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Advertising After the Dot-Com Debacle

  |  May 1, 2001   |  Comments

Before the recent dot-com disaster, advertising went to one extreme, and now it's headed back. How far will it go, and what should your company do about it?

In Y2K, computers didn't fail. But dot-coms did. And they failed spectacularly. Publicly. Humiliatingly. (Can you say, "Pets.com"?) In the corridors of Nasdaq, there's blood on the floor.

After any such catastrophe, there are valuable lessons to be learned. But in the heat of the moment, defining truth can be lost in the rush to place blame. And the rush is definitely on. At a recent forum, an early-round venture capitalist was asked what he least wanted to see in a prospect's business plan. He answered, "I wouldn't want to see them running a TV spot on the Super Bowl." He is not alone.

Analysts and journalists alike have commented on the princely ad budgets lavished on the behalf of "virtual" companies. Advertising excess is a popular theory for the fall of the house of dot-com, because nobody really likes advertising in the first place. (No one over the age of 12 admits to being influenced by advertising, even though we're sure that the vague and indeterminate "masses" are in its thrall.)

But no matter who pins the tail on the scapegoat, the unavoidable truth remains that the advertising pendulum swung to one extreme, and now it's headed back in the opposite direction. How far will it go, and what should your company do about it? Here are a few things to consider.

Brand

"Brand": It's the hot buzzword in advertising these days. The concept of brand has been understood for hundreds of years, of course, but it's gotten a paint job in the last decade and has, in the process, acquired the gloss of a new idea. Simply put, brand is the impression or series of impressions that come to mind when someone sees or hears your company's name.

IBM. Coke. FedEx. AOL. Disney. Each of these names evokes a distinct and different response in your brain, and that conceptualization is, to a greater or lesser extent, what these companies have spent many years and untold millions of dollars telling you they represent. It's their brand.

Brand is a synthesis of many discrete elements, not the least of which is user experience, but the linchpin of brand creation tends to be advertising. Brand advertising is a promise. And unless the user experience is in direct conflict with that promise, the advertised message becomes the brand in the collective mind of the marketplace. It's what ad people call "positioning."

Brand positioning gives customers a reason to select a product or service over that of the competition. It becomes a convenient handle, the intuitive logic behind the buying decision. Without brand positioning, you still have a position in the marketplace. It's called "others," as in "the leading brand, the next leading brand, and others." Almost no one buys "others," even though they're usually less expensive. And why should they? Make no mistake: We are a brand-name culture.

Don't take my word for it. Just think about it next time you reach for a Coke instead of a generic supermarket cola.

Lead Generation

Advertisers like lead-generation campaigns because they're trackable and therefore can be tied to ROI. Brand campaigns, on the other hand, can be critical to your success but they're maddeningly ineffable. You can rarely tell how much specific revenue your brand campaign is generating.

Of course, in the post-dot-com doldrums, people are already talking about cutting back on lead-generation advertising: "We've got a sales force to generate leads." Good luck. You might as well ask them to climb Everest without oxygen. If the sales force is responsible for developing leads as well as qualifying and closing leads, well... you do the math. (Hint: Less isn't more in this case.)

Lead-generation campaigns jump-start the sales cycle. A shorter sales cycle means more sales closed per quarter, and that translates into a higher valuation. How much can one or two bad quarters hurt you? Ask Oracle. Ask Apple. If there are any CEOs out there who aren't laser-focused on shareholder value, please raise your hands.

Cutting your lead-generation campaign is like cutting off your hands. If your lead-generation campaign isn't working, then change it. But don't cut it. Just make it work.

Market Leadership

Remember the high tide that was going to raise all the boats in the harbor? Well, welcome to low tide. But look at the bright side. There's less competition.

Some of the competition is just plain gone, and much of the rest of it is too confused to mount an effective effort. To calmer minds, that means opportunity.

Market leaders will continue to advertise during the coming year. And their ads will be seen by more of their target audiences because there will be less clutter in the media. What's more, the stable presence of market leaders will be reassuring. And their leadership position will become even more entrenched. If that sounds good, think seriously about doing it.

Avoid excess but don't panic. At the same forum where the early-round venture capitalist disparaged the Super Bowl, a pre-money investment banker offered a different point of view. He said, "A solid brand in the marketplace shortens the sales cycle, helps meet revenue goals, and supports corporate growth."

Amen, brother.

There will be two types of companies in the coming year: market leaders and "others." Which type do you want to be?

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ABOUT THE AUTHOR

Tom Simmons

Tom Simmons, Executive Creative Director at Strategic Communications Group, works to develop and distill clear marketing messages from complex, leading-edge technology products. A 22-year veteran of the Washington, D.C. advertising market, Simmons has worked on major national consumer and business-to-business campaigns, with an emphasis over the past decade in the rapidly emerging technology sector.

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