Making Advertising Really Pay

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.

Measuring Results from a Multimedia Marketing Plan

Adam Armbruster

Our clients report that all of the drastic changes in consumer media usage has caused them confusion about how to measure retail mutli-media electronic advertising campaigns.

If you are the advertiser, you may have even already discovered that the old standby measurement tool, the customer survey, is becoming irrelevant due to the fact that your consumer is spending more and more time “virtually shopping” before “actually buying”.

In other words, by the time she finally comes in to your store, she may forget what advertisement media brought her there!

Due to today’s longer Ad Exposure to Purchase cycles, consumers may not able to accurately recall what motivated them to shop your store. This phenomenon is reflected in increasingly higher error rates of retail customer surveys. Case in point. Nielsen, and more recently Arbitron, switched over to digital audience measurement because of massive human recall error in recalling even “Same Day” media use.

We all know that consumers already have a foggy idea of what media they think they are using versus what Nielsen and Arbitron report that they actually use. As such, consumer recall rates of your original television ad may be diminishing due to the dramatic changes in her shopping habits. Clearly, it’s time for a new measurement tool.

We already know that consumers begin all major purchases by viewing the seller’s Web site…but we also know that something motivated them to visit that Web site in the first place.

Make no mistake about it. Television is just as effective, or even more effective, than ever before. Consumers have shifted to using video and electronic media as their media of choice. But new standards of campaign measurement are now necessary since consumers are also “using” television advertising in new ways.

Remember in the 1980’s television ads generated immediate store visits, and then in the 1990’s television ads generated phone calls? Well now television ads generate Web site hits. Today the consumer is beginning her shopping pattern virtually, before physically.

Try it yourself. Tell a friend about a great new store you just found and mosty likley the first question she will ask is “What’s the Web site?”

We also know that once a television message is seen and heard by a consumer, she makes a decision immediately made to act, or not act. Assuming she acts on your television message and perhaps logs on to your Web site that very same day, but then visits your business over a week later, and then returns another week later to actually buy, she may not be able to accurately recall how she originally found you!

So if you are still asking current customers the question: “How did you hear of us?” expect confusion when you sit down to go over the final research data.

So how can you eliminate the human error and begin to accurately measure the impact of these new multiple media television / internet campaigns?

First off, you need to design new measurement metrics. Here are the best metrics for measurement as reported by a mixture of our automotive, furniture, home builder, home contractor, health care, and financial clients:

1. Organic (Non-Sourced or Non-Searched) Web site hits
2. Overall Website traffic volume during TV Ad Flights
3. Click-Thru Rates of linked television station Web site ads
4. Positive / Negative Relationships of Incoming Phone Calls to Television Ad Flights
5. Closing / Conversion Ratios of Television Leads generated
6. Gross Sales during Television Ad Flights
7. Net Profitability during Television Ad Flights
8. Increase / Decrease in the usage of printed media run during TV Ad Flights
   

Did you notice that none of these measurement tools involve talking to actual customers?

The fact is that today the consumer is deluged with so many ads each day that asking them what brought them to your business is like you trying to remember what you had for lunch yesterday. Also, the metrics above are easily measurable so you can now build a measurement graph using some, or all, of these campaign measurement metrics

Next, you need to design “measurability” into your television and internet message.

To generate measurement, your television message needs to be promotional in nature and not an image ad. Image ads are not easily measurable as they require a very long horizontal style campaign and most advertisers are not willing to invest this level of television spending without an immediate payback.

In your promotional television message you also should include a clear and bold web site mention both in the middle of the script and most importantly at the end of the commercial. Your Web site address should always be the last thing the consumer sees and hears. Why? Because we already know that interested consumers will go to their computer next! Don’t be passive and make consumers “Google” to find you since your competition will most likely show up on the first Google page as well.

Next, your television flight needs to be planned around the consumer lifestyle patterns so that she can act immediately after seeing your commercial. An example of this is to run high levels of Early Morning news to reach Working Women so that she can see your television “Web Driver” message and then log on to your website at work that same morning.

Lastly, you need to be congruent in the design of your commercial so that it matches the same style and tone of your Web site. Here generous use of video versus text is the answer. Consider airing a television commercial and also launch a Web site that is designed to welcome consumers with a video using the same style creative and the same on-camera talent. This will help build frequency of message along with higher ad recall levels.

In the end, campaign measurement is kind of a bad news / good news scenario. The bad news is that television campaigns have never been harder to measure with traditional methods, the good news is that better metrics have arrived that are much more accurate than customer surveys. Getting accurate feedback about your television campaign is crucial to a knowing what ad concepts and media plans are most effective. Today however, asking the consumer may be the worst place to start.

So in 2007 let’s change our measurement metrics to align with the way that today’s consumer really shops.

Adam Armbruster is a partner in the retail and broadcasting consulting firm Eckstein, Summers, Armbruster & Company located in Red Bank, New Jersey and can be reached at adam@esacompany.com.

Sources: Automotive News, Homebuilder Magazine, Ward’s Dealer Business - 2006

The Other Success Indicator

Adam Armbruster

“Increase my sales immediately!” is the cry we all hear so often from advertisers. Is it that a sales increase is the only, or even the preferred method to measure an advertising campaign?

Is there no other way to create financial success for a television advertiser?

Of course there is. It’s Profit increases.

How many companies constantly search out the next sales increase only to report a poor financial “net margin” performance 12 months later? Perhaps it’s time to discuss some of the basic points about how to market a business for an increase in profit as the success metric, and not just for a sales increase.

In our experience, most clients are already generating adequate sales volume based on their overall investment. But what we most often see these that their expenses are simply too high in relationship to the amount of their sales volume. This can be a symptom of a broken advertising plan and if so it's important to fix the advertising plan before we can expect to generate a significant return over the prior year.

We’re also assuming here that the company leadership is interested in the profitability of the company and that they are not compensated simply on sales increases. Since most companies in America are privately held this is true in most cases.

That being said, if a company is most interested in making money, then profitability should be a priority target over sales increases since sales increases also bring along increased expense.

The best way to start this analysis is to examine the clients’ industry profitability averages. Most trade industry magazines or organizations publish this type of information. Another way to get accurate information is to poll several other noncompetitive clients in the same field. You will soon begin to see some predictable averages of industry profitability.

Next, compare your clients’ profitability average with that of his top five competitors in the selected market. This data use often available through vendors or financial partners. It’s a simple step that may reveal a substantial opportunity for profit gain. For example, if your client is the lowest in profitability of the five. Then it's going to be relatively simple to generate a profit increase with a better designed advertising plan. In contrast, if your client is first in profitability than another success metric should be applied. Usually this involves market share increase.

So to begin, how does your media choice affect your profitability?

One of the great advantages of broadcast television is its very low CPM (cost per thousand viewers) delivery of audience. Simply bringing a retailer into television advertising can generate an immediate increase in business profitability because you already succeeded in bringing more prospects to the door at a lower cost per prospect.

But we need to go deeper into a marketing plan design to target a profit increase.

Merchandise selection is a key component to be discussed in the design of a advertising plan. Some clients may try to convince you to feature their slowmoving products in their TV commercial as a way of clearing it off the shelves. Try to convince the client and is in his or her best interests to instead feature widely popular merchandise since this will be the traffic driver for the entire campaign. It makes no sense to put the slowest moving product in front of tens of thousands of viewers since they will now judge your clients business based on this impression of merchandise.

Pricing and product has a lot to do with the success of the campaign as well.

Some high-end advertisers will want to avoid advertising lower prices out of concern that they will generate an unqualified consumer. Most often this concerned is unwarranted since today American consumers will cross-shop 3 to 5 different retailers within a product category. This is especially true in fashion orientated products like furniture, apparel, homes, and home-improvement. A high-end advertiser that refuses to demonstrate their affordability to a mass client base is limiting their profitability since many of these will be first-time customers that can be generated at a much lower cost per thousand.

Lastly, the television program selection is the final step in building a profitable television marketing plan. Choosing programs based on audience psychographic composition, household income levels, lifestyle and brand orientation, and finally the cost per thousand of the television program are all equally important. You may find just as much profit success using an early-morning news television show as you will with substantial primetime programming. Of course all of these decisions are taken in a case-by-case basis. There is no such thing as a standard television marketing plan.

Final note: Helping a client achieve a profit increase has a dramatic effect since it can take a substantial sales increase to generate a small increase in profitability. This said, it makes sense to view this proposition in reverse mode and target of profitability increase first. Only after the net profitability of the company has improved doesn't make sense to go after a significant sales increase.

My view of business goes this way, first help business owner to examine their operating systems much more closely since the sales increase will put stress on these systems quickly. These systems include but are not limited to their sales staff, their display, computer software, registers, and overall staffing levels.

I hate to admit it, but I've seen businesses insist that they target major store traffic increases only to get it… and then suffer the consequences of poor preparation! Case in point: one business generated a 50% traffic increase and saw sales decline 2% because they were not able to help customers coming into the store quickly enough in the overcrowded store was avoided by high-end shoppers.

So next time your client insists on a major traffic increase, consider a profit discussion first. It may be the best recommendation you could make.

Happy Profiteering!

Adam Armbruster is a partner in the retail and broadcasting consulting firm
Eckstein, Summers, Armbruster and Company located in Red Bank, New Jersey