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Making Advertising Really Pay

May 21, 2007  •  Post A Comment

By Adam Armbruster, Special to TelevisionWeek

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 or 941-928-7192.

12 Comments

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