Tag Archive for Advertising

How Much Do We Really Spend?

Most of what we read about marketing is about how to make the most of social networks or how to optimize something. While staying current with technology and using available resources to connect with your customers is very important, most marketers still are not spending a majority of their advertising budgets online, even if your reading tells you a different story.

Marketing Experiments shared some data published by Forrester Research that showed.

2009 2010 2011 2012 2013 2014
Total Interactive Marketing Spend (Mobile, Social, Email, Display, Search) In US$ Millions $25,577 $29,012 $34,077 $40,306 $47,378 $54,956
Percent of All Advertising Spending 12% 13% 15% 17% 19% 21%

Looking into the future, offline and traditional media, including direct mail, will still be a very important part of marketing strategy.

Advertising is Still Important

The graphic from the previous post about Word of Mouth showed that advertising, including direct mail, is the most important factor of consumer purchasing decisions during the “initial consideration” phase of the purchase decision making process.

Consumers “pull” information to them later in the purchase decision process.

How can we help you use direct mail to help you build your brand or stimulate demand?

Word of Mouth Matters

Word of mouth is the primary factor behind 20 to 50 percent of all purchasing decisions.

The power of word of mouth is greatest when consumers are buying a product for the first time or when products are relatively expensive, these factors tend to make people conduct more research, seek more trusted opinions, and take longer to think about purchases.

The Harvard Business Review summarized research from the McKinsey Quarterly that indicates that in developed markets, word of mouth has its biggest impact when consumers decide which products to consider and when they’re actively evaluating products.

Spray and Pray??

BNET posted an article titled “Spray and Pray: Why Does Anyone Still Buy Advertising?”

This stirs many controversial thoughts. While we agree with the line of thinking about the problems with many traditional forms of advertising that offer no accountability. We don’t want direct mail to get lumped into being called “spray and pray”, spraying money around and praying it works. Direct mail and direct marketing offer targeting and accountability.

We profoundly disagree with the author’s total, complete faith in online advertising. The author also stated “Advertisers love to claim that the decline in advertising is due to the recession.” What about the thought that the recovery is taking longer than it should because we are relying on new media to generate new business? Which came first the recession or the absolute dependence on a media that can so easily be deleted, ignored or closed with a click? There is a lot of science that supports the effectiveness of things that can be touched and felt.

We agree that much of the investment made in email and some other forms of electronic and Internet marketing feel so affordable. The costs are so negligible. Can you build or rebuild your business with such a small receptive audience to your offer?

How Much Should You Spend?

Business Week published an article titled, “What Should You Spend on Advertising?” Instead of seeking a rational answer to the question, many just ignore it and hope it will go away.

Most emerging companies focus most of their time and talents on meeting the needs of customers, which is a great strategy. If they don’t take care of the customers they already have, everything else will go away. However, many neglect the function of winning customers in the first place. Others naively assume that if they simply provide excellent products or services, their reputation will precede them. Call it the “build a better mousetrap” syndrome. But the world has too many other things to do with its time than beat a path to your door. That means you need to structure your profit-and-loss statement in such a way that you can profitably allocate a reasonable percentage of your revenue to marketing.

The Big Question: How Much?

While there is no definitive answer as to how much any business should spend on marketing, there are general guidelines any company can use to develop a formula that works for them.

Your first step should be to try to find out what the advertising-to-sales ratio typically is in your field. Public companies in your industry may give a figure for their marketing spending in their financial statements (found in their annual reports). With a simple calculation, you can figure out what percentage of their overall revenue that represents. If you can’t find any public companies that seem similar enough to yours, you might want to start at 5% and then adjust your projected spending up or down based on the size of your market, the cost of media, what you can learn about how much your competitors are spending, and the speed at which you’d like to grow.

You’ll also need to ask yourself if your business is built to leverage volume or to leverage margin. Even within industries, there are differences in the marketing spend of volume-driven companies compared with margin-driven ones. Volume-driven companies tend to spend a tiny percentage of sales on marketing, in part because their large revenues enable small contributions to add up fast, and in part because of the margin pressures they face in having to compete with other high volume companies. By contrast, margin-driven companies tend to spend a larger percentage of sales on marketing: They have room in their margins to afford it, and they’re often working from a smaller revenue base.

The retail industry provides some good examples. While Wal-Mart might spend a meager 0.4% of sales on advertising, the sheer size of the company turns that tiny percentage into a significant budget. Wal-Mart’s nominally higher-margin competitor, Target, spends closer to 2% of its sales on advertising, while Best Buy, as a specialty retailer, spends upwards of 3%. Finally, more upscale stores like Macy’s typically spend close to 5%.

The same kind of ratios can be seen in the car industry (automakers’ generally spend 2.5% to 3.5% of revenue on marketing), liquor (5.5% to 7.5%), and packaged goods (4% to 10%).

If you’re in a services business, you might want to bump your starting point higher than 5%.

Marketing, Not Just Advertising

It’s important to make a qualification here. Giant consumer corporations such as automakers, packaged food manufacturers, and retail chains spend a huge percentage of their marketing dollars on paid media advertising, the most visible (and expensive) tool in the marketing toolbox. Depending on the size of your company and the business you’re in, advertising might not be the right (and certainly not the only) tool for you.

For a variety of reasons, media advertising might not be right for your company either, but direct mail, events, vehicle wraps, point-of-sale displays, or other tactics certainly could be.

The important thing is intentionally and deliberately to set aside some rational percentage of your sales to get out there. That way, the question you have to answer isn’t “How much should we spend?” but rather, “How do we spend most effectively?”

The “WOW!” Number

A recent Harvard Business Review Blog asked, “What Surprising Number Will Change Your Business?”

Numbers are the universal language of business. We use them to win approval for product introductions, to attract investors for our startup ideas, to make the case for expanding into new markets or entering new categories. In other words, numbers, when used well, tell a compelling story.

Marketing and advertising is about big ideas. But it is also very much about numbers: budgets, ratings, impressions, ROI. Which brings us to the search for the “Wow!” Number, and why one piece of data may be worth a thousand words.

Here are a few such numbers.

  • 70% of teens who abuse prescription drugs get them from home.
  • 80% of women plan to exclusively breastfeed; only 20% actually do.
  • Many are in front of whiteboards 4 hours a day, but only use them for 4 minutes.
  • 80% of people age 45+ consider changing careers; only 6% actually do.

Why do these numbers tell a story? Because they’re simple and easy to understand. Because they’re human and easily relatable. Because they surprise us, and/or capture the gap between intentions and actions.

And how do you get to such numbers? Juxtapose: “Put related numbers together to create new information.” Try different contexts: “What’s the social angle? The green angle? Put it in terms of time, or length, or volume.” Turn them over: “2% one way might not be as interesting as 98% the other way.”

However you choose to rethink your approach to numbers, it’s an important way to address a huge missed opportunity. Business isn’t just a battle of products and services. It’s a battle of ideas about priorities, opportunities, values, and value. Ultimately, those competing ideas get reduced to competing numbers. So, if you can arrive at numbers that matter, you’ve got a better chance at winning the battle of ideas.

We have told you some surprising numbers about mail in the last few months:

More than 70% of Gen Yers (born 1977-1994) and Gen Xers (born 1965-1976) sort their mail immediately

76% of internet users were directly influenced to buy an item or service thanks to direct mail

78% of email recipients do not open the message, so that means that 94.1% of email recipients are not clicking through to landing page

Simplicity, Elegance and Impact in Design

In a recent BNET post about ways to improve presentations, the author, Sean Silverthorne, looked to Steve Jobs for inspiration.

This got us thinking about ways to improve overall marketing messages and especially direct mail messages.

To translate some of those ideas:

Color: What about a clean use of signature color? Can interest be heightened with simplicity?

Space: Give important facts and information lots of space.

Images: A beautiful image can often deliver the message.

Does this inspire some new ideas for your next mail piece? Talk to us and see if we can help.

Direct Mail Works

Smart Money Magazine published an article in the June issue with the title “Why Your Mailbox Runneth Over”. The article stated that charities still rely heavily on direct mail as a fund-raising tool. Nonprofits spent $1.8 billion on direct-mail solicitations in 2009.

Pasadena, Calif., marketing consultancy Russ Reid Co. found that fund-raising campaigns with 12 to 18 mailings a year were twice as profitable as those based on just three to six mailings. Donors are surprised when they receive a rapid request for another gift after making a first time donation. The tactic is effective because donors feel the strongest connection with a nonprofit immediately after their first donation.

We can help you put these findings to work for you in your profit or non-profit organization. Even if people say they only want to hear from you a few times a year, they may respond much more when you triple or quadruple the number of times your customers hear from you. What about a plan to send something to your customers very soon after their first purchase? Can we help you with a multichannel communication plan, integrating direct mail and email?

The Future of Advertising Agencies

Forrester is selling a report titled, “The Future Of Agency Relationships” with a subtitle of “Marketers Need To Lead Agency Change In The Adaptive Marketing Era”.

The report encourages marketing leaders to re-evaluate their relationships with advertising agencies and in the process suggest that agencies should continually reinvent themselves to serve their clients. They suggest that we are entering an “Adaptive Marketing” era and must quickly adapt to changes in marketing strategy, media, technology, and society. In this era, mass media may no longer be the foundation of marketing communication, forcing yet more changes in the expectations of what marketing agencies can and should deliver.

Dean’s Mailing has many ideas and resources to help you use technology to be found and communicate with your customers and likely buyers in a way that they will appreciate and not view as an annoyance.

Media Choices

The multitude of media choices available to target and deliver  messages is amazing. And there are more options headed our way. This means that readers are strapped for time and bombarded with marketing communications, great writing alone probably won’t get your messages opened and read. Pat Friesen offered some understanding of how to deliver the message at the right time and in the right place in Target Marketing Magazine.

Tips for delivering maximum impact from a direct marketing writer.

• Don’t be overwhelmed by choices. Remember what’s worked in the past, and test new options that make strategic sense for reaching your audience and meeting your business objectives.

• Apply common sense and basic direct marketing principles. Measure and evaluate results, including initial response, closure rates, average order size (dollars and units), abandon/cancellation rates, lifetime value, etc. Remember, direct marketers track and measure the level of response.

• Cheaper on the front end isn’t necessarily more cost-effective on the back end. Track, measure and compare results.

• Not all media is direct response media … but that doesn’t mean you shouldn’t use it. Public relations, special events, and social media are marketing tools with the power to influence buying decisions. Use them accordingly.

• Don’t put all your eggs in one basket. Even with a successful 15 percent to 20 percent e-mail open rate, you still are not reaching 80 percent to 85 percent of your highly qualified buyers. Common sense dictates using both e-mail and postal mail to maximize results.

• Just because you know your offer is on your Web site or featured in your organization’s magazine, that doesn’t mean your customer knows it. A targeted phone call, e-mail, letter or even a postcard may be appropriate to communicate your offer.

• Not all messages are appropriate for all media. A letter still looks more personal, more valuable and more confidential than e-mail. It’s also less easily “trashed” by mistake or intentionally. If you offer financial services or other products of personal importance (e.g., legal, medical, upscale travel), don’t forgo postal mail for e-mail without testing.

• Put your message with a measurable call to action on your shipping box or packing materials. Create a product insert (not package) that encourages a second purchase. Be creative, be inventive and put your message in multiple places where your customer will see it.

• Some market segments respond better to specific types of media than others. For example, mature audiences 75-plus years old remain more comfortable with postal mail even if they have e-mail addresses.

• Test. Studies, case histories and anecdotal reports confirm that marketers who are most successful across the board using all types of media follow the direct marketer’s mantra of test, test, test.

• Don’t take a message written for one medium and plop it into another without careful review. Be aware that e-newsletters are different than ink-on-paper newsletters. Web ads are read differently than space ads. Readers’ expectations after opening an e-mail are different than after pulling a letter out of an envelope.

• All messages (no matter which type of media delivers them) have hot spots. Know where they are, and use them to your advantage.

• Consider the appropriateness of your media. The media you use for prospecting may not be the same as you use for communicating with your customers.

• Use different media to communicate with different customer segments. Just because you send a personal First Class letter with a 44-cent stamp to the top 20 percent of your customers who generate 80 percent of your sales doesn’t mean you have to mail First Class letters to all your customers.

• Save money; prospect within your own database. Cross-sell, upgrade, reactivate. They are very cost-effective ways to generate new business.

• If you limit yourself to using only one medium, you limit your opportunity for success. The more places consumers see you and the more ways they hear from you, the better they know you, the more they like you and the better they trust you.

• When your contact strategy includes a series of messages, have a strategy for your mix of media. Do what is appropriate for your message, audience and business objective. It could be an initial phone call, followed by a personal letter, then e-mail communications.

• No matter how cheap it is, media isn’t a good investment if it doesn’t generate the cost-effective results you need. Weigh the pros and cons of any media choice including cost, open rates, security concerns, deliverability rates, recipients’ perceptions of the medium, how it supports your brand, etc.

• Timing is as important as the media and message. Factor in time of delivery, holidays, how soon is too soon and how often is too often.