13: Death of Advertising--Predictive and Precognitive Sales and Marketing
The mass-media approach to marketing is broken, yet is still being taught at most business schools, and the marketing departments of financial service companies are staffed and led by professionals who are accustomed to the old way of marketing, and are clinging to it in spite of its diminishing effectiveness.
The media-switch from traditional vehicles to new media is clear: in 2008, the Internet surpassed all media as the primary source for national and international news. IT's noted that magazines have also been hit hard, though many have sought to augment, or replace, their print publications with online editions.
Book sales are also on the decline, though e-books are still fairly primitive and do not pose a significant threat so far due to the primitive nature of the technology. (EN: this book was written when the "kindle" was the leading e-book reader, and the iPad had not been introduced. However, I think this is irrelevant to the topic of marketing - while books are a consumer choice for reading material, it is generally a different kind of reading, and there has never been much advertising in books.)
It's also noted that, in addition to changing formats, consumers are turning to new sources. They are abandoning the traditional media, created by professionals, for user-generated content (blogs, discussion groups, and other sites). Traditional media are attempting to remain relevant by permitting user-generated content, primarily commentary on articles. However, they are counting on diminishing brand equity: the public has lost faith in the professionalism and objectivity of the "mass media" and is increasingly considering other sources as more timely and reliable.
The trend in media-switching is predicted to become more pronounced. Whereas older generations are relatively slow to change their habits from paper to digital media, and has to learn to trust bloggers over professional journalists, the younger generations never developed a preference for paper and have always regarded traditional outlets with suspicion - so electronic media is their first choice, with which they are familiar, rather than a "new" phenomenon that requires a change in habits.
In 2008-2009, 53 regional newspapers folded in the UK, and in the US, 20 of the top 25 papers have reported declining readership and revenue, and are closing bureau offices. In both the UK and US, television advertising revenue is suffering double-digit declines. While traditional media have been dismissive of the Internet, they are now in a state of abject panic.
The author also cites the tendency of consumers to avoid advertising in traditional media. Commercial-free satellite radio has eaten into the audience of traditional radio, and more consumers are using DVR units to time-shift their television viewing and fast-forward through advertisements.
Ad spending on traditional media has not shown much of a decline, as many traditional media merely raised prices to compensate for fewer clients, but especially in the wake of the global recession, advertisers are beginning to reconsider their media mix with an eye toward channels that give them better returns. In September 2009, the Internet Advertising Bureau announced that advertisers in the UK spent more on the Internet than on television, for the fist time - and in the US, Internet surpassed television in 2007.
Even direct mail is suffering, given the high cost and low response-rate as compared to Internet adceertising,. From 2007 to 2009, direct mail spending decreased by 32%, and is expected to decline another 38% by 2011.
The New-New Media
While references to "new media" generally pertain to the Internet, it's nearing 20 years in existence and is no longer a fringe medium, but is used by the majority of the population in most developed economies. And its audience and ad-spend contends with the traditional media (only when all traditional channels are aggregated against the Internet does it seem small by comparison).
The real "new media" is the mobile channel, which is in its infancy but is expected to account for at least 10% of "digital ad spend" in the next five years. However, there is a lot of disagreement in the channel, and the truth lies between the extremes.
In spite of the high adoption rate of mobile devices, there still is not much ad-spend in this channel. This is largely due to consumer resistance. While protest over Internet advertising has largely died down (customers have come to accept spam and learned to ignore banner ads), they remain fiercely opposed to receiving advertising through the mobile channel.
(EN: An interesting parallel is that objection to Internet advertising was strongest when users paid for bandwidth - every image, and every e-mail, ate into their bandwidth quota, and they had the sense that advertising was costing them money. After most ISPs switched to a flat-fee structure, objection to advertising died down. My sense is the same may be true of the mobile channel: when there is no cost associated with receiving ads - bandwidth and messaging quotas are lifted - the objections may abate. However, I'm not convinced they will entirely disappear, as the mobile device is similar to the telephone, and consumers aren't OK with telemarketers even though inbound calls cost them no money.)
"In any case," the author suggest, "mobile marketing is sure to be the next area of focus" for advertisers.
Consumer Avoidance
Traditional measures of advertising focused on audience: the number of people who see an ad, and the more frequency they see it, the greater the chance that the customer will be able to recall your brand when making a decision to purchase, and the greater the chance they will purchase your brand.
(EN: it's worth noting that this paradigm has been accepted, even though it's repeatedly proven to be false. While there have been some psychological theories of operant conditioning, they have largely been based on animal studies in a controlled environment, and similar results have not been produced in human trials within a reliable level of statistical confidence. Even so, the theories have been largely accepted, for lack of any better or more compelling method of justifying or measuring advertising.)
It's also noted that the research that supports the traditional model was largely conducted when audiences received few commercial messages. But over the years, the number of advertising messages that the average citizen seeks has exploded - to the point that people are constantly assaulted by marketing, and have taken active steps to avoid it: pop-up blockers, call screening, do-not-call lists, VCR/DVR fast-forwarding, use of personal music players rather than radio, etc.
Advertisers are acknowledging that consumers seek to avoid advertising, and are seeking more subtle ways to get their brand in front of the customer: sponsorships and product placement are cited as examples. These methods embed advertising in the context of media (rather than as a separate "commercial" that the user can skip).
The author predicts that the days of traditional advertising are numbered - companies simply will not pay for advertisements that don't reach an audience. He also notes that this will have a detrimental effect on the media: as advertisers turn away, local and regional TC stations, radio stations, and newspapers will lose revenue, and many will not survive.
(EN: It's also worth noting that traditional advertising was largely based on supposition. The Internet can measure, with a high level of reliability, the number of users who saw an ad, clicked the ad, and bought a product - this has never been possible with traditional media, which generally assumed that any increase in sales during a period of time was a direct result of any advertising that took place during that same period - a very specious conclusion.)
Not Just for Kids
The author addresses the notion that new media - mobile and internet - are "just for kids" and just for frivolous purposes, and that older and more affluent customers don't use these channel for anything serious. In a word: wrong.
High net-worth individuals, the most desirable segment for financial service, are generally professional people who are pressed for time. They are intelligent and savvy, tech-friendly, and are rapid adopters of technology that will save them time and money,
Turning to statistics: Neilsen and Pew research firms find that over 60% of adults age 55-65 are regular Internet users and prefer Internet banking over branch. Turning the statistic around, over 68% of internet banking users are in the 30-55 age bracket.
(EN: Anecdotally, it's worth noting that cell phones and portable computers didn't start of as being "for kids," but for on-the-go professionals. These devices were popular with attorneys and executives long before they fell into the hands of teenagers.)
When Push Comes to Shove
Traditional marketing favors the "push" technique - inflicting unwanted messages on an unwilling audience in hopes that some of them will be receptive enough to make a purchase, and hoping that the rest are not offended.
Because of the overuse of push messaging, customers who are bombarded by a constant stream of "pushy" advertising messages find them annoying, and even offensive, and advertisers who continue to use this tactic are finding that, for every recipient who becomes more willing to buy as a result of seeing an advertisement, there are several others who become likely to avoid doing business with you as a result of the offensive intrusion.
It's noted that banks, by virtue of their existing relationship with customers, do not need to go out of their way to market to current customers: an individual who has a bank account visits their vendor's Web site an average of ten times per week. This provides ample opportunity to communicate to them and cross-market or up-sell in a non-intrusive way, and to use the information available (transactions) to make more intelligent decisions about marketing to customers.
As an aside, the author also mentions the "podcast" of "web conference" as a way to do needs-based marketing. Not only does it enable the company to appear tech-savvy, but customers are more receptive to watching a free seminar about saving for retirement than they would be to getting an advertisement to open an IRA account.
Returning to "pushy" sales tactics, not only does this alienate the customer who does not purchase, but it often damages the relationship with customers who do buy. If you seek to take advantage of the customer's willingness to buy a product just to terminate the encounter (which works), the customer often experiences buyer's remorse: they feel they were pushed into buying, which makes them resentful. This means that the bank gets good "numbers" in the immediate sales, but increases churn as customers cancel these products later (and decreased revenue as they decide to close other accounts, and take their business elsewhere).
A "good sale" results in a customer who feels that the company has helped them by providing a product that serves their needs. While this produces lower sales numbers than pushier methods, it results in customers who keep their accounts longer, and are open to doing additional business with the firm.
Companies that seek to establish positive long-term relationships with customers, increasing lifetime value, products per household, and share of wallet, should therefore reconsider whether the short-term gains of "push" selling are worth the damage to the long-term goals.
One thing that banks can do, right away, is to seek to reach customers at the "point of impact" - which is different than the "point of sale" in that it involves the customer's use of a product after they have purchased it. This is especially true of banking products, such as a payment card that will be used constantly, a brokerage account that is used for constant trading, a checking account that will e accessed via ATM, or even a loan that involves monthly statements and payments. Banks should seek to develop a list of all the points of impact, and determine where opportunities to improve customer experience exist.
Another opportunity, which will require a bit more effort, is to employee customer analytics to improve the content and timing of communications. One example is event-based marketing, which considers unusual transactions as a "flag" that identifies a possible opportunity. For example, a large deposit might indicate an appropriate time to discuss investments or financial planning, or a large withdrawal might indicate an appropriate time to discuss consumer loans.