Appetite for Monetization

By Chris Kerns | 1 Comments | Posted in in Analytics | Permalink

Last week, Dr. Pepper issued a press release that challenged Guns N Roses to release their album Chinese Democracy in 2008. This legendary album has been in production since 1994, and the band has seen plenty of band members come and go during the fourteen year recording process. Dr. Pepper's big announcement is a challenge to Guns N Roses: if they can actually release their album in 2008, everyone in America gets a free Dr. Pepper (but two former band members Slash and Buckethead won’t be given free soda. Nice touch.)

I love that Dr. Pepper did this – and the overall reaction from various marketing blogs was very positive, many of them saying that this was a “smart move.” My question was: how smart was it? So, I decided to monetize Dr. Pepper’s press release. I figured that here at ZAAZ, we monetize tough things all the time in the online channel – things that many business stakeholders never consider to have value. So other than being pretty damn funny, what was the value of Dr. Pepper’s challenge? Let’s check out the numbers.

So – the cost of coming up with this idea and issuing a press release is pretty cheap. I’m estimating $10,000 of a team’s time and the press release fees. Also – the press release created requests from the press for a good amount of interviews, I estimated the time to field and manage these at $8,000.

As far as the campaign itself, there’s two ways to look at it. It could either be potential value of the sales that this could generate (very hard to calculate), or savings that Dr. Pepper realized by taking the press release approach instead of a traditional advertising campaign. I went with the second option and estimated that the cost for a campaign to get same amount of exposure as this press release received via ad buys for online, tv, print, and radio (this news ended up on the front page of Yahoo!, Rolling Stone, CNN, Wired, MSNBC, BBC, E Online, ABC News, New York Post, etc.) plus paying the band to be associated with Dr. Pepper brand, would easily be around $12M. So that's great, I can hear you saying, but isn't Dr. Pepper in a lot of trouble if the album gets released? Patience.

Let's look at the potential costs. Average cost of a can of soda is about five cents (this is mostly the aluminum). Take that cost and multiply it times the total number of Americans (minus Slash and Buckethead.) Then multiply by an estimated percentage of Americans that actually know about the promotion, enjoy Dr. Pepper, and have the spare time to actually go get their free can (average coupon redemption rates in the US are around 7%, so I doubled that to be generous.) Don’t forget the distribution costs, which I estimated to be $2M. Add it all up and you get a cost of $4.3M if the album drops. So, the advertising cost savings of $12M outweigh the potential cost of Guns N Roses calling Dr. Pepper’s bluff. But that’s not the whole story, rock star.

What we have here are two potential scenarios: 1) the album drops, or 2) it doesn’t. If the album doesn’t come out in 2008, Dr. Pepper gets a great viral ad campaign for almost nothing, and saves nearly $12M. But the real story here is that if the album does get released, Dr. Pepper actually does better. If Chinese Democracy comes out in 2008, the press will have a field day with the Dr. Pepper promotion and give it as much press, if not more, than the first round. So that’s at least another $12M in marketing cost savings that Dr. Pepper realizes, taking the total cost savings toward the $20M mark.

Overall, the moral of the story is: with the right assumptions, you can monetize activities instead of just saying “smart move.” And that helps you to understand exactly how smart you really are as a company (note to readers: Dr. Pepper is smart.)