The Engaged Consumer

In a prior life, I spent a lot of my time focused on advertising. At least enough so that when I openly question its effectiveness, I have a leg to stand on. This may fly in the face of conventional wisdom given the fact that NBC found the demand for last Sunday's Super Bowl spots at an all time high but did Dorito's, Anheuser Busch et al. really see a return on their investment? Or was this just another case of their CMOs and CEOs wanting somthing to brag about with their golfing buddies.

Obviously GM and FedEx 's execs weren't in a bragging mood as both of these longtime Super Bowl advertisers begged out of this year's event. Both have been hard hit by the economy and likely realized that spending $10-15 million dollars each on a few 30 second spots just wasn't in the cards. Instead they've chosen to spend their money on more targeted and measurable forms of marketing and advertising.

In case you needed more convincing that ad effectiveness is eroding, note that 27% of US households currently have DVRs which means a quarter of the US population fast forward or skip over tv ads altogether. Combine that with the fact that ad recall is 11% lower than the average given our current economic times, that's now another haircut that tv advertising is taking.

To that end, online ads are also losing their impact. Doing some quick math on this... if you have $3 million to spend and buy ads at $10/CPM -- probably and unrealistically low rate -- and receive a .01% click through rate (on the high side) and a 5% conversion (also high), you could expect to get 1,500 new customers from this campaign. This means the lifetime value of those customers needs to be  at least $2,000 just to break even.

So why to other big brands continue to spend tons of money on a tactic that is hard to measure and continually yielding diminishing returns? Well for one, more effective ways of reaching new and existing customers like e-mail marketing and SEM aren't that sexy. Neither are managed online communities and social media tactics. Ironically, the combination of these more effective tactics is not only measurable but can yield some amazing results.

To highlight this impact, let's look at three scenarios, each involving a $3 million spend.

• One Super Bowl ad and you were able to reach 100 million people for 30 seconds and then perhaps another 25 million people for another 30 seconds via YouTube, Hulu, etc. This absolute BEST case scenario gets you to a point of $.024/30 second view which is not bad. Unfortunately, after a couple of weeks when the recall of most ads wears off, you'll need to spend another chunk of money to touch these same consumers.


• An online banner ad campaign with the potential to acquire 1,500 new customers (also not bad but requires a LTCV of $2,000 to break even).


• A $2.5 million on e-mail and search engine marketing (two marketing techniques that are still delivering strong results) while driving all of those folks to an online community that you spend $500,000 on (including content, headcount, technology) knowing that you could see results* like this:
    
  
  
  
  • 92% of your customers recommending your site to a friend
  
  
  • 95% of your customers would visit your site again
  
  
  • 85% of your customers would recommend your brand to a friend
  
  
  • 66% of your customers would be more likely to buy from your brand
  
  
  • 63% of your customer would have a more positive view of your brand
  
  
  
  

If you've read this blog or follow me on Twitter, you know exactly where I stand on this front. But where do you stand? Are you measuring your limited ad and marketing dollars? Are you getting the results you deserve? If not, maybe it's time to start thinking about adding an online community into your mix. If you are getting results through traditional or online advertising, I'd love to be proven wrong. Share whatever you can in the comments and I'll be happy to rethink my assessment.

 

*From Powered's 2008 ROI Report (release date is late February)

Does Advertising Still Work?