It Pays To Advertise - Or Does It?

Like Procter & Gamble, Daimler Chrysler, The Walt Disney Company and other leading advertisers that cut their ad budgets last year, carwash operators would do well to take a new look at their advertising game plans. No one is suggesting that conventional advertising will disappear (P&G spends $3.2 billion on ads in 2005), but the decline of the major TV networks, the shrinking circulation of newspapers and the emergence of new technologies that allow people to skip commercials have made traditional ads far less effective.

And Now A Word From Our Sponsor.... But Is Anybody Listening?

According to a study by TNS Media Intelligence, the ten largest advertisers cut ad spending by an average of 3.3% in 2005, led by marketing trendsetter P&G, which slashed 4.6% off its advertising budget. These companies are advertising less, because TV, newspaper and radio ads have become a less cost-effective way to reach consumers.

A number of social and technological factors have worked to diminish the persuasive power of advertising; chief among them is the decline of mass media. There was a time, not all that long ago (1973), when an advertiser could reach 95% of US women between the ages of 25 and 49 with a single spot aired on the ABC, CBS and NBC networks. Today it would require 92 commercials to reach the same group, according to the Los Angeles Times.

Network television has become only a shadow of its former self, less able to spark a trend or create a buzz around the water cooler than in its heyday. In 2000, the number one rated TV program, Survivor, drew a 27% audience share, about half of the ratings earned by the 1987 champ The Bill Cosby Show (53%), or 1980's champ Dallas (52%).

Daily newspapers have been retreating even more quickly from our national consciousness. There were 1.23 newspapers sold for every home in the US in 1950. By 2000, this number had fallen to .53 newspapers for every American home — and with circulation declining by about 1% a year, it will drop even further. Click here to learn how SiteWatch can help you track the effectiveness of your newspaper and direct mail coupon ads.

The shrinking role of network TV and daily newspapers in our lives has not only weakened two once-reliable forms of advertising, it's also made it more difficult to fashion a universal selling message.

Everyone may be a potential carwash customer during the day, but at night they're not all going home to read the Daily Gazette and watch Jed Clampett, Marcus Welby or Jerry Seinfeld, the way they did in the past. Many marketing experts believe that the decline of mass media has weakened our shared popular culture bonds, making it all but impossible to reach customers with a single one-size-fits-all message. "Monolithic blocks of eyeballs are gone," said Eric Schmitt of Forrester Research, Inc. " In their place is a perpetually shifting mosaic of audience micro segments that forces marketers to play an endless game of audience hide-and-seek."

Rise Of Micro Cultures

Technology, in the form of radio and television, gave rise to modern advertising between 1920 and 1960, and now new technology is giving rise to a "micro media culture" that is making traditional advertising and marketing concepts less relevant.

Compared to a generation ago, America is a far less homogeneous nation, in terms of ethnicity, lifestyle, and culture. The rise of the Internet, iPODs, text messaging, and other technologies have made it easy for us to pursue our own personal interests and share information with like-minded individuals.

The average American home receives 100 TV channels today, compared with 27 in 1994, according to Nielsen Media Research.

Take a look at your customers. If they're passionate about Scottish folk dancing or antique bottles, they can spend hours satisfying these interests on websites and blogs far from the reaches of the mainstream media. Other customers who drive by your carwash are tuned into a station thousands of miles away on satellite radio. Chefs from cable TV food stations are celebrities to 1% of your customers, but are unknown to everybody else.

The point is that your carwash probably doesn't depend on one market for customers anymore, but on a variety of small micro market niches, each with its own distinct character. As a marketer, your biggest challenge is not only developing a unique message for each of these disparate groups, but also finding the best means of delivering it.

A Lesson From McDonald's

McDonald's is one large advertiser that has refined its strategy to reflect the emergence of micro markets. The nation's biggest quick serve restaurant chain now devotes only about one-third of its ad budget to television, compared to about two-thirds in 1999. The company has taken the money that was once spent on generalized 30-second spots, and used it to pay for closed circuit sports programming piped into Hispanic businesses; ads in Upscale, a magazine distributed to barber shops that cater to African Americans; commercials aimed at young men that are aired on Foot Locker's in-store video; ads focused on mothers in Marie Claire; and website advertising.

"We're a big marketer," said McDonald's chief marketing officer, M. Lawrence Light. "We are not a mass marketer."

At its core, McDonald's marketing strategy recognizes the "atomization" of our popular culture. No music is as popular with as many of us as rock 'n roll was from the 1950s through the late '90s. There hasn't been a must-see TV program for the majority of Americans since Seinfeld. In all likelihood, no late night TV host will ever be as popular as Johnny Carson; no newscaster will ever rival the influence of Walter Cronkite; and no movie will match the box office receipts of Titanic. The American market has simply become too fragmented to ever move in such mass unity again.

For a carwash operator this may mean running different coupon ads in different small newspapers, instead of a single ad in the metropolitan daily. Interestingly, while large dailies have been bleeding circulation, small weeklies and specialized newspapers have been enjoying record profits by addressing micro market niches. It may also mean sending a promotional prepaid card (loaded with one wash) to a select number of people in a micro market, instead of a blanket coupon mailing to every residence in a zip code. Click here to learn more about SiteWatch prepaid cards.

Viral Marketing

The biggest beneficiary of mass media's decline has been the Internet. The amount of money spent on online advertising jumped by 26% in 2005 to $14.7 billion, according to Forrester Research. A study by the Wall Street firm Sanford C. Bernstein & Co. predicts that by 2010 marketers will spend more on the Internet ($22.5 billion) than on network TV ($19.1 billion).

A key benefit of online advertising is its affordability. Free of the raw materials and distribution costs of newspapers and magazines and the production costs of TV stations, websites and other Internet advertising media are able to offer lower-cost ad options. This allows relatively small advertisers like carwashes to take a broader, more adventuresome approach toward advertising. For example, suppose a carwash operator was looking for a way to reach golfers because he knew that many of his best customers golfed. Advertising in the statewide golf guide magazine would probably be too expensive, especially since many of its readers live outside the carwash's trading area. However, the ad rates for the state's golf website would be so low that advertising there would make sense, even if many of the visitors lived outside the carwash's market.

Online advertising hasn't just been growing, it's also been improving. Most people are turned off by unsolicited e-mail, and many ignore standard banner ads. This has led online advertisers to develop content rich permission-based e-mails that customers and potential customers ask to receive.

Another strategy has been to use the Internet as a springboard for viral marketing campaigns. The high-tech version of traditional word-of-mouth advertising, viral marketing relies on creating an online message that's novel or entertaining enough to compel people to pass it along to friends and relatives, thereby spreading the word about a brand or product.

This is what Procter & Gamble is striving to do with its Vocal Point. In March 2005, the company began enlisting 600,000 moms of children 19 and under, who were prescreened for their large social networks, in its grass roots program. P&G is sending Vocal Point members coupons, samples and informative literature all aimed at getting them to talk to friends about the company's products. "We are finding that as advertising has become more difficult -- more fragmented -- that word-of-mouth is becoming even more and more important, and is rapidly becoming the most effective way to reach consumers," said Jeff Weedman, the P&G marketing executive spearheading the program.

P&G has plenty of evidence to support its trust in the power of viral marketing. According to a recent survey by the Promotion Marketing Association, 48.5% of consumers cite word-of-mouth as the most important factor influencing their purchase decisions, compared to only 27% that pointed to advertising. Word-of-mouth referrals play a significantly more important role in the consumer's decision-making process than it did just a generation ago. A survey done by Roper Research found that consumers are 25% more likely to be influenced by word-of-mouth when buying cars today than they were in 1977.

A Game of Chicken

The Subservient Chicken campaign from Burger King takes a somewhat different approach to viral marketing. Rather than sending material to people, it relies on an interactive website that is so compelling people come to it.

Burger King was lagging far behind McDonald's in 2004, and in danger of being passed by Wendy's for second place in the quick serve restaurant industry. Hoping to make inroads with customers who wanted something other than a burger, Burger King came out with the Tender Crisp Chicken Sandwich in March to replace its lagging Original Chicken Sandwich.

Instead of turning to television to introduce this critically important product, Burger King unveiled a new, and very different website, called Subservient Chicken. The site features an actor dressed in a chicken outfit who will respond to typed in commands from visitors. Although the chicken's actions have all been prerecorded, the site has the look and feel of a web cam, making it seems as if the chicken is following commands in real time.

The Subservient Chicken site, which cost relatively little to make, resonated with the chain's core market of young men. Within a month, it registered 20 million hits. By the end of nine months, 385 million people had come to the site, spending an average of six minutes. Compare this to a 30-second Super Bowl spot, which costs $2.4 million and was seen by 133 million people.

Traffic to the website apparently drove sales. About a month after Tender Crisp Chicken was introduced, sales of the sandwich were increasing at a rate of 9% a week. For the year, Burger King's overall sales jumped 18.2%, compared to 11.3% for McDonald's. In 2005, Burger King's sales increased 10.6%, and the company enjoyed its best same-store sales increase in 21 years.

More Emphasis On Point-Of-Sale Marketing

The decline of mass media advertising has also led many companies to place more emphasis on communicating with customers at the point of sale by using digital signage, intelligent receipts and closed circuit videos. In-store marketing offers the distinct advantage of cutting through advertising clutter, since a company can be assured of reaching customers who are already interested in its products and services. Click here to learn more about SiteWatch Intelligent Receipt Messaging.

According to J. Walker Smith, president of the highly regarded Yankelovich market research firm, the average American now encounters 3,500 to 5,000 marketing messages a day, compared to a daily dose of 500 to 2,000 messages in the 1970s. "There are so many ads out there that consumers actively avoid commercials today to an extent never before realized," said Dan Howard, a marketing expert at Southern Methodist University. "No matter how many more ads we put out there it's not going to work, because it's not registering."

This marketing glut has let many of the biggest advertisers to turn inward, and focus more on communicating with proven customers. Wal-Mart, for example, has upgraded its in-store television network, which captures an estimated 130 million viewers at its 2,600 sites.

In-store videos have proven to be so successful that many marketers are buying ads on other companies' videos, even if they are in seemingly unrelated industries. For example, as noted earlier in this paper, McDonald's is advertising on Foot Locker's in-store video network.

Intelligent receipts provide similar opportunities for cross marketing. A carwash, for example, can give customers receipts good for a discount at an auto dealer's lube center. The dealer, in turn, can give new vehicle owners a prepaid card for a carwash. New car owners are, after all, more likely to be interested in keeping their vehicles looking good, which makes them better carwash customers. And in today's micro culture market, reaching small tightly focused groups of customers with a compelling message is often the most effective way to advertise, even if it doesn't involve placing a paid ad in the media.