Advertising, as was said most notably by department store magnate John Wanamaker, is a wasteful endeavor. It has been for a very long time. There have been countless reformations that promised to make it less so — and generally have not. Yet, I think we are at a moment in time when market forces and emerging technologies will combine to force (or encourage, if you are optimistic) our business to change in a profound way.
This is what I hope to explore with you in the columns to come how advertising, particularly online advertising, can and must change to become more rewarding for marketers. At the end of the day, it will also become more pleasing to consumers. I was interested to read the inaugural President’s letter from Bob Barocci, the new president and CEO of the Advertising Research Federation (ARF) on the issue of declining advertising effectiveness:
Twenty years ago, advertising agencies were very concerned as they watched their packaged goods clients boost trade promotion and reduce advertising spending to less than half of their marketing budgets. Today, advertising spending has withered further to a skeletal 12 percent of marketing spending.
Why? Because the situation is even worse than Wanamaker said. The “wasted half” is not 50 percent, but, in some media, closer to 80 percent. And, that’s serious money.”
Corporate marketers and corporate shareholders have extraordinary tolerance for this waste. That, in turn, creates a general sense of apathy toward the whole issue on the part of most advertising and media executives. It has prevented reformers from resolving the waste over the years. That, it appears, is about to come to an end.
Why now? Why after almost a century of indifference, billions of wasted dollars and countless failed reforms? Today, marketers and advertising executives are caught in a “Perfect Storm.”
Consumer marketers are now confronted with more challenges than they have the tools or the time to deal with. These include media fragmentation, declining consumer loyalty, global competition, price commoditization, disruptive communication technologies that evolve at frightening speeds, and unrelenting corporate pressure for ROI.
Why haven’t businesses solved these problems already? Three reasons: One, they didn’t need to. Two, there were few viable alternatives. And three, IT resources were busy solving other problems.
Why will they solve it now? Two reasons: They have the technology, and their IT teams are available and focused on implementing it.
Until 1970, if a marketer wanted to reach a large number of consumers, he had no cost-effective choice other than to buy mass media advertising. The advent of direct marketing vehicles and powerful new alternatives such as cable TV weren’t much help. Their expense and novelty made it seem foolish to take chances when the economy and consumer marketing businesses were growing so fast, no one worried too much about a few inefficiencies. “If it ain’t broke, don’t fix it,” were words to live by.
Increased global competition and the advent of microchip-based technologies now force companies to optimize almost every major aspect of the enterprise, from finance, HR, procurement, manufacturing, inventory, sales and service.
Spreadsheets and automated accounting have long since replaced double-entry ledgers. Computers, robots and sophisticated optics are more a part of the manufacturing process in factories than punch clocks and break whistles. Computer-driven logistics changed the way companies order, store, and transport raw materials and finished goods. Supply chain management and the concept of just-in-time inventory revolutionized relationships between manufacturers, suppliers and customers. It’s become the key profit driver in a number of industries.
Most recently, we’ve seen companies save enormous amounts of money and improve client sales and service relationships over the past decade with sales force automation and call center management software.
With the exception of tools to expedite the creative process and reduce the back-office paperwork of ad buying, marketing sat on the sidelines of a great technological revolution.
Marketers can no more afford ineffective advertising than industry can support enormous overages of expensive raw materials sitting in warehouses. Technology eliminated the latter. It’s certain to eradicate the former.
As databases and electronic data interchange replaced the little black book and teletypes my grandfather used when he ran purchasing at the Dixie Cup Company in the 1960’s, marketing analytics and addressable advertising will replace ratings-based media buying and panel-based measurements that have been used for decades in advertising.
Why should cat food manufacturers pay to advertise their brands to people who don’t have cats (including people who absolutely hate them)? They shouldn’t. Soon, they won’t.
New technology can tell marketers exactly who saw which ads and how they responded. Addressable advertising tools insure the right ad is delivered to the right person. The Internet and other digital media channels can deliver them both. Watch out. The days of wasted advertising will soon be behind us.
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