Over 100 years ago, John Wanamaker, the father of modern advertising, stated “”Half the money I spend on advertising is wasted; the trouble is I don’t know which half.“ Since then, it has been uttered countless times at ad agencies and marketing departments. It is a truism that is not only tolerated, it’s anticipated. And most would tell you it is getting worse not better.
I don’t think it’s a mystery. The holy grail of advertising is consumer loyalty. $300 Billion spent every year with the hope of increasing consumer loyalty and all the spoils that come with it. So advertisers pour money into Lost, People Magazine, drive time radio and any other media property that has gathered an audience of consumers. And after they spend their $300 Billion, consumers are most definitely more loyal…but only a bit of that loyalty goes to the advertisers. Consumers build loyalty to Lost, People Magazine…the media properties.
Loyalty typically is a one degree of separation thing…you are loyal to who you have a relationship with. Advertisers spend the money, but the direct relationship is between consumers and the media properties and that’s where the bulk of the loyalty lies. All on the advertiser’s dime.
So John Wanamaker wasn’t exactly correct. The money isn’t wasted. It’s just being spent building loyalty between consumers and Lost more so than consumers and advertisers. A direct relationship between advertisers and consumers puts the money in the consumers’ pockets and the consumer loyalty in the arms of the advertisers. That makes a lot more sense to me.
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Not sure this comment belongs here but with the advent of the Internet, the advertising propositions are changing? Click to view payment system is now allowing those brands to pay for only those views that were actually used by a prospective consumer. I read in business week that ad dollars are continuing to grow on the internet since a much more targeted market are being delivered at a much cheaper cost (in essence changing that 50% ratio to a much higher number). Therefore, it is becoming much easier to focus advertising to the correct consumer. There are something like 300 networks that place those ads on web pages across the internet as well as web pages themselves directly selling space. However, in order to focus those ads to the correct consumer, requires capturing individual consumer behaviors, aggregating the data for like consumers and then finding patterns and refocusing ads to similar individuals or already identified target audiences. Ads on shows like the superbowl are scatter shot, there is a larger target audience but that market is all over the consumer spectrum.
The ability to track those viewing and spending habits on the internet of those individuals has been the catalyst for the changing ad spending proposition. Amazon has a strong suggestion system to further up sell additional related items and items that have appealed to others with similar interests. They have leveraged that collected data and have been able to harness that information. The major cost of these internet targeted ads has been consumer privacy. Very early on a backlash from users for tracking their viewing and spending habits has been voiced and is still a point of contention as consumers learn they are being watched. Consumers valued their privacy and felt strongly that it was a violation of their rights to capture that data without their knowledge. Consumers feel they own their spending and viewing data. In essence, part of the direct to consumer payment is really paying consumers access to their habits and interests. Is it paying for their loyalty to the media property or really paying for the fact that a loyalty exists beyond the media itself? Roughly, a magazine or other media property is trying to group similar interests together. People magazine is vying for those individuals interested in pop culture. They can sell ads since they have a roughly identified market of similar interests. Companies that have products that appeal to that wide crowd think that magazine is a place to find their prospective clientele. The knowledge of that target market is were there seems to be value to the advertiser.
Consumers have something to gain as well since they are receiving advertising tailored to their wants and desires. So it becomes more of a win win situation, ads are targeted to the desired markets and the individuals who are interested in those products can learn about them. So it seems the proposition of paying the consumer directly for their habits and loyalties makes sense since there is value in that data to market similar, new or related products. Thereby, making the advertising spending more efficient since companies armed with data can communicate directly with their most likely consumer.
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