Marketing

One of the common questions people ask when they learn I am in the advertising business is “how much did that commercial cost to produce”. While the price of a production for a commercial varies widely from thousands to millions of dollars, here are the most recent stats on the average budgets to produce nationally-run commercials according the the 4A’s (the advertising industry’s main trade group).

Overall, the average production budget for a thirty second commercial (not including agency mark-ups or any other kind of agency commission – which would normally add roughly another 20%) was $302,000.  This does also not include any kind of celebrity talent.  Budgets also vary tremendously based on the product catagory.  For instance, the average budget for a car commercial was $426,000, while office equipment and computer commercials were significantly less at $231,000.   As we might expect, beer commercials top the list with average budgets of $781,000.

Here’s an interesting stat on the state of cable television. In the US, over 800,000 households that previously had subscribed to cable TV have “cut the cord” and cancelled. Of course, that might seem insignificant compared to the 100 million households that still subscribe, but my guess is that this is only the beginning. We are in the midst of a profound change in the way we watch and interact with television, and the cable providers and television programmers need to change their model to prosper in the long run.

I pay almost $140 a month to receive premium cable that delivers the ten or fifteen channels I regularly watch, and the other hundred and thirty or so that I ignore. Some consumers are choosing to drastically reduce their bill while still receiving almost all the entertainment. The convergence of television and the web, easy downloading, efficient DVD delivery systems, and an increasing amount of content have made it easier than ever before.

• Buy an inexpensive antenna, and you can receive many basic stations for free. But this is not the snowy on-air signal we hated when we were growing up – now it’s in high def! One time cost for the antenna – $20 to $80.

• Buy a Tivo, or other Blockbuster, Netflix and Amazon Unboxed-equipped device that can accept downloads. You might already own one that has this capability. Samsung, LG, and even Wii now allow you to download for free from these and more providers. As the Apple iPad expands, consumers will also get more comfortable paying download fees for video, and I suspect the underlooked Apple TV will grow in popularity.  Cost for the hardware if you don’t own the right equipment – $200 and up.

• Sign up for a download provider. My favorite is Netflix. For as little as $9.00 a month you can get DVDs in the mail, and unlimited downloads to your TV. You can choose from thousands of movies and full television series. So while you won’t be watching “24”, Desperate Housewives, or The Tudors on the same night they are released, you can watch them a few months later on your schedule for a fraction of the price.

• Connect your computer into your television to watch other network episodes through Hulu, ABC.com, and the other online sites that allow you access to all kinds of programming.

So for an investment of a few hundred dollars at the most, and monthly fees of less than ten bucks a month, plus maybe another ten or fifteen dollars for download rentals, you can essentially create your own little personal television network, programmed with the programming you want to watch, and on your schedule.

Now I am not predicting this will lead to the immediate demise of cable television. I’m too lazy to cancel cable, and there are features I still enjoy. But if I was a cash-strapped, technologically adept young person I probably would not be paying for cable, just as I would not be paying for a phone land line. And as that generation ages, they will have a different attitude towards cable TV that advertisers, programmers, networks, and cable providers need meet.

Over the last few years there has been a lot of angst in the advertising industry over the use of DVRs (digital video recorders). Quite naturally, advertisers assumed that given the opportunity, viewers will zap through ads. On the surface, research seems to support this. As of the last Nielsen survey in 2009, approximately 30% of US households owned DVRs, and they estimate that approximately 68% of DVR owners use the technology to skip ads.

But look a little deeper and you can draw different conclusions. A Millward Brown survey of 1000 US households of which 400 had DVRS showed no decrease in recall or prompted recognition of commercials among the DVR users in comparison to non-DVR households. Researchers attribute this to the fact that if you are zapping through a commercial you actually have to pay closer attention to it to make sure you don’t speed through programming.

As I dedicated DVR user I can attest to this fact. While I zap most commercials, I am watching them carefully, albeit at high speed. And when I see a product or commercial I am interested in, I stop and watch the commercial carefully – sometimes twice.

My admittedly biased but logical view of DVRs would lead me to the conclusion that direct response advertising bodes much better in an “ad zapping” environment, for several different reasons:

1. The highly graphic nature of DRTV, and the modular design of most good direct response is much more understandable in fast forward mode than most traditional brand advertising. Testimonials with graphic support, before and after shots, call to actions, and clear demonstrations can still be comprehended at high speeds. High concept brand advertising does fare well in comparison.
2. Viewers watch DRTV with a much higher level of involvement. Unlike watching a traditional commercial it is not a passive activity. You are ultimately expected to take action. So the DRTV viewer typically has some level of interest in the product and is interested to learn more.
3. DRTV formats are longer, so even if you are zapping you are carefully watching a longer message.

Per my final point, I also strongly believe that consumers want to be sold to, and that is why DRTV works. At our agency we know from experience that if you list an infomercial in the program guide the results go up. Consumers are tuning in when they see a Murad, or Bare Minerals, or a Bowflex ad because they want to know more about the product. If used properly the DVR many ultimately be a asset to DRTV because it would allow consumers to watch the sales message they want to see on their own time schedule.

I thought that the government sending a letter telling us they were sending us a letter was the pinnacle of Government waste – until a reader wrote to alert me that The Census Bureau was actually sponsoring a Nascar car – at a cost of $1.2 million for three races.  I assumed this was a joke, as those of us in the advertising business know that these kinds of sponsorships are a complete waste of money for most advertisers, but sure enough, here it is!

Accordingly, I would like to suggest a few other  ways to advertise the Census that make as much sense as sponsoring Nascar:

• Hand out free “Census 2010″ doggie poop bags in all local parks.
• Make Census 2010 the official sponsor of the Little League World Series.
• Census 2010 gum.
• Sponsor a Census 2010 dance team on Dancing With The Stars – Dick Cheney and Cher.
• Make Cyndi Lauper’s charity on The Celebrity Apprentice the 2010 Census.
• Free Census 2010 tattoos on Fridays.
• A special edition Census 2010 Toyota Prius.
• A Census 2010 Superhero movie starring Robert Downy Jr.
• Put the guy that runs the Census on Undercover Boss.
• The Census 2010 Happy Meal at McDonalds.

One of The Bizzy Life’s favorite lawyers, Jeff Merrick, has a contribution today that has nothing to do with legal issues, but instead discusses concerts, online marketing, Keb Mo, and your favorite Los Lonely Boy’s song.

Los Lonely Boys & Keb’ Mo’ Teachings on Customer-Centered Business

by Jeff Merrick

Customer testimonials online sway buying decisions, and those “billboards” last for years. That’s why, in this age of Web 2.0, it is more important than ever to put your customers first if you want additional customers in the future. Los Lonely Boys and Keb’ Mo’ reinforced this message to me with their contrasting approaches to concerts performed months apart at the Aladdin Theater in Portland, Oregon.

Keb’ Mo’ is a blues musician with a strong fan base. He started his concert promptly at 8:00 p.m. with one of his most popular songs. His band played with professional precision, accurately recreating the recordings that brought people out on a work night. Sound quality was excellent. Keb’ displayed some of his good personality between songs. Enough so the fans felt like we were appreciated, but not so much to distract from the music.

Following the concert, TicketMaster E-mailed requests for reviews. People raved. Personally, I would see Keb’ Mo again in an instant. Additionally, people posted to their networks on Facebook and MySpace.

On a work night last week, we attended a concert by Los Lonely Boys. The group is best known for a song called, “Heaven,” a melodic ballad with a good beat that displays a lovely harmony from three brothers singing together. Two lesser-known acts delayed the start time from 8:00 p.m. to about 9:40 p.m.

The brothers played with a lack of precision: it seemed like they were a ½-beat apart on everything. Sound quality was tinny. When they alluded to getting munchies after being with Willie Nelson in times past, I wondered if they had smoked away the last the 1 hour and 40 minutes. When they played kazoos — before getting to any recognizable hit—Los Lonely Boys had lost the audience, despite the fact that they seemed to be enjoying themselves.

I was itching to leave 25 minutes before the people in front of us left. We left a couple of songs later.

Los Lonely Boys is unlikely to build a following with that performance and the negative buzz that followed. One thread read as follows:

J: Last night, in Portland, Los Lonely Boys concert was not very good.

K: Really? I’m sorry. Is that because they only have one song?

J: Yes, and I thought we were going to die before they ever got to “Heaven.”

That “billboard” is out there. It was seen by many people, and may be seen for a long time.

So, the lesson taught by the tale of two bands: treat every customer like a broadcast journalist, because, these days, we all are.

About the Author – Jeff Merrick is an attorney practicing in Lake Oswego, Oregon. Having worked at big-time firms, he now practices on his own, helping people who need to sue insurance companies and others who are trying to screw them.

After wiping out most of their retail competitors, Walmart has been steadily moving towards controlling the brands they sell. Last week they eliminated the Glad and Hefty brands from their food storage shelves, consolidating to their fast-growing private label brand, Great Value, and the Ziplock brand.

Many anticipate that this will be a sign of things to come across many product catagories, with Walmart consolidating to fewer brands and really promoting their own more profitable private label brands.

Walmart is such a Goliath that these kind of moves could have tremendous consequences for many manufacturers.  This could mean the decline of many major American companies, but you can’t really blame Walmart for the move.  Consumers probably don’t need  – or want to choose from dozens of plastic bag options. Slimming SKUs in favor of more profitable and desireable products seems to make sense in many product catagories for retailers.

But this also points to the need for manufacturers to come up with design and marketing efforts that allow them to control their own destinies, as opposed to just being a low-cost house manufacturer for major retailers. Walmart’s mantra of the lowest price certainly resonates with a huge group of consumers, but a manufacturer that sells on price alone remains continually vunerable.  They also need to sell innovation – features and benefits that imbed their product in consumers’ minds and make them a destination brand, with advertising and marketing that reflects this differentiation.

If you are in the advertising business – or many other industries dominated by large clients – there is nothing worse than having your account put up for review – especially if you were under the impression your relationship was solid and wonderful.

I’ve taken the liberty of reprinting an excerpt from today’s AdAge.com, written by James P. Othmer, and taken from his book Adland, that I think adequately describes the emotion of the review:

Excerpt from Adland

Being put up for review is akin to having your spouse announce in front of everyone you know that he or she no longer loves you and for the next several months he or she will be seeing other people — dozens of smarter, younger, cooler people, many of whom, by the way, you know quite well — and then having all sorts of kinky, experimental sex with the most interesting and promising of them, probably no more than six, often doing many of the things that you may have once suggested but were never allowed to.

Sometimes during this process your spouse will describe his or her ongoing antics in excruciating detail for you. Sometimes you’ll simply read a steamy, anonymous, insider’s account of it in the press. And then, after up to six months of this, six months of holding your tongue and continuing to do all of the dishes and dirty laundry and seeing to the upkeep of the home you once shared, the children that mean so much to you, you will finally get your chance to say — after I’ve given you every ounce of my energy and passion for the last xx years, after trying to rekindle better times with romantic weekends and couple’s counseling, after he or she has slept or flirted with just about every one of your friends and neighbors, not to mention several total strangers — “Here’s how I’ve changed, sweetheart, here’s why and the extent to which I’m willing to publicly humiliate myself to win you back.”
At that point, if you were the client (or spouse) would you want to take you back?

I was a little slow to make the transistion to a smart phone (a web enabled touch screen cell phone), but since I bought my iPhone just over a year ago it has become the most useful and essential piece of technology I own.  And I am certainly not alone. The statistics on Smart Phone adoption are staggering:

• In one year Smart Phone ownership has tripled!  24 million Americans now own one.
• By the end of 2010 it is estimated that over 50% of the population will have shifted to a Smart Phone – over 150 million users.

This is impressive when compared to almost any technological advancement in history.  And it will certainly signal a major shift in advertising.  For the first time in history people will carry a device with them at almost all times that knows the following:

•  Where they are.
• What they like to buy, watch, eat, drink – all their buying habits.
• What they are looking for.
• Who they like to hang out with.
• What the weather is like at their current location.

In fact, the amount of info your phone potentially knows about you could be frightening and poses huge privacy risks.  But the upside if it can be managed is tremendous user convenience.  And for the advertising industry, it will be monumental – bigger than the invention of television and radio combined.

One of the common questions I am asked is “how much did that commercial I saw last night cost?” Though the price of media fluctuates wildly, and time is always subject to heavy negotiation, here is a snapshot of some fairly recent pricing for media in big name time slots (based on numbers from Ad Age) -

• Spot on Sunday Night Football – $339,700 (the most expensive slot on television)
• Spot on Grey’s Anatomy – $240,462
• Spot on Desperate Housewives – $228,851
• Spot on Two And A Half Men – $226,635
• Spot on The Family Guy – $214,740

The most expensive slot for a new show goes to ABC’s Flash Forward (one of my favorites of the new season), which goes for $175,724.  Perhaps the biggest bust of the new season is The Leno Show.  NBC was banking on the fact that they would come out dollars ahead by discontinuing the production of expensive dramas, and instead put the cheap to produce Leno show in the 10 pm slot.   However, the loss of advertising revenue will probably cancel out any savings given its dismal performance.  A slot in Leno now goes for anywhere from $48,000 to $65,ooo – significantly less than the nighttime dramas generate.  Leno is also causing major issues for NBC affiliates.  As viewership in the 10 pm slot has dropped, so has the viewership for local news programs that follow Leno, which really hurts affiliate profits.

The above numbers don’t include the cost of creative and production for the commercials.  The average production budget for a nationally-broadcast commercial is somewhere in the $400,000 range, but depending on the creative can easily run into the millions of dollars.  And those numbers don’t include the cost of talent, which can add several hundred of thousands to several million dollars a year.

I published an article this week in Advertising Age on the lessons traditional advertisers can learn from television pitchman Billy Mays’ career.  http://adage.com/columns/article?article_id=138590