A Forrester Total Economic

Project Director:

Impact™ Study

Liz Witherspoon

Commissioned By Acxiom

The Total Economic Impact™ Of LiveRamp Connect

Cost Savings And Business Benefits Enabled By LiveRamp, An Acxiom Company

July 2015

Table Of Contents Executive Summary .................................................................................... 3 Disclosures .................................................................................................. 6 TEI Framework And Methodology ............................................................ 7 Analysis ........................................................................................................ 8 Financial Summary ................................................................................... 21 LiveRamp Connect: Overview ................................................................. 22 Appendix A: Composite Organization Description .............................. 23 Appendix B: Total Economic Impact™ Overview ................................. 25 Appendix C: Supplemental Material ....................................................... 26 Appendix D: Endnotes .............................................................................. 26

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© 2015, Forrester Research, Inc. All rights reserved. Unauthorized reproduction is strictly prohibited. Information is based on best available resources. Opinions reflect judgment at the time and are subject to change. Forrester®, Technographics®, Forrester Wave, RoleView, TechRadar, and Total Economic Impact are trademarks of Forrester Research, Inc. All other trademarks are the property of their respective companies. For additional information, go to www.forrester.com.

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Executive Summary Acxiom commissioned Forrester Consulting to conduct a Total Economic Impact™ (TEI) study and examine the potential return on investment (ROI) enterprises may realize by using LiveRamp Connect to onboard data into their marketing platforms. The purpose of this study is to provide readers with a framework to evaluate the potential financial impact of LiveRamp Connect, a connectivity service for marketers provided by LiveRamp, an Acxiom company.

Acxiom’s LiveRamp Connect enables the marketing organization to better target advertising to customers and prospects, measure the impact of digital marketing across sales channels, optimize its digital advertising budget, expand its reach, and take a holistic approach to omnichannel marketing. Some of the key benefits experienced by companies interviewed for this research include: • A 5% sales lift following campaigns.

To better understand the benefits, costs, and risks associated with a LiveRamp Connect implementation, Forrester interviewed several enterprise-size clients with multiple years of experience using LiveRamp for data onboarding. LiveRamp Connect brings • A 10% increase in efficiency of digital marketing budget. CRM, sales, and other customer data into a central, online hub that brands can use to anonymize and then match customer • A 2.5x increase in new customers records to online devices and digital IDs. From this hub, digital making a store purchase following marketers can distribute data segments to more than 200 digital campaigns. marketing applications and media platforms, including Facebook, Google, Adobe, and MediaMath. LiveRamp Connect enables the marketing organization to better target advertising to customers and prospects, measure the impact of digital marketing across sales channels, optimize its digital advertising budget, expand its reach, and take a holistic approach to omnichannel marketing. This leads to increased offline and online sales for both repeat and new customers. Prior to LiveRamp Connect, the interviewed customers did not have the ability to target their existing and prospective customers with appropriate digital advertising because they did not have an effective way to match their customer records to the digital and social channels in which those customers were active. While they could pay individual publishers for that matching, this was an inefficient way to operate, and the analytics, measurement, and optimization guidance was limited. With a growing share of budget going toward digital channels, these interviewed organizations decided to find a partner to assist them with “data onboarding,” or the process of anonymizing and transferring offline customer data to the digital realm. With LiveRamp Connect, interviewed customers were able to run more efficient and effective online campaigns, and tie digital marketing investments to real sales results. FIGURE 1 Financial Summary Showing Three-Year Risk-Adjusted Results

Source: Forrester Research, Inc.

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CLIENTS GENERATE NEW INCREMENTAL SALES Our interviews with four existing clients and subsequent financial analysis found that a composite organization based on 1 these interviewed organizations experienced the risk-adjusted ROI, benefits, and costs shown in Figure 1. See Appendix A for a description of the composite organization. The composite organization analysis points to benefits of $5.1 million over three years versus implementation costs of $387,701 over the same time period, adding up to a 12.3x return and a net present value (NPV) of $4.75 million. With LiveRamp Connect, the sales lift following campaigns enabled by data onboarding was 5%, the percentage of new versus repeat customer sales increased by 2.5x, and the composite organization experienced additional savings in reducing the work needed to effectively onboard customer data and activate it for use in digital channels. Said one digital marketing director, “We realized we needed to be able to look at all of that data together to understand the offline impact of our digital advertising investments, determine the right budget allocations, and how to gain the right operational efficiencies. As the digital space continues to expand — especially with mobile — LiveRamp Connect is a big game changer.”

FIGURE 2 Financial Summary Showing Three-Year Risk-Adjusted Results

Sales lift: 5%

Increase in new customer sales: 2.5x

Payback: three months

Efficiency gain in marketing budget: 10%

Source: Forrester Research, Inc.

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Benefits. The composite organization experienced the following risk-adjusted benefits that represent those experienced by the interviewed companies: • A 5% sales lift due to influencing customers through digital campaigns who previously would not have been reached. The ability to target advertising through digital channels, match those ads directly to customer records, and reach them on digital properties resulted in a sales lift of 5%. In some cases, that increase was reported to be as high as 10%. While this lift came from both online and brick-and-mortar sales, one organization interviewed for this study reported a 30% increase in the percentage of brick-and-mortar purchases that were influenced by digital advertising following a campaign after using LiveRamp Connect. • A 10% increase in efficiency of digital marketing budget due to data onboarding. Digital marketing leaders interviewed for this study indicated that they reduced their marketing budget by 10% for specific digital media channels (e.g., display and paid search) due to data onboarding. Compared with the previous year, they were able to reach their target customers with 10% fewer dollars. • Reduced costs for point-to-point integrations due to consolidating data onboarding in one central hub. The composite organization was able to reduce the internal resource costs for point-to-point integrations with 20-plus digital marketing applications and media platforms by using LiveRamp Connect. This saved the equivalent of one

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full-time equivalent (FTE), a data analyst, by reducing the inefficiency of having to pull millions of records and prepare them for transfer to multiple vendors and publishers with unique formatting and refresh requirements. With LiveRamp Connect, the process occurs one time and then is ready for ongoing refresh and distribution among 200plus partners where integrations already exist. Said one vice president of eCommerce: “I think the biggest benefit of working with LiveRamp is to bring the costs for integrations to zero, basically. The ecosystem of media platforms and partners is fragmented, and we had to build those integrations ourselves. There was a startup cost, ramp-up, or steady state operating maintenance cost across a series of different digital partners, which we don’t have now.”

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Other benefits are not quantified in this study, but are representative of those experienced by the interviewed customers: • A 2.5x increase in the number of new customers to make a store purchase following a digital campaign, versus past campaigns. Not only did LiveRamp Connect lead to increased sales following digital campaigns, it also promoted the acquisition of new customers. This was driven by onboarding “look-alike” models, which enabled the organization to find customers online who looked like its best customers. By reaching those prospective customers with targeted advertising, the composite organization saw an immediate increase — two and a half times — of its instore sales being driven by new customers who were exposed to the digital advertising. • Increased return on advertising spend (ROAS). On average, marketing organizations spend 13% of their 2 marketing budget on digital advertising and marketing . The organizations interviewed for this research reported an increase on ROAS spend of as much as $5. Through better targeting of ads to the right customers and matching them to their digital devices, the composite organization spent less money to reach a more targeted group. Furthermore, the organization was able to retarget over time and suppress ads to those already served, which increased its campaign efficiency. Because advertising pricing is dynamic and based on the competition for space and demographics, the ROAS metric was not calculated in the financial model, but it is an important metric that was positively influenced. • Increase effectiveness/efficiency of communication campaigns with customers about a service issue. The composite organization not only used LiveRamp Connect to influence purchase behavior, but it also used the connectivity service provider as a means to reach customers about a known product defect so that it could minimize its exposure to financial risk. Because LiveRamp Connect can match customer records with traditional addresses (e.g., postal addresses, emails, and phone numbers) to online devices and publishers (e.g., Facebook, Twitter, and Yahoo), the composite organization could reach customers in new ways with the important service message and then suppress future ads once a customer had completed a service action.

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Costs. The composite organization experienced the following risk-adjusted cost: • Monthly recurring data onboarding fees. These are monthly recurring data onboarding fees that are paid to LiveRamp based on the number of customer records that are onboarded. The pricing is per 1,000 records and is tiered so that once an organization reaches more than 10 million, it pays less for additional records. LiveRamp also offers a basic and premium subscription model.

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Flexibility, The composite organization may see increased value over time due to the following factors: • Improved match rates. One of the key metrics driving the potential reach of data onboarding is the match rate (see the Flexibility section for more detail). Over time, match rates will improve as both the company and its digital media partners become more sophisticated at making that match. • Additional integrations. As LiveRamp expands its partner ecosystem, marketers will be able to activate their customer data in more ways, creating an expanded set of marketing use cases.

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• Growing influence of digital advertising in purchases. Because this influence percentage is expected to grow over time (to 60% of all retail purchases, according to the Forrester Retail Sales Forecast), the organizations that take advantage of data onboarding early can expect to increase their sales over time.

Disclosures The reader should be aware of the following:

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The study is commissioned by Acxiom and delivered by Forrester Consulting. It is not meant to be used as a competitive analysis.

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Forrester makes no assumptions as to the potential ROI that other organizations will receive. Forrester strongly advises that readers use their own estimates within the framework provided in the report to determine the appropriateness of an investment in Acxiom/LiveRamp Connect.

›

Acxiom reviewed and provided feedback to Forrester, but Forrester maintains editorial control over the study and its findings and does not accept changes to the study that contradict Forrester’s findings or obscure the meaning of the study.

›

Acxiom provided the customer names for the interviews but did not participate in the interviews.

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TEI Framework And Methodology INTRODUCTION From the information provided in the interviews, Forrester has constructed a Total Economic Impact (TEI) framework for those organizations considering implementing LiveRamp Connect. The objective of the framework is to identify the cost, benefit, flexibility, and risk factors that affect the investment decision, to help organizations understand how to take advantage of specific benefits, reduce costs, and improve the overall business goals of acquiring, serving, and retaining customers. APPROACH AND METHODOLOGY Forrester took a multistep approach to evaluate the impact that LiveRamp Connect can have on an organization (see Figure 3). Specifically, we:

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Interviewed Acxiom and LiveRamp marketing, sales, and/or consulting personnel, along with Forrester analysts, to gather data relative to LiveRamp Connect and the marketplace for data onboarding.

›

Interviewed four organizations currently using LiveRamp Connect to obtain data with respect to costs, benefits, and risks.

›

Designed a composite organization based on characteristics of the interviewed organizations (see Appendix A).

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Constructed a financial model representative of the interviews using the TEI methodology. The financial model is populated with the cost and benefit data obtained from the interviews as applied to the composite organization.

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Risk-adjusted the financial model based on issues and concerns the interviewed organizations highlighted in interviews. Risk adjustment is a key part of the TEI methodology. While interviewed organizations provided cost and benefit estimates, some categories included a broad range of responses or had a number of outside forces that might have affected the results. For that reason, some cost and benefit totals have been risk-adjusted and are detailed in each relevant section.

Forrester employed four fundamental elements of TEI in modeling the LiveRamp Connect service: benefits, costs, flexibility, and risks. Given the increasing sophistication that enterprises have regarding ROI analyses related to IT investments, Forrester’s TEI methodology serves to provide a complete picture of the total economic impact of purchase decisions. Please see Appendix B for additional information on the TEI methodology.

FIGURE 3 TEI Approach

Perform due diligence

Source: Forrester Research, Inc.

Conduct customer interviews

Design composite organization

Construct financial model using TEI framework

Write case study

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Analysis THE DIGITAL SHIFT AND GROWTH OF DIGITAL MARKETING BUDGETS Marketers are increasingly concerned with omnichannel customer experience — taking a holistic view of reaching existing and prospective customers through online and offline channels. However, their marketing budgets and organizations are traditionally siloed. Forrester Research identifies a shift in budgeting that has brought digital marketing in a “three-way tie” 3 with traditional marketing and direct marketing budgets. However, digital marketing budgets frequently remain separate, “Like most retailers, our data and brands lack clear visibility into the influence that digital advertising has on customer action, such as making a purchase, was very siloed and so were completing a transaction, or fulfilling a service request. Said one vice president of eCommerce: “The CRM data has not changed our marketing team budgets that much, but the destinations where that data can be used and initiatives between inchange all the time. There’s a new media company that comes up every two days, and there is a new publisher platform that store and digital marketing. comes up every few months.” By 2017, Forrester expects that the Web will influence 60% of all 4 retail purchases in the US. Digital marketing budgets are 5 growing year over year. However, the majority of sales continue to occur offline — in fact, 90% of sales occur in brick-and-mortar 6 locations versus online.

As we focused on the omnichannel customer experience, we realized that it doesn’t make any difference to our customer whether they are online or offline.”

There is no dispute that the growth of consumers using devices to research and purchase products, consult with friends about 7 their preferences, and complete transactions is growing steadily. It’s critical for most organizations to reach their existing ~ Digital marketing director, global retailer customers in this digital channel with the most impactful message or offer, even if they ultimately make their purchase offline. Those existing customers, on average, spend more than new customers, and they are more likely to become loyalty program 8 members, which often equates to higher average order values for their purchases. Furthermore, being able to create a lookalike model of the ideal customer and distribute it as a target audience segment across multiple marketing platforms can yield additional new customers who, over time, contribute more value to the company as repeat customers. COMPOSITE ORGANIZATION For this study, Forrester conducted a total of four interviews with representatives from the following companies, which are Acxiom and LiveRamp customers based in the US:

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A Fortune 500 global apparel retail company.

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A Fortune 500 multinational automobile corporation.

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A Fortune 500 global discount big box retailer.

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A global chain of cosmetics stores.

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Based on the interviews, Forrester constructed a TEI framework, a composite company, and an associated ROI analysis that illustrates the areas financially affected. The composite organization that Forrester synthesized from these results represents an organization with the following characteristics:

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It is a US-based global organization.

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With about $1 billion in revenue, the organization has five product lines and over 500 brick-and-mortar locations, with both a physical and digital presence for selling and promoting its products to customers and prospects. The organization is growing sales at a steady rate.

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It has over 10 million customer records. The organization has positive brand recognition and generally satisfied customers.

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The organization spends about 13% of its annual marketing budget on digital marketing, with about three-quarters of it going to advertising activities enabled by data onboarding.

“We’re able to lower spend while increasing the number of impressions being served. We use LiveRamp Connect to spend fewer dollars to reach existing customers and prospects.” ~ Director of strategy and analytics, global retailer

After an extensive process evaluating the limited number of vendors in the space, the composite organization chose LiveRamp Connect because of its neutrality as a third-party provider, strong accuracy and match rates, and simple implementation process, and because of Acxiom’s comprehensive digital services:

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The implementation started two years ago. It was initially focused on activating data in a single marketing platform and expanded to four platforms over time.

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The organization first started onboarding known customers, using customer relationship management and transactional sales information.

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The effort began with display ads.

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Data onboarding was used in tandem with other complementary offers and across channels, including email, display, video, and social networking ads.

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After proven success, LiveRamp became the default centralized integration point for all digital partner advertising efforts.

INTERVIEW HIGHLIGHTS The organization reported the following challenges and results surrounding data onboarding to target advertising to its customers online. Situation The composite organization had been adding digital marketing capabilities and budget over time as new channels emerged. Although the majority of its sales still occur in a store or branch location, the organization realized a growing influence of online advertising on those brick-and-mortar purchases. Wanting to tap the potential of advertising online to influence offline spend, the digital marketing leader decided to pursue a data onboarding partner. For this service, it wanted to use an outside provider that already had integrations with the 20-plus application and media partners the organization already worked with for advertising placements. Furthermore, it wanted to avoid the long queue of requests for customer data files within its marketing analytics organization, which could take weeks to fulfill.

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In purchasing a data onboarding solution, the composite company had the following objectives:

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Centralize the integration point with multiple digital marketing platforms and publishers — one portal for using first-party and third-party data across digital marketing and advertising efforts.

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Perform attribution analysis of the offline sales influenced by the digital channel.

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Perform optimization of ads during and after campaigns, leading to an improved ROI of campaigns and increased return on ad spend.

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Reach an audience across digital touchpoints, and optimize advertising for them using CRM and sales transaction data.

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Improve the understanding of end-to-end customer interaction with the brand, and improve communication with customers at key touchpoints.

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Support the move from siloed, channel-specific marketing and budgeting to cross-channel budgeting and marketing, with the goal of optimizing marketing dollars.

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Find and acquire new customers who share common attributes with existing customers.

Solution The composite organization selected LiveRamp Connect for data onboarding services.

“Consumers are changing the way they behave, with different devices and technologies, and we have to be able to plug in to those changes and maintain the relationship with our consumer or we will lose them. I think the new part is connecting. Data onboarding enables you to have all of this offline data in an online platform.” ~ eCommerce vice president, global retailer

Results The interviews revealed that:

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Data onboarding, and the targeting digital advertising it enabled, drove increased sales and profits. The most significant of the benefits experienced was the increase in sales by 5% following campaigns that used the data onboarding services. The organization targeted advertising to existing customers (and prospective ones) it could not reach before. That advertising influenced their decision to purchase a product, leading to increased sales.

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The entire marketing budget, especially the portion devoted to digital, could be better optimized. The composite organization was able to reduce by 10% its overall spend on the digital advertising budget that is affected by data onboarding. With less overspending by channel and a better picture of web influence on purchasing, it could optimize dollars.

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The percentage of sales by new customers increased. Furthermore, the composite organization reached new customers and increased its percent contribution to sales. Sales driven by new customers were 2.5x higher following data onboarding than in previous campaigns. This was due to look-alike modeling that enabled the organization to target advertising to prospects that resembled its best customers.

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BENEFITS The composite organization experienced a number of quantified benefits in this case study:

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Increased incremental profit due to data onboarding.

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Increased efficiency of digital marketing budget.

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Reduced costs for point-to-point integrations with advertising partners.

Another important benefit mentioned by the composite organization was an increase in the percentage of new customers who purchased products following targeted digital advertising. Although the sales increase due to these new customers is already captured in the financial model, the fact that new customers were born from the look-alike modeling enabled by LiveRamp Connect means an increase in new customer acquisitions. A steady growth in new customers is necessary for any business to grow, and because repeat customers spend more than new customers, on average, these newly acquired customers will be even more valuable in the future to the organization. Increased Incremental Profit Due To Data Onboarding The composite organization indicated that a key benefit from the LiveRamp Connect implementation was a 5% increase in product sales following digital advertising that was enabled by data onboarding. In some cases, that increase was reported to be as high as 10%. Prior to LiveRamp Connect, the composite organization had no consistent, efficient method to match offline first- and third-party data to online identifiers for targeting on digital properties. Advertising spend, as a result, was not optimized. Existing customers could not be “found” and targeted online with specific offers based on their segment, past purchase behavior, and level of loyalty — the critical data that a company knows about its own customers. As a result, the composite organization relied on individual digital partners, including Facebook, BlueKai, and Adobe, to match its customers on a one-off basis. With 20-plus (and sometimes up to 50-plus) marketing applications and media partners to work through, and each one requiring customer records to be prepared according to the partner’s specifications, the organization was unable to match and target digital advertising effectively to support its ongoing brand, product promotion, and seasonal campaigns. In addition, the digital marketing leaders had no clear visibility into the influence that digital advertising spend had on customer purchase behavior. This was especially true for brick-and-mortar sales. Said one digital marketing director, “Before LiveRamp, we couldn’t understand where our marketing investment was contributing to a sale or how we could effectively communicate to a client based on their behavior across different devices.” The figure below shows how LiveRamp Connect can increase ROAS and enable marketers to reach existing and prospective customers more efficiently. Furthermore, the budget can be optimized, leading to further financial benefit (see benefit “Increased Efficiency Of Digital Marketing Budget”, p.14).

The composite organization found that LiveRamp Connect increased product sales by 5% following digital advertising campaigns that used data onboarding. In some cases, the increase was reported to be as high as 10%.

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FIGURE 4 The Impact Of Using LiveRamp Connect On The Digital Advertising Budget

Source: Forrester Research, Inc.

Following the LiveRamp Connect implementation, the composite organization centralized its data records in one place, onboarded them once, and began accessing that data in short order in support of ongoing campaign use. This reduced the time to prepare data for advertising significantly, sometimes avoiding internal queues of weeks if not months. Customers who previously could not be targeted through digital advertising were now addressable online. Following the digital advertising campaigns enabled by data onboarding, the composite organization experienced a 5% sales lift, and the total benefit resulting from increased incremental profit due to data onboarding over the three years was about $5.2 million (present value). Interviewed organizations represented different industries, product categories, brand recognition, and average sales prices for their products. Their marketing and campaign planning reflected those characteristics, so they would likely experience a range of sales increases, depending on those characteristics. To compensate, this benefit was risk-adjusted and reduced by 25%. The risk-adjusted total benefit from increased incremental profit due to data onboarding over the three years was over $3.95 million (present value). See the section on Risks for more detail.

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TABLE 1 Increased Incremental Profit Due To Data Onboarding Ref.

Metric

Calculation

Initial

Sales growth rate of 3%

Year 1

Year 2

Year 3

$1,000,000,000

$1,030,000,000

$1,060,900,000

5%

5%

5%

A1

Annual revenue

A2

Sales lift due to data onboarding

A3

Percentage of digital campaigns enabled by data onboarding

Conservative estimate used for modeling; some organizations may use it for 100% of campaigns.

55%

55%

55%

A4

Percentage of incremental profit that is due to placement enabled by data onboarding

Many factors influence consumer purchase behavior, including the offer, the creative, and placement of advertising. In some direct media buys, data onboarding isn’t used.

30%

30%

30%

A5

Average cost of goods sold

75%

75%

75%

At

Increased incremental profit due to data onboarding

$0

$2,062,500

$2,124,375

$2,188,106

$0

$1,546,875

$1,593,281

$1,641,080

Risk adjustment

Atr

Increased incremental profit due to data onboarding (riskadjusted)

Source: Forrester Research, Inc.

A1*A2*A3*A4* (1-A5)

25%

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Increased Efficiency Of Digital Marketing Budget The composite organization indicated that a key benefit from the LiveRamp Connect implementation was increased efficiency of the digital marketing budget. Prior to LiveRamp Connect, the composite organization had less visibility into the performance of its digital advertising and its impact on sales, especially brick-and-mortar sales that account for 90% of all sales on average. As a result, the composite organization estimated that it overspends by about 10% across digital channels, including search, display, and social. Said one senior director of strategy and analytics of a global retailer, “Marketers are facing the pressure to take a step back and talk about tradeoffs of budget dollars and how we can optimize spend across channels.” With better ability to measure the impact of digital marketing on in-store purchases and online sales enabled through LiveRamp Connect, the composite organization could perform ongoing attribution analysis, mix optimization, content optimization, and site analytics. This measurement and optimization occurred on a weekly basis for the composite organization and enabled the organization to optimize in-flight campaigns. In addition, by onboarding customer data, the composite organization was able to create advertising suppression lists and remove existing customers from campaigns focused on new customer acquisition. This resulted in fewer wasted media impressions and a better experience for current customers, who were spared exposure to irrelevant messages and offers.

By using LiveRamp Connect as its central hub for matching first -and thirdparty sales transaction data to impressions from online campaigns, the composite organization was able to reduce its digital spend by 10% in years 2 and 3.

In the first year of use, the organization measured advertising effectiveness on an ongoing basis but did not lower its overall spend. However, after historic analysis and the arrival of a new budget cycle, the organization was able to benefit from that analysis in years 2 and 3. The total benefit resulting from increased efficiency of digital marketing budget was $1.48 million (present value). Interviewed organizations vary in terms of the number and type of campaigns that they run annually using their marketing budget. Furthermore, marketing budgets (as a percentage of revenue) vary by industry. To compensate, this benefit was risk-adjusted and reduced by 30%. The risk-adjusted total benefit resulting from increased efficiency of digital marketing budget over the three years was $940,476 (present value). See the section on Risks for more detail.

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TABLE 2 Increased Efficiency Of Digital Marketing Budget Due To Data Onboarding Ref.

Metric

Calculation

Initial

Year 1

Year 2

Year 3

$110,000,000

113,300,000

116,699,000

$14,300,000

$14,729,000

$15,170,870

76%

76%

76%

75%

75%

75%

n/a

10%

10%

$839,553

$864,740

$587,687

$605,318

11% of revenue Source:

B1

Annual marketing budget

Forrester/DNM Q4 2014 North American Digital Marketing Online Survey 13% of marketing

B2

Percentage of marketing budget dedicated to digital advertising

budget Source: Forrester/DNM Q4 2014 North American Digital Marketing Online Survey

B3

B4

Percentage of digital advertising budget affected by data onboarding Percentage of uses for data onboarding that can benefit from measurement insights and suppression

B5

Efficiency gain due to data onboarding

Bt

Increased efficiency of digital marketing budget due to data onboarding Risk adjustment

Btr

Increased efficiency of digital marketing budget due to data onboarding (riskadjusted)

Source: Forrester Research, Inc.

Source: Forrester/DNM Q4 2014 North American Digital Marketing Online Survey Conservative estimate. Measurement insights and suppression are often applied to all marketing and advertising efforts.

B2*B3*B4*B5

$0

30%

$0

$0

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Reduced Costs For Point-To-Point Integrations Due To Consolidating Data Onboarding In One Central Hub The composite organization indicated that a key benefit from the LiveRamp Connect solution was a reduction in the internal resource costs for point-to-point integrations with 20-plus digital marketing applications and media platforms. Prior to LiveRamp Connect, the composite organization had to pull millions of customer records for each digital partner. Different publishers, including Facebook, MediaMath, and Adobe, have unique requirements and setups to match records to online devices and digital identifiers, which created significant work for a data analyst. With LiveRamp Connect, the customer records could be pulled once, uploaded to LiveRamp Connect, and distributed to multiple platforms. And since the platform already has pre-existing data integrations with 200-plus marketing applications and digital partners, this process did not have to be repeated for different advertising campaigns. Said one vice president of eCommerce, “An independent, third-party alternative that gives us access and connections to all of our media partners is incredibly valuable.” Furthermore, the organization could regularly update its onboarded customer records more easily. This benefit results in a cost reduction of $300,000 over three years.

LiveRamp Connect reduced the time to prepare data for advertising significantly — sometimes avoiding internal queues of weeks if not months — by providing a centralized hub for onboarding and distributing data to multiple marketing platforms.

TABLE 3 Reduced Costs For Point-To-Point Integrations Due To Consolidating Data Onboarding In One Central Hub Ref.

Metric

C1

Number of data analysts

C2

Average annual salary

Ct

Reduced costs for point-to-point integrations due to consolidating data onboarding in one central hub Risk adjustment

Ctr

Reduced costs for point-topoint integrations due to consolidating data onboarding in one central hub (risk-adjusted)

Source: Forrester Research, Inc.

Calculation

C1*C2

Initial

Year 1

Year 2

Year 3

1

1

1

$100,000

$100,000

$100,000

$0

$100,000

$100,000

$100,000

$0

$100,000

$100,000

$100,000

0%

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Total Benefits Table 4 shows the total of all benefits across the three areas listed above, as well as present values (PVs) discounted at 10%. Over three years, the composite organization expects risk-adjusted total benefits to be more than $5.1 million.

TABLE 4 Total Benefits (Risk-Adjusted) Initial

Year 1

Year 2

Year 3

Total

Present Value

$0

$1,546,875

$1,593,281

$1,641,080

$4,781,236

$3,955,979

Btr

Increased efficiency of digital marketing budget due to data onboarding

$0

$0

$587,687

$605,318

$1,193,005

$940,476

Ctr

Reduced costs for point-to-point integrations due to consolidating data onboarding in one central hub

$0

$100,000

$100,000

$100,000

$300,000

$248,685

Total benefits

$0

$1,646,875

$2,280,968

$2,346,397

$6,274,241

$5,145,140

Atr

Benefit Increased incremental profit due to data onboarding

Source: Forrester Research, Inc.

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COSTS The composite organization experienced one cost associated with the LiveRamp Connect solution:

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Data onboarding fees.

These represent the external costs experienced by the composite organization for data onboarding fees. Data Onboarding Fees The organization incurred monthly recurring data onboarding fees that are paid to LiveRamp based on the number of customer records that are onboarded. The pricing is tiered based on the number of customer records provided. Once an organization reaches more than 10,000,000 records, it gets a volume discount for the additional customer records it onboards. LiveRamp offers a basic and premium subscription model, with differences in the maximum allowable files and customer segments that can be uploaded, as well as staffing ratios and supported channels for customer service. Data onboarding fees for this composite organization totaled approximately $387,000 (risk-adjusted, present value) over three years. The table below assumes that clients increase the volume of data onboarded over time to support more use cases — for example, starting with CRM data for targeting and adding transaction data for measurement.

TABLE 5 Data Onboarding Fees Based On Number Of Records Under Management Ref.

Metric

D1

Number of customer records

Dt

Data onboarding fees based on number of records under management Risk adjustment

Dtr

Data onboarding fees based on number of records under management (risk-adjusted)

Calculation

Initial

Year 1

Year 2

Year 3

10,000,000

17,500,000

23,000,000

$0

$108,000

$166,500

$202,200

$0

$108,000

$166,500

$202,200

0%

Source: Forrester Research, Inc.

Total Costs Table 6 shows the total of all costs as well as associated present values, discounted at 10%. Over three years, the composite organization expects total costs to total a net present value of a little more than $387,000.

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TABLE 6 Total Costs (Risk-Adjusted) Benefit Data onboarding fees based on number of records under management

Dtr

Total costs

Initial

Year 1

Year 2

Year 3

Total

Present Value

$0

$108,000

$166,500

$202,200

$476,700

$387,701

$0

$108,000

$166,500

$202,200

$476,700

$387,701

Source: Forrester Research, Inc.

FLEXIBILITY Flexibility, as defined by TEI, represents an investment in additional capacity or capability that could be turned into business benefit for some future additional investment. This provides an organization with the “right” or the ability to engage in future initiatives but not the obligation to do so. There are multiple scenarios in which a customer might choose to implement LiveRamp Connect and later realize additional uses and business opportunities. Flexibility would also be quantified when evaluated as part of a specific project (described in more detail in Appendix B). These scenarios include: • Improved match rates over time. One of the key metrics driving the potential reach of data onboarding is the match rate. Match rates are defined differently by each data onboarding service provider, and the “rate” varies by the definition. For example, the length of time that cookies are active for matching will have an impact on the reported match rate. Many other factors can have an impact on the number reported by the onboarding service provider, so it’s important that clients understand in depth how this metric is calculated. In the case of LiveRamp Connect, match rates are defined as the number of unique records matched to one or more devices. Average match rates are approximately 40%. Over time, match rates will improve as both the company and its digital media partners become more sophisticated at making that match. As the match rate improves, the reach of digital campaigns will expand significantly, which will, in turn, further drive sales lift. • Additional integrations. As LiveRamp expands its partner ecosystem, marketers will be able to activate their customer data in more ways, creating an expanded set of marketing use cases. • Growing influence of digital advertising in purchases. Because this influence percentage is expected to grow over time (to 60% of all retail purchases, according to the Forrester Retail Sales Forecast), the organizations that take advantage of data onboarding early can expect to increase their sales over time. The more they invest in skills to optimize their digital advertising, the more impact they can expect as digital budgets increase and the influence of digital grows. RISKS Forrester defines two types of risk associated with this analysis: “implementation risk” and “impact risk.” Implementation risk is the risk that a proposed investment in LiveRamp Connect may deviate from the original or expected requirements, resulting in higher costs than anticipated. Impact risk refers to the risk that the business or technology needs of the organization may not be met by the investment in LiveRamp Connect, resulting in lower overall total benefits. The greater the uncertainty, the wider the potential range of outcomes for cost and benefit estimates.

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TABLE 7 Benefit And Cost Risk Adjustments Benefits

Adjustment

Increased incremental profit

25%

Increased efficiency of digital marketing budget

30%

Source: Forrester Research, Inc.

Quantitatively capturing implementation risk and impact risk by directly adjusting the financial estimates results provides more meaningful and accurate estimates and a more accurate projection of the ROI. In general, risks affect costs by raising the original estimates, and they affect benefits by reducing the original estimates. The risk-adjusted numbers should be taken as “realistic” expectations since they represent the expected values considering risk. The following impact risks that affect benefits are identified as part of the analysis:

›

Increased incremental profit due to data onboarding. Interviewed organizations represented different industries, product categories, brand recognition, and average sales price for their products. Their marketing and campaign planning reflected those characteristics, so they would likely experience a range of incremental profit increases, depending on those characteristics. To compensate, this benefit was risk-adjusted and reduced by 25%.

›

Increased efficiency of digital marketing budget. Interviewed organizations vary in terms of the number and type of campaigns that they run annually using their marketing budget. Furthermore, marketing budgets (as a percentage of revenue) vary by industry. To compensate, this benefit was risk-adjusted and reduced by 30%.

Table 7 shows the values used to adjust for risk and uncertainty in the cost and benefit estimates for the composite organization. Readers are urged to apply their own risk ranges based on their own degree of confidence in the cost and benefit estimates.

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Financial Summary The financial results calculated in the Benefits and Costs sections can be used to determine the ROI, NPV, and payback period for the composite organization’s investment in LiveRamp Connect. Figure 5 below shows the risk-adjusted ROI, NPV, and payback period values. These values are determined by applying the risk-adjustment values from Table 7 in the Risks section to the unadjusted results in each relevant cost and benefit section.

FIGURE 5 Cash Flow Chart (Risk-Adjusted)

Financial Analysis (risk-adjusted) $6,000,000 $5,000,000

Cash flows

$4,000,000 $3,000,000 $2,000,000 $1,000,000 $0 ($1,000,000) Initial

Year 1 Total costs

Total benefits

Year 2

Year 3 Cumulative total

Source: Forrester Research, Inc.

TABLE 8 Cash Flow (Risk-Adjusted) Initial

Year 1

Year 2

Year 3

Total

Present Value

(108,000)

(166,500)

(202,200)

(476,700)

(387,701)

Benefits

$1,646,875

$2,280,968

$2,346,397

$6,274,241

$5,145,140

Net benefits

$1,538,875

$2,114,468

$2,144,197

$5,797,541

$4,757,439

Costs

ROI Payback period Source: Forrester Research, Inc.

1,227% three months

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LiveRamp Connect: Overview The following information is provided by Acxiom and LiveRamp. Forrester has not validated any claims and does not endorse LiveRamp or its offerings. Digital marketers use dozens of disparate applications and media platforms to reach consumers across a highly fragmented landscape of digital touchpoints and devices. Most marketers manage a wide array of technologies for search, display, video, social, mobile, websites, content, email, analytics, and more. New channels continue to emerge, such as addressable TV, digital radio, and the Internet of Things. And marketing programs frequently involve the use of external media platforms, such as Facebook, Google, and Twitter. Each of these technologies creates a data silo, which often leads to siloed marketing activities, disjointed consumer experiences, and missed revenue opportunities. Data onboarding is the process of connecting customer data to digital marketing platforms. When marketing infrastructure is connected, brands can reach consumers with consistent messages across channels and devices. Instead of treating each technology investment as a solo performer, organizations can run integrated campaigns where all applications and media platforms work together as an ensemble. Brands also gain a competitive edge by achieving the flexibility to deploy best-inclass marketing technologies without incurring significant integration costs. A data onboarding service operates as a universal translator between customer data sources and digital marketing platforms. Through the data onboarding process, audience segments from CRM systems, point-of-sale (POS) systems, and other customer databases are anonymized before they are matched and activated for use across marketing platforms in a way that protects consumer privacy. By connecting first- and third-party customer data to marketing platforms, data onboarding helps a marketer increase sales lift and efficiency through the following use cases enabled by partner integrations: TARGETING

›

Look-alike modeling. Enables a marketer to reach more consumers who resemble a brand’s best customers.

›

CRM retargeting. Increases lift by targeting current customers based on purchase history.

›

Ad suppression. Improves efficiency by removing existing customers from new customer acquisition campaigns.

›

Cross-channel marketing. Enables a marketer to reach the same consumers across channels with relevant messages.

ONE-TO-ONE MARKETING

›

Site optimization. Provides optimized messages and offers to site visitors without requiring a login.

›

Dynamic creative optimization. Presents optimized display, search, and video creative to consumers

MEASUREMENT

›

Closed-loop measurement. Enables a marketer to measure the impact of digital marketing on sales.

›

Cross-channel attribution. Provides insight into how to optimize investments across marketing channels.

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Appendix A: Composite Organization Description For this TEI study, Forrester has created a composite organization to illustrate the quantifiable benefits and costs of data onboarding. The composite company is intended to represent a US-based global organization and is based on characteristics of the interviewed customers. The composite company has more than $1 billion in revenue, with five product lines and over 500 brick-and-mortar locations, with both a physical and digital presence for selling and promoting its products to customers and prospects. In purchasing LiveRamp Connect, the composite company has the following objectives:

›

Centralize the integration point with multiple digital partners/marketing platforms (one portal) for using first-party and thirdparty customer data across digital marketing and advertising efforts.

›

Measure the offline attribution of sales influenced by the digital channel.

›

Perform optimization of ads during and after campaigns, leading to an improved ROI of campaigns and increased return on ad spend.

›

Reach an audience across digital touchpoints where they are engaged on digital media properties, and optimize advertising for them using primary customer data.

›

Improve the visibility and understanding of end-to-end customer interaction with the brand, and improve communication with customers at key touchpoints.

›

Support the move from siloed, channel-specific marketing and budgeting to cross-channel budgeting and marketing, with the goal of optimizing marketing dollars.

›

Find and acquire new customers who share common attributes with existing customers.

For the purpose of the analysis, Forrester assumes that this is an enterprise-size organization with which customers have a strong, positive brand association. The organization devotes an average percentage of its marketing budget to digital channels and has brick-and-mortar store locations that customers can visit to make purchases. Furthermore, the model assumes that the organization has at least one resource dedicated to digital marketing who understands the opportunities that data onboarding presents, as well as the challenges and limitations of doing this internally or point-to-point with marketing application and media partners. Furthermore, this organization must have an ongoing digital marketing campaign strategy in place that will enable it to maximize the ROI of the investment. FRAMEWORK ASSUMPTIONS Table 9 provides the model assumptions that Forrester used in this analysis. The discount rate used in the PV and NPV calculations is 10%, and the time horizon used for the financial modeling is three years. Organizations typically use discount rates between 8% and 16% based on their current environment. Readers are urged to consult with their respective company’s finance department to determine the most appropriate discount rate to use within their own organizations.

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TABLE 9 Model Assumptions Ref.

Metric

C1

Average budget of a marketing organization

C2

Average percentage of budget going to digital channels

C4

Ratio of in-store sales versus online sales

C5 C6 C7

Average number of digital partners with which marketing organizations are working Average annual salary of a marketing data analyst Average match rate of first-party data to thirdparty data

Source: Forrester Research, Inc.

Calculation “The State Of Retailing Online 2015: Key Metrics, Initiatives, And Mobile Benchmarks” “The State Of Retailing Online 2015: Key Metrics, Initiatives, And Mobile Benchmarks” Forrester Consumer Technographics

Value 11% of revenue

13% 90 to 10 20+ $100,000

Acxiom LiveRamp Connect

40%

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Appendix B: Total Economic Impact™ Overview Total Economic Impact is a methodology developed by Forrester Research that enhances a company’s technology decisionmaking processes and assists vendors in communicating the value proposition of their products and services to clients. The TEI methodology helps companies demonstrate, justify, and realize the tangible value of IT initiatives to both senior management and other key business stakeholders. TEI assists technology vendors in winning, serving, and retaining customers. The TEI methodology consists of four components to evaluate investment value: benefits, costs, flexibility, and risks. BENEFITS Benefits represent the value delivered to the user organization — IT and/or business units — by the proposed product or project. Often, product or project justification exercises focus just on IT cost and cost reduction, leaving little room to analyze the effect of the technology on the entire organization. The TEI methodology and the resulting financial model place equal weight on the measure of benefits and the measure of costs, allowing for a full examination of the effect of the technology on the entire organization. Calculation of benefit estimates involves a clear dialogue with the user organization to understand the specific value that is created. In addition, Forrester also requires that there be a clear line of accountability established between the measurement and justification of benefit estimates after the project has been completed. This ensures that benefit estimates tie back directly to the bottom line. COSTS Costs represent the investment necessary to capture the value, or benefits, of the proposed project. IT or the business units may incur costs in the form of fully burdened labor, subcontractors, or materials. Costs consider all the investments and expenses necessary to deliver the proposed value. In addition, the cost category within TEI captures any incremental costs over the existing environment for ongoing costs associated with the solution. All costs must be tied to the benefits that are created. FLEXIBILITY Within the TEI methodology, direct benefits represent one part of the investment value. While direct benefits can typically be the primary way to justify a project, Forrester believes that organizations should be able to measure the strategic value of an investment. Flexibility represents the value that can be obtained for some future additional investment building on top of the initial investment already made. For instance, an investment in an enterprisewide upgrade of an office productivity suite can potentially increase standardization (to increase efficiency) and reduce licensing costs. However, an embedded collaboration feature may translate to greater worker productivity if activated. The collaboration can only be used with additional investment in training at some future point. However, having the ability to capture that benefit has a PV that can be estimated. The flexibility component of TEI captures that value. RISKS Risks measure the uncertainty of benefit and cost estimates contained within the investment. Uncertainty is measured in two ways: 1) the likelihood that the cost and benefit estimates will meet the original projections and 2) the likelihood that the estimates will be measured and tracked over time. TEI risk factors are based on a probability density function known as “triangular distribution” to the values entered. At a minimum, three values are calculated to estimate the risk factor around each cost and benefit.

26

Appendix C: Supplemental Material Related Forrester Research “The Future Of Shopping,” Forrester Research, Inc., April 9, 2015 “2015: The Year Of The Big Digital Shift,” Forrester Research, Inc., April 8, 2015 “The State Of Retailing Online 2015: Key Metrics, Initiatives, And Mobile Benchmarks,” Forrester Research, Inc., March 2, 2015 “Adopt The Right Marketing Metrics To Measure Success,” Forrester Research, Inc., February 24, 2015 “Embrace A Cross-Channel Attribution Measurement Process,” Forrester Research, Inc., December 3, 2014

Appendix D: Endnotes 1

Forrester risk-adjusts the summary financial metrics to take into account the potential uncertainty of the cost and benefit estimates. For more information, see the section on Risks. 2

Source: “2015: The Year Of The Big Digital Shift,” Forrester Research, Inc., April 8, 2015.

3

Source: “2015: The Year Of The Big Digital Shift,” Forrester Research, Inc., April 8, 2015.

4

Source: “Forrester Research Web-Influenced Retail Sales Forecast, 2012 To 2017 (US)," Forrester Research, Inc. July 8, 2013. 5

Source: “2015: The Year Of The Big Digital Shift,” Forrester Research, Inc., April 8, 2015.

6

Source: Forrester ForecastView

7

Source: North American Consumer Technographics Online Benchmark Survey (Part 1), 2014, Forrester Research, Inc.

8

Source: North American Consumer Technographics Online Benchmark Survey (Part 1), 2014, Forrester Research, Inc.