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. 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.