The industry must measure advertising effectiveness.
As we prepare for our first steps in the twenty-first Century, with the past ringing in our ears...a past filled with advertising idioms such as "reach", "frequency", "gross rating points", "copy testing", "focus groups" and the like, a true measure of advertising performance must be "investment efficiencies". Retailers' frustration born of attempts to deal with rapidly increasing ad costs have spawned sophisticated ad models. These go beyond reach and frequency to the one sure marketing measure that really counts...actual sales. It is called advertising accountability. And we will and must be held accountable.
By using ultra sophisticated techniques that account for how changes in various components of the client's marketing mix impact sales, today's marketers no longer have to rely on a faith that advertising works.
And those who are in the business of hawking advertising's virtues must demand that their clients learn how, when, where and why it works and then apply that knowledge to the setting of new marketing plans.
Many of these new techniques came from the packaged goods industry. A brand receives just so much investment depending upon its rate of sale and its degree of profitability. The brand manager must keep in mind a leveling stage; a point of diminishing returns where no matter how much is invested in the brand, sales levels remain the same. To reach this plateau is to succeed. But only for a moment. As people change, so do their habits...particularly their buying habits. And when this change occurs, so must marketing plans.
We can no longer be myopic when it comes to advertising.
One of the main tools that is used in this new strategic thinking is an old ally of the retail marketing industry...scanner data. Benchmark studies in the soft drink industry during the 70s were conducted in which retail scanner data was used to benchmark advertising effectiveness.
An early effort to use this methodology was in the creation of Seagram's Wine Cooler. You may recall a young, hip actor (Bruce Willis of "Moonlighting" fame at that time) appearing in various commercials in support of the brand. Not only were they creating brand identification, they were also creating a new category...wine coolers. Marketing managers used a strategic model to follow advertising efficiencies. Marketing accountability told them how many cases had to be moved within an allotted period of time... and at what advertising investment level. Once sales reached that "goal" level, investment was decreased to find an activation level (the level when minimum advertising support is needed to reach the maximum sales plateau). Once determined, the brand was maintained, with a constant surveillance of the rate-of-sale data. Diet Coke, Pepsi, Dr. Pepper, Canada Dry, Coke did this and still do, as do most package goods brands.
In home furnishings, our name is our brand. The local furniture retailer is no different than the local supermarket. With one small, minor exception: the supermarket receives a great deal of advertising support for the products they handle, while the home furnishings dealer receives very little manufacturer brand advertising support. This places the "brand" business squarely on the shoulders of the retailer.
Home furnishings retailers must adopt advertising accountability now. While most advertising agencies initially resist working under this methodology because of fear that efficiencies will be uncovered, leading to reduced advertising budgets; this methodology is "the only way to go." Yes, initially an immediate efficiency of about 15% on current advertising media plans will be realized. But over a long-term, those increased efficiencies lead to greater advertising effectiveness and an increase in overall advertising investment. After all, by using this "investment efficiency" strategy you actually find out where your advertising dollar is going and how well it is working for you.
In short, it is important to build sophisticated models that gauge how sales respond to major or subtle shifts in marketing variables. All are based upon rule based assumptions which we adapt as rules change. The process begins with an extensive one-year assessment of a store's marketing history that factors every measurable variable in its marketing mix, including what the competition is doing, as well as extraneous variables like fluctuations in weather and/or social patterns during certain times of the year. The annual assessments lead to immediate fine-tuning and an overhaul of the marketing plan. In theory, you can identify the optimum media placement, the ideal creative message and the appropriate mix of advertising to promotion with very little waste.
This is advertising accountability. It enables every retailer to determine the return on every marketing dollar invested. Home furnishings retailers can determine how much value they get from their television advertising this year versus last year, versus the year before. That is not how most advertising agencies approach the planning process. But that is what is needed in order for us to prosper in the twenty-first Century.
You can look at marketing communications as a bridge you are going over. It begins with a belief in your products and services and ends with the effective, direct and most efficient communications with the people who would, could or should buy from you. The best way to go over this bridge is through advertising accountability lanes. They provide for your profit and your future.
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Lance G. Hanish is the President of Lance Benefield & Co., Inc. Worldwide, a leading marketing communications firm serving home furnishings retailers. Questions on any aspect of television media management or production can be direct to Mr. Hanish care of FURNITURE WORLD Magazine at firstname.lastname@example.org.