The Cable Guise

Craig Reumund

Cable sales teams have lead auto dealers to believe that broadcast TV is wasted coverage and reaches outside their primary trading area. “Why would a customer drive past other same make dealers to my store?”

Here’s why: You ask them to.

A dealer can deliver a believable message that gives them a reason to drive past their competitor’s store to their store, and an efficient delivery system (broadcast TV) to distribute that message to more potential buyers for less money.

There are over 23,000 auto dealers in the US. The average store sells 100 cars per month. The primary trading area is a 10 mile radius. The manufacturer wants the dealer to sell as much of the primary trading area as possible. The dealer wants to sell as many cars as possible both in and outside the primary trading area.

When a customer chooses a dealership, they are selecting dealers for perception of best price or selecting dealers for convenience to service.

If a buyer is selecting a dealer based on the dealer’s convenient location for service, (a very small segment of buyers) the buyer finds the dealer closest to their home or work. The dealer does not need to advertise to bring this customer in. The customer searches and finds the dealer.

If a buyer is motivated to get the best price, as most buyers are, that buyer will travel for the perception of saving perhaps thousands of dollars at a dealership many miles from home.

This is where a destination mindset is critical for the advertiser.

A dealer that advertises only in their primary trading area, will lose the opportunity of luring buyers from other counties outside the trading area. Cable claims it is wasteful to advertise outside the primary trading area. Cable is wrong.

If a dealer wants to grow sales larger than average, i.e., if they have destination mentality, they must use a media that has the following mathematical criteria:

1) Delivers the largest audience within the demographic per dollar spent; i.e. the lowest cost-per-person in the demographic.
2) Has a high reach capability in the demographic.
3) Has the largest geographic footprint in the local DMA.

Broadcast Television is that medium. It delivers the lowest cost per thousand on any major demographic. It has virtually no “glass ceiling.” It has the largest geographic footprint of any local media. Broadcast television is everything a destination store needs to grow their business most efficiently.

Cable has one of the highest cost per thousands of any media, low “glass ceilings,” and smaller geographic footprints. Cable is a perfect media to increase the cost of buying new customers and losing market share. Cable is a great media to use to remain average or less than average in sales (and profit).

How could Lynn Hickey Dodge sell an average of 2,400 cars per month from one store in Oklahoma City? By inviting every potential customer in the Oklahoma City DMA to their store. This would not be possible on cable. Lynn Hickey Dodge was 100% broadcast TV during their reign as the world's largest Dodge store. Lynn Hickey was sold to a consolidator who stopped using TV and drove the store down to 80 cars a month in less than a year.

Auto dealers aren't the only business to benefit from the largest footprint, lowest cost-per-acquisition, highest reach media of Broadcast TV. All destination stores can benefit. Furniture stores, floor covering stores, in fact, most durable goods stores, financial institutions, medical practices, and legal practices can be destination businesses that grow faster and cheaper on Broadcast TV.

Don’t let cable steal your retailer’s growth with bad logic and an inefficient media. Tell them the truth about growing a destination store.

Craig Reumund is a Senior Consultant with ESA & Company. He meets with hundreds of local business owners each year and has significantly changed the fortune of thousands of local businesses over the past 20 years.

Choosing Between Broadcast and Cable

Adam Armbruster

Every year our firm holds advertising profit seminars with large groups of clients. What have we learned? For starters, we've learned the old adage about "50 percent of all advertising is wasted" is wrong. Actually, the percentage is higher.

We have determined that at least 60 percent of a typical client's advertising dollars are wasted because they burn ad dollars in the wrong places, advertising to the wrong people, in the wrong TV programs, on the wrong days.

Enough about the problem. Let's talk solution.

Let's start with what an advertising budget really is: a small percentage of the gross sales of a company that is allocated to create more demand for even more sales. The ad budget is the "gas money" of a company.

Without new customers, business soon will begin to stall.

So we should help a company owner redefine what his ad budget really is to help him begin to see how important it is to have this budget working at its highest level of performance. Otherwise, the client will be just another member of the 60 Percent Wasted Ad Budget Club.

What we see most often are clients whose ad expenses are too high in relation to the amount of sales volume. This red flag can be a symptom of a weakening plan; if so, it's important to fix the advertising plan before we can expect to generate a significant return over the prior year.

Clients need three important things: Profitable advertising; measurable advertising; and effective advertising.

That being said, if a company owner is most interested in making more money, then profitability should be the priority target instead of the usual target of a sales increase.

Profitable advertising requires an analysis of past media choices. How does a client's media choice affect profitability? Simple: The CPM (cost per thousand) of the current media mix has a direct effect on the buying power of the ad budget. The CPM of a client's multimedia ad plan should be the first thing examined.

As the different media begin to assume new roles in the lives of consumers, clients need to recognize this evolution and shift their ad plan accordingly.

Case in point: When was the last time you used your Yellow Pages telephone book to look up a local business? Compare that to when you last Googled a local business. Google is the new Yellow Pages for millions of us today. So a home improvement company owner who keeps buying ads in the Yellow Pages trying to grow sales volume will actually experience a steady advertising CPM increase each year.

Therein lie the inherent advantages of broadcast television. Television's very low CPM delivery of audience generates an immediate increase in profitability because you're bringing more prospects to the client's door at a much lower cost per prospect (CPP).

Measurability in advertising takes up-front planning. Plan what you want to measure in advance and don't shift to new metrics midway through the campaign. Real measurement is a science, not an art. You need multiple sources of data and you should track them for a period of six months or more to remove any variance from the data.

Yes, it's boring stuff. But it's the client's money and we need to help maximize their buying power with careful tracking tools linked to the campaign from start to finish.

A few metrics to establish up-front are: Organic (non-sourced) Web site hits, Web site traffic volume during TV ad flights, click-through rates of linked Web site ads, positive/negative ratio of incoming customer calls, closing/conversion ratios of TV leads generated, gross sales during TV ad flights, net profitability during TV ad flights and increases/decreases in the usage of related print media run during TV ad flights.

As stated in prior articles: Please do not ask actual customers. They don't know, don't care, and will only tell you what they think you want to hear. Following business consumer polls will lead you directly into a ditch.

Effective advertising requires knowing the real consumer buying triggers. Why do people really buy stuff? Are we logical? Usually not.

We are emotionally driven creatures who buy with emotion and rationalize with logic. My wife rationalizes the purchase of an outfit by saying she got it on sale. Don't we all do this?

Just as valuable is the real reason people will buy. Usually it's based on a person's desired image (Lexus), or a person's need for a reward system (Starbucks). Does a $104,000 car or a $4 cup of coffee make logical sense? No. But we don't make buying decisions logically.

Clients need to see their customers' emotional triggers in a new light, and your outside perspective usually helps. Choosing television programs based on consumer buying windows, psychographic composition, household income levels, lifestyle and brand orientation and, lastly, cost per thousand, respects the emotion vs. logic argument made above.

We often suggest a client write down the top 10 reasons a consumer would buy from his business to help the business owner see his business the way a consumer will.

It's said that a cash register ringing is the only true indicator of a successful television campaign. But ironically, when asked, buying consumers seldom credit a business's ad plan as the reason they bought-which is truly exasperating to clients.

That's not to say the advertising was ineffective. It just means that at the time of sale, the consumer made a purchase based on features and benefits of the product or service. The TV commercial is very far back in the mind of the customer emotionally. They've moved past the advertising's emotional impact and into their logical rationale to buy.

We all need to help make the client's progression into television advertising the most profitable, measurable and effective move they've ever made.

Adam Armbruster is a partner with Red Bank, N.J.-based retail and broadcasting consulting firm Eckstein, Summers, Armbruster & Co. He can be reached at adam@esacompany.com.