Advertising Creative Your job as a consumer ... LEARN about brands Advertising aims to ... get you TALKING about brands Brands PESONALIZE their ads ... to you Ads incorporate CONSUMER ... photos ... videos ... music, etc. Ads become more like MOVIES ... with stories and effects It's hard to tell ads ... from CONTENT

D1 D2 D3 D4 D5 D6

Category4: Consumers Behavior Most advertising ... just WASHES OVER you You COMBINE MEDIA ... to do whatever you want to do You expect that most advertising you see... directly RELATES to your interests What people you trust SAY about brands ... matters more than advertising SOCIAL NETWORKS and advertising ... don't mix You control the ads you see ... through SOFTWARE and PERMISSIONS

E1 E2 E3 E4 E5 E6

Category5: Brand Advertising Advertising INTERRUPTS you ... to get noticed Advertisers ENGAGE you in a brand EXPERIENCE Advertising provides SERVICE to you ... info, details, help, etc Brands LISTEN to you ... and RESPOND accordingly Advertising goes where YOU go ... stores, malls, waiting areas, etc. Advertisers join the CONVERSATIONS ... you have with friends

F1 F2 F3 F4 F5 F6

Category6: Advertising Industry Madison Avenue ... CENTER of the advertising industry Content, advertising, shopping, buying ... SEAMLESSLY INTEGRATE You PAY-FOR-CONTENT ... more often You expect advertisers ... to BEHAVE responsibly in all ways You find new digital technology ... CONFUSING Marketing and advertising ... becomes more INTENSE than ever

B1 B2 B3 B4

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Appendix 2. Data Tables Demographics Q2: What is your gender? Female 593 53% Male 520 47% 1113 100% Q3: What is your age? 16-24 332 25-44 475 45-64 267 65 or Over 39 1113

30% 43% 24% 4% 100%

Q4: What is highest level of education you have completed? High School College Graduate School Professional Degree Other

372 490

33% 44%

125

11%

104

9%

22 1113

2% 100%

Q5: For demographic purposes only, which best describes your ETHNICITY? Black/African American

90

10%

White/Caucasian

581

65%

Hispanic/Latino Asian American Indian/Alaska Native Other

84 110

9% 12%

8 26 899*

1% 3% 100%

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Q5: For classification purposes only, please indicate your household income. $25,000 or less 221 20% $25,000 375 34% 50,000 $50,000 $100,000 $100,000 or more Prefer not to say

350

31%

155

14%

12 1113

1% 100%

Media Behavior Watch, Read, Listen Watch TV Listen to the radio Watch video online Read books Text Read magazines Listen to music online Read a newspaper Read blogs Contribute Content Chat Upload photos Update your profile page Upload music Post or comment to blogs Upload video Use a file sharing service Manage a blog Create music or video Other Control Viewing Record or watch TIVO or DVR

80% 61% 59% 58% 55% 53% 52% 48% 40% 52% 51% 46% 36% 31% 23% 22% 19% 16% 12% 32%

Note: Respondents could answer more than one activity. Base=899

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Psychographics Q12: I need to be IN THE KNOW ... about brands I care about (1 = Not at all ... 5 = Describes me perfectly) 1----1 88 10% 2----2 82 9% 3----3 224 25% 4----4 277 31% 5----5 228 25% 899*

100%

Q13: I like giving MY ADVICE ... on products I know well (1 = Not at all ... 5 = Describes me perfectly) 1----1 45 5% 2----2 73 8% 3----3 171 19% 4----4 215 24% 5----5 395 44% 899* 100% Q14: I ask people for THEIR ADVICE ... on products they know about (1 = Not at all ... 5 = Describes me perfectly) 1----1 53 6% 2----2 80 9% 3----3 214 24% 4----4 240 27% 5----5 312 35% 899* 100% 0% Q15: I mainly LEARN about brands ... from friends, searches, blogs, posts, websites, etc. (1 = Not at all ... 5 = Describes me perfectly) 1----1 79 9% 2----2 116 13% 3----3 208 23% 4----4 242 27% 5----5 254 28% 899* 100%

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Q16: I like being part of a COMMUNITY ... that cares about brands I'm passionate about (1 = Not at all ... 5 = Describes me perfectly) 1----1 147 16% 2----2 174 19% 3----3 249 28% 4----4 164 18% 5----5 165 18% 899* 100% Q17: I expect that advertising will become LESS IMPORTANT to me (1 = Strongly Disagree ... 5 = Strongly Agree) 1----1 142 16% 2----2 152 17% 3----3 276 31% 4----4 156 17% 5----5 173 19% 899* 100%

Q18: I TRUST product information I find myself ... more than from any other source (1 = Strongly Disagree ... 5 = Strongly Agree) 1----1 45 5% 2----2 86 10% 3----3 289 32% 4----4 231 26% 5----5 248 28% 899* 100% Q19: Companies COLLECT and use my PERSONAL INFORMATION ... to benefit me (1 = Strongly Disagree ... 5 = Strongly Agree) 1----1 277 31% 2----2 184 20% 3----3 223 25% 4----4 104 12% 5----5 111 12% 899* 100%

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Q21: I prefer ads ... that are INTERACTIVE (1 = Strongly Disagree ... 5 = Strongly Agree) 1----1 214 24% 2----2 127 14% 3----3 269 30% 4----4 135 15% 5----5 154 17% 899* 100%

*Note: Base size of 899 reflects only the Luth Research and Peanut Labs samples.

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