New Media, New Rules
Advertising In A Changing Marketplace
In this challenging commercial environment, how can companies maximize their advertising budgets? How is the role of marketing changing? How do you know what’s working and what’s not? MB recently invited four local business people from different industry sectors to a round table discussion to discuss these and other issues affecting advertising and marketing today. Here’s what they had to say.
By Marilyn Arthurs
Don Flynn, Publisher, MB, Moderator: Mike, you’ve taken an innovative approach by growing your company through a referral network. How did you come up with that marketing plan?
Mike Holmes, President, The Cleaning Guy Inc: Through our dry cleaning pick-up and delivery routes, as well as our carpet cleaning service, we had built up a large clientele. But I realized the best way to grow the company was to find people who could send me the right type of leads. So we went to see all the major high-end carpet retailers in Toronto and surrounding areas, and took some simple foods like donuts and cookies in with us to add value to our visit. We would then offer complimentary cleaning in their offices, showrooms or private homes. For the last four years, every month to six weeks I’ve visited every one of our retail referral sources, taken in food and marketing information, and developed a relationship with them. In return, they send us highly qualified leads. When a lead calls us from one of these sources, they don’t need to be sold: they’ve been pre-sold by the retailer, despite the fact we’re higher priced. We’ve targeted that niche market and our retail contacts send us the leads we’re looking for.
Wolfgang Franke, President, Words at Work Advertising: This is a great case study in how to market a company. Number one is a marketing plan. Mike decided who he wanted to reach, how he was going to do that, and what results he wanted to achieve. He understood that to build his referral network he needed to keep working that network, to contact people again and again – through calls or visits. Many companies could learn from his experience: you must have a marketing plan, you must work that plan, and you must understand that working that plan could be a one- or two-year exercise, but at the end of that time, you start to reap the benefits. Mike is now getting super qualified prospects that he is basically just processing. For smaller companies, the marketing plan can be based almost entirely on sweat equity. Mike didn’t just buy a lot of print ads in newspapers. He put time and effort into building his network. He didn’t even have to spend much - how much do a few donuts and cookies cost? It was a great plan and it’s working.
Flynn: What about electronic forms of marketing and advertising, such as the internet and websites?
Franke: The internet is an advertising tsunami: you either ride it or get out of the way. Many companies have not tweaked to this fact. They still live in the world of mass media: newspapers, TV and radio. Their first response to advertising is to take big newspaper ads, and for many, that is a huge, critical mistake. The internet works for you 24/7, and with companies like Google and Yahoo, any company can now advertise anywhere to anybody anytime.
Ingrid Mueller, Professor of Marketing, Seneca College: But you still need to understand your target customers. If most of your target customers are over 65, for example, it is fairly safe to assume many may not use the internet a great deal.
Franke: The number of so-called non-users is constantly going up. And the next generation of customers are incredibly internet-savvy. The internet is part of their shopping experience, whether they buy directly or research a product or service online.
Mueller: That’s why competition is so fierce. People have immediate access to information and they can do all of their comparison shopping sitting at their desks. So companies had better deliver what they promise. Otherwise, they’re in big trouble.
Holmes: In some ways, competition can be easy to eliminate. With our business, we’ve made the transition from a service business to an experience business. Surprisingly few people shop on the basis of price only these days. They look for companies which provide credibility, availability, reliability, and who come highly recommended by trusted sources. If you market your company accordingly, price can become a non-issue.
Franke: If you’re selling just on price, you’d better be Wal-Mart.
Mueller: Mike is in a different niche entirely. He hasn’t mass marketed, and so his pricing policy is that of skimming. He’s going for the elite customers because his company is being recommended.
Holmes: There are two different phases of marketing: marketing for new business and marketing to existing clients. Ultimately, we’re trying to convert one-time users to clients who wouldn’t consider going anywhere else. According to a recent survey, if somebody uses your service and is dissatisfied, they will use it again about 14% of the time. If you meet their expectations, they will use it again about 40% of the time. But if you exceed their expectations, they will use your service again about 85% of the time.
Franke: And an unhappy customer will tell at least 10 times more people than a happy customer. That’s how things get unmarketed, and that’s why in some cases people’s opinions can never be swayed.
Flynn: Many companies advertise in more traditional ways, so what should their approach be?
Franke: More advertisers are looking for return on investment, and one of the key things they should do is to track their advertising. Many companies don’t track where their inquiries are generated from or how much money they’ve made from those inquiries, so they don’t really know what advertising and marketing is working and what isn’t. Many spend 80% of their marketing budget on the least profitable 20% of their responses. They may not spend any money at all on the most profitable prospects. And if they don’t measure results, how can they know what works and what doesn’t, and where to put their money?
Flynn: So what would you advise?
Franke: Our advice is to work an existing database first. Those people are most likely to buy, it costs the least to market to them, and you’ll generate the highest margin because the cost of servicing those customers is low. All too often we see the opposite: companies spending almost all of their budget on cold-calling and prospecting – high risk,
high cost, low response. When it comes to marketing, many companies think in terms of new business only. They blast the market and hope something happens. Often nothing happens, which is why so many companies fail.
Flynn: What about retailers? How should their marketing attitudes change?
Mueller: Our shopping environments have changed dramatically. People have more choices now, from big box stores and no frills, to moving more upmarket. Some people are even willing to scan their own products without getting a discount for it. Also, customers are more information-oriented today. They want information and they know how to get it. They want to make educated buying decisions – not for routine items like bread and milk, perhaps, but for major purchases.
Flynn: And what about the power of the brand?
Franke: When you buy a brand, you’re buying an experience. Through advertising and marketing, companies create the powerful perception that a branded product is somehow different and better.
Mueller: The youth market is particularly brand-oriented. Teenagers, for example, spend more money per capita than any other demographic group. It may not necessarily be their money, but they are a huge voice. Just look at how much kids now spend on music devices.
Peter Doyle, Vice President, T. Litzen Corporate Promotional Sales: And at the same time, they’re causing mom and dad to change as well – from record players to cassettes to CDs to DVDs to iPods, for example. They force the issue all the time.
Flynn: Do retailers deserve our business? The service is not good.
Doyle: We’re getting mixed messages in-store. Some stores deliver a bad experience, and some can’t do enough for you. It’s a lack of product knowledge versus service and expertise, and often it’s a matter of commission versus non-commission.
Franke: You have to differentiate. Otherwise you will become a commodity, and if you do, don’t be surprised if people go elsewhere. Somehow customers have to perceive value in buying from you. The differentiation needn’t be in the product; it could be in the service. Because service levels are so poor these days, the easiest way to gain an advantage is simply to improve your service. You could increase your profit and grow your business – simply by improving your service.
Flynn: How important is the promotional products business to advertising and marketing today?
Doyle: The promotional products industry is worth $18 billion in the USA and $2 billion in Canada, and has grown every year for the past 50 years. It has never had a down
year, in the USA or Canada. In bad times, people may switch from buying $300 leather jackets to $25 jackets. They’ll stretch their marketing dollar by quantity, so they may
buy 1000 jackets instead of 50. They adjust their marketing thinking to good markets and bad markets.
Flynn: What are the most popular promotional items these days?
Doyle: Pens are still the number one seller, followed by such items as coffee mugs and T-shirts. But people need to choose promotional products carefully. If you give out a .50 pen, chances are it will end up somewhere unknown, compared to a quality pen of some value, say $10 or more. The greater the value of the item, the greater the chances of use, the greater the chances the logo and name will be seen and recognized.
Flynn: But some people don’t want to carry a pen with a name on it.
Doyle: In our industry, we do what is called tone-on-tone. For example, a driver picks up his new BMW. He receives a leather jacket with the black BMW logo appearing tone-on-tone on a black jacket, so it’s there, but not there. Another example is a Cross pen worth $50, with a company’s logo laser-engraved to achieve subtle, discreet advertising. Where the opposite approach is required, there’s what we call billboard advertising: the logo appears large, colourful and contrasting to make it stand out. So the higher the value of the item, the smaller and more discreet the logo should be.
Flynn: There’s no doubt premiums are here to stay. But are they being used strategically and smartly?
Franke: Premiums work in terms of customer retention and making an impact, but if you just distribute them randomly, that cannot be the best expenditure for your marketing plan.
Mueller: All of the advertising and marketing elements must be blended. The best premium suppliers know that, and will put together a plan that supports the overall marketing program so a company can measure its success.
Doyle: Some companies just give out flowers, candy or money because it’s a last-minute thing and they just want to get it done. That’s a huge waste of marketing dollars. It would be better to give a nice crystal vase rather than flowers. Well selected promotional items can deliver a minimum value of one year. We have an item right now that offers seven years worth of value. Think about your marketing dollar stretching over seven years, or at least one year, if it’s well selected. Cash is the worst thing: you get it, you spend it, it’s finished. A newspaper ad can last one second. But a promotional item can last a year or more.
Franke: A newspaper ad may deliver 40,000 eyeballs, whereas promotional items such as coffee mugs in the office may only reach a few hundred. The difference is that customers seeing those coffee mugs in the meeting room are qualified prospects.
Flynn: You’ve mentioned newspaper advertising. How do you see the role of magazine advertising?
Franke: A magazine delivers a different audience than a newspaper. It’s more targeted, and if your best prospects are within that readership, you’ll want to buy into that. It’s all about micro media now, not mass media. Even the huge megabrands are moving away from mass media because it’s not giving them a good ROI. They’re pouring more money into the internet, outdoor advertising and satellite radio.
Flynn: That’s a major shift. What effect do you think it will have on the more traditional advertising and marketing channels?
Franke: It’s a complete sea-change! Satellite radio is stealing audiences away from traditional radio. Newspapers are under assault because so many competing micro media are a better buy, make more sense and allow companies to target prospects more carefully. There’s new media, interactive media – and outdoor media is exploding. There’s even outdoor media that can interact with the customer: newspapers can’t match that. Then there’s the whole tsunami of the internet that’s sucking more money and air out of traditional mass media. When the biggest brands say that buying network TV advertising doesn’t make sense anymore, that tells everybody they need to look at a mix of highly targeted elements because there is so much micro media now.
Flynn: How are advertising and marketing budgets changing in this volatile environment?
Franke: Before the internet, in order to play in the marketing and advertising pool, you had to have a fair amount of money. That’s gone now. Anyone with a Google or Yahoo campaign can advertise to the world for pennies. That is an incredibly empowering development. Yet many people haven’t woken up to that fact, and are still spending their money in the wrong places on the wrong things at the wrong time. If you’re in the marketing game today, you need to understand the internet. You need to understand how you can use it and how your customers are using it. Yes, there are still people who want to talk to a salesperson, but you’d better be strong on the internet, understand it and be putting your dollars and effort into it.
Mueller: And those who are in retailing need to have educated salespeople because they have customers now who know what they’re talking about. Many people today won’t even think of making a major purchase without researching it on the internet.
Flynn: How does all of this change affect the supply sector?
Franke: Soon consumers won’t just be able to go out and pre-buy a product – they’ll be able to design it. That’s changing the role of marketing. In the past, suppliers produced products and pushed them at customers. Now it’s going to be customers designing products, pushing them at suppliers, and suppliers had better be able to deliver.
Mueller: Car companies are already doing it, Dell has always done it, and now you can even custom-design your Levis online.
Flynn: With all of this growing internet activity, how should companies approach websites in terms of the overall marketing plan?
Franke: A website should be interactive and add value. Too many companies set up a website, put their literature on it, don’t update it, and it just sits there. Often when we ask people how many prospects their website has delivered, the answer is none. How much profit have they made from the website, and the answer is none. They have the website, but it’s doing nothing for them. It’s not delivering prospects, it’s not supporting existing customers, and it’s not producing any ROI. They think they can build a website and
forget about it, but it just doesn’t work that way. The advertising and marketing world has changed, and it has changed a lot!
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