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Promotions... build them and they will come?
This entry was posted on 5/3/2008 5:06 PM and is filed under Rant,Thoughts.
In the early 90's, one of the clients I had was an auto after-market
repair chain that was a mix of corporate owned and franchise locations.
The corporate client opened a new store not too far from a franchisee.
The franchisee was up in arms. He shouted that the corporate location
was stealing his customers, and as proof he showed a decreasing sales
trend vs the prior year. The client asked us to run some numbers. Since we
were 'third' party and both had business with us, the analysis would be
accepted by both.
Well, to combat the corporate location, the franchisee began a series
of promotions. x% off brake jobs, every x oil change free, free labor
on exhaust installation, etc. The promotions worked really well... at
lowering his average sale. It turns out, he was just running the
promotions in store. There was no out-bound advertising to draw people
in (or very little actually). So, while the corporate location did
virtually nothing to decrease his customer base, his promotion-focused
'solution' did a lot to decrease the value of that base.
So, this is the lens through which I read the clickz article, "Promotions Could Overtake Display and Search Says Report"
According to the study, search and display will peak, then decline
while promotions will overtake them. The study was done by Borrell and
Associates ( CEO Gordon Borrell)
According to the study, display advertising is flat at about $12.6B and will decline by 1/2 over the next four years."What's driving it is an overall dissatisfaction or nagging feeling on
the part of advertisers that their advertising isn't working, or that
they're overspending on it," said Borrell. "With the Internet, they can
go straight to consumers. If they're having a sale, they can put it up
on their Web site and consumers will come to them, and if their Web
site is good enough, consumers will keep coming back."
"With the Internet, they can go straight to the consumers." I am not
sure how. Decrease the display advertising, decrease the search
advertising, and anti spam laws are terrifying companies. How exactly
do they go straight to the consumers with the promotions? The answer
would appear to be, " put it up on their Web site and the consumers
will come to them..". So, they are not attracting as many new customers
(if any at all), and for any customer that would come to the site
anyway, they will give them a discount - promotion.
Now, contrast Gordon Borrell's perspective with that of Jon Brancheau,(15 minute video) from GM.
http://www.imediaconnection.com/content/19186.asp
GM's director of media operations, Jon Brancheau, reveals the truth
about the company's digital budget allocations in a frank chat from the
2008 iMedia Driving Interactive Summit. He is bullish on the digital space.
Far from seeing digital as not working, this is a place to push the boundaries.
I cannot see a 50% decline in display advertising. As for it being
flat the past 2 years, there has been an inventory influx with social media over that time. This has been high volume, low CPM inventory. Contrary
to a retraction, as behavioral targeting improves and the niche value
of the individual areas of inventory are identified, I believe this
will increase. These low value segments will fine their place in the
advertising ecosystem and help it grow.
I am not sure that Gordan Borrell believes in the
'build-it-and-they-will-come' myth that was debunked years ago. But the
general sense of the article would lead one to believe that this is
nearly so.
If we believe the advertising is not working, then we should fix it before
we start leaving money on the table with unadvertised promotions. There
really is no reason for any online advertiser to wonder if their
efforts are working. We can track minutia. If we are unsure of
performance, it is not a lacking of the media, but a lacking of our
imaginations. There are many ways to tag metrics to our
advertising. And it will probably cost less than running unadvertised
promotions.
   
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