Advertising

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.

More input from the recent New York advertising conference (see last blog entry for Part One)…

The most interesting panel I observed at the BMO Thought Leaders Conference was titled “The Agency of the Future”.  CEO’s from large agencies around the country – many of them divisions of the big public agencies – layed out their vision of how advertising agencies will begin to look in the very near future.  A few bullet points from the discussion:

• Accountability in advertising will continue to be the mantra.
• To this end, there will be an increased push towards “media-led creative”, allowing actual response rates to dictate creative approach as opposed to the much more difficult to measure “brand hunch”.  (Actually, they didn’t say “brand hunch”, it is a cute term I just made up, but you get the idea.)
• This will neccessitate a change in the typical creative structure, that now usually includes a creative and art director and perhaps a writer, to include an analyst that will interpret advertising results to be implemented into creative.
• Tracking technologies will increase (see next point).

After this discussion, the next panel was called “The Race for The Digital Media Hub”, which in many ways was an extension to the “agency of the future” discussion.  Participants in this panel, many from digital agencies, discussed how the agency of the future will have a centralized tracking system that will be used to optimize all media channels.  As part of this process, and as mentioned in the earlier panel, this would involve greater interaction between creative and media, and really a fundamental shift in how agencies manage business.  The interactive-based crowd embraced this idea, but I suspect getting brand agencies to warmly greet the concept would be a little more difficult. The panelists also all agreed that performance-based media buying will become much more common, and is already common in almost every digital agency.

All this was facinating, but also a bit surreal, as the panel members seemed unaware that the agency structure and the “agency of the future” as they described already exists.  They are called Direct Response Agencies, and the good ones are media-centered and have sophisticated tracking systems to manage advertising based on performance.  Essentially everything the panelists thought would happen sometime in the future already happens right now, they just don’t seem to know it.

I felt like I worked for Toyota and was attending a conference called “the car of the future” in which participants described the “magical hybrid auto that someday will run on gas and electricity” while being totally oblivious to something called a Prius.

Ah, but I guess I should not take it personally.  Direct response agencies seldom gets the respect they deserve, but I have a feeling that is all turning around.  It feels good to be an “agency of the future” as opposed to one clinging to the past.

I’m going to digress from my usual whining about cell phones, politicians, banks, airlines, and assorted Weasels, and pass along some interesting information aimed at my friends in the advertising business.  If you have no interest in advertising, I suggest you peruse some back issues of the blog.  “How to Hire A Butler” is quite popular. If you are interested in advertising, read on….

Last week I was on a panel in New York at the BMO Capital Markets Thought Leaders conference on advertising.  There were many advertising big wigs much smarter than me pontificating on the future of the industry, and I thought I would pass along some of the more interesting thinking I heard.  First a few compelling statistics that came out:

• General Advertising is in the biggest decline since the Great Depression.
• Over the last three years advertising revenue has declined by $25 billion dollars.

Of course everyone in advertising is quite familiar with the fragmentation of media.  This business got a lot more complicated when three major networks and a few huge newspapers and magazines turned into hundreds of thousands of cable networks, streaming sites, blogs, online newsletters, and other media outlets.  But one speaker spoke of a media outlet I had not considered – the mega-retailer.  An interesting stat:

• In 1970 the most popular show on television was “All In The Family”, which drew 70% of household viewers.
• Last year the most popular show on television was “American Idol”, which drew 17%.
• Every week three time three times more people visit a WalMart store than watch American Idol.

So is the right strategy to drop advertising on American Idol and buy more space in WalMart?  Well, not necessarily, but this does speak to the transformative power of the mega retailer.  As media channels expanded at dizzying speeds, the retail market collapsed in many ways.  Hundreds of thousands of retailers were replaced huge “big boxers”, so the game was changing on multiple levels.

In-store marketing has taken a major role in the advertising world.  Consumer used to be “advertising driven” in their product choices, but now they often made decisions “in-store”.  Interesting switch.

In my next entry I will reveal the thought leaders vision on “the agency of the future”.  This was the most interesting part of the conference!

In a sign that karma does exist, a major business Weasel was sent to prison this week.  Steve Warshak, founder of Berkeley Premium Nutraceuticals (better known as Enzyte – the so-called hard penis people) was sentenced to 25 years in prison.  Warshak, his mother, and several others were accused of bilking customers out of millions of dollars via false advertising and bogus credit card transactions. In fact, they took so much money that they were also fined $500 million dollars in addition to the jail time! 

Viewers may remember the “Smilin Bob” Enzyte commercials that promised to turn every average Joe or Bob into a sexual powerhouse.  Warshak was indescriminate in his dishonesty.  In addition to stealing from customers, he would also refuse to pay his advertising agencies, claiming he was going bankrupt and tying them up for months in court in an attempt to delay and ultimately reduce payment.

It’s always good for the advertising business and consumers when these kind of scam artists get sent away, but although Warshak deserves it I was still a bit suprised at the severity of the sentence.  25 years!  He apparently underestimated how serious men are when it comes to their erections. ”Steve Warshak preyed on perceived sexual inadequacies of customers”, said the Judge when he handed down the sentence. 

One must wonder if there are any disgruntled customers where Steve is going. Perhaps the fact that Enzyte doesn’t work will make prison a less painful experience.   

Next month, for my 15th consecutive year, I will trek to Las Vegas for the direct response television industry’s annual gala, the Electronic Retailing Association convention. I attended my first ERA convention when the organization was in its infancy and called National Infomercial Marketer’s Association. Because the word “infomercial” conjures visions of screaming, steroid-pumped fitness gurus and badly coifed, get-rich-quick pitchmen sitting around pools, the board wisely changed the name. In the early days of NIMA, a couple hundred people would gather in Vegas to argue about juicers, ab-machines and the rising cost of media time. ERA has grown rapidly in size and sophistication, and thousands from around the world now attend. While they still discuss the above, the convention has become a good resource to meet DRTV’s players and service providers.

I have a love/hate relationship with the show, frequently vowing not to go and changing my mind at the last minute. This may have something to do with the location. Though I am pleased to see Vegas abandon ill-advised marketing toward families and return to its seedy, wonderful roots of gambling, nudity and excessive alcohol consumption, I have grown more sedate and don’t enjoy these activities as much as I once did.

Clients often express interest in attending, which I discourage. Though it has interesting vendors and good educational opportunities, it can be bizarre for someone unaccustomed to DRTV culture. Wild-eyed inventors stop you in the hall, begging to rub your leg with a solar-powered, cellulite-reducing wand or encouraging you to drink brown liquid from a filthy coffee mug that they claim will reduce the size of your prostate.

A craziness seems to infect all who attend. Competitive agencies are unabashed about trying to steal clients; they stop me in the hall to pitch my client in front of me. A decade ago I boarded an elevator with a Fortune 100 client when a well-known television pitchman saw his name tag, cornered him and began poking him in the chest, yelling “Stay out of the DRTV business!” For years, a strangely muscular old man known as Doc roamed the convention halls surrounded by buxom girls in bikinis. Clad in a skin-tight leotard like an elderly but fit Richard Simmons, Doc’s goal was to be discovered as the next Jack LaLanne. Jowly, sad celebrities last seen sailing The Love Boat hang out in the cocktail lounges, soliciting gigs as infomercial hosts.

Perhaps the freakiest and best experience is the awards ceremony. Most ad competitions stress creative execution, but the ERA awards tend to honor campaigns that succeeded financially. Winners can run the gamut from “awful but worked” to truly inspired.

Years ago I had two major clients attending the awards, both with campaigns nominated in the Best Corporate DRTV category. The host showed beautiful clips from the spots as my clients smiled, but their expressions turned to confusion as the final nominee’s entry was shown. Their competition was a spot for a new kitty litter box, and the screens around the room were filled with images of cats defecating on a tiny conveyer belt, the innovative system whisking away the offal into hidden poop containers. To my dismay, one of my clients tied with the kitty litter box. But in defense of kitty hygiene, I am told the box sold millions.

I am excited that this year’s awards ceremony features the musical styling’s of one of my favorite infomercial hosts, Esteban. He became famous on HSN and infomercials selling his guitar course.

DRTV has made enormous gains in popularity and acceptance the past few years, and every year the convention tends to reflect this. I suspect this year I am more likely to see major corporate executives roaming the halls than characters like Doc. While I applaud this professionalism, somehow I think an ERA convention without a few crazy inventors would seem lacking. Most of the products we buy originally came from the minds of slightly eccentric entrepreneurs with a vision, and I would miss their energy.

At Respond2 (my direct response advertising agency) we have always specialized in DRTV campaigns; but more recently we’ve realized the importance of pursuing new media as an additive to DRTV for our clients.

During the past few weeks, Respond2’s new media duo has put together a pretty impressive campaign for our Bosley (hair restoration specialist) client. It is still too early to measure ROI, but I am convinced that when done appropriately, a smart web campaign can compliment DRTV, thus bringing more value to clients.

In short, BattleAgainstBald.com documents Seth Garon’s (Respond2 Creative Director) battle against hair loss, which he is taking "head-on" by going through the Bosley Hair Restoration procedure. Daily blog entries, pictures and soon-to-come videos will let visitors partake in his journey. And while his hair is growing, Seth writes about topics related to hair loss and hair restoration. It’s kind of like what Jared did for Subway, except that his progress (we hope) can be seen in real-time. Plus, Seth is much more of a meatball sub guy anyway.

Your reputation precedes you. A successful Warrior (and, for that matter, a Worker) ultimately develops a personal brand. (Please note that the concept of “personal brand” is not something I originated; it has been espoused by others in business circles. I just find it to be an essential Warrior tool.) Just as you trust that BMW is synonymous with world-class automobiles, that Wal-Mart means low prices, and that Nike shoes feature an athletic heritage, style, and quality—so should you have a positive “personal brand” that is synonymous with you and how you use your tools. Your personal brand (assuming it is positive) should precede you into many business and social situations. Regardless of where you fall in the scope of the Four W’s, you will have a personal brand whether you like it or not, so it is always best to take control and hone it in a positive way.

If you live life as a Warrior and utilize the Warrior’s tools, you will develop a personal brand that is partially based on the integrity, honesty, and drive that are a regular part of your life. That is one of the advantages of being a Warrior—you tap into an existing positive basis for your personal brand, almost like buying into a franchise. But past this point, you should endeavor to develop a unique and compelling component of your personal brand that really separates you from the masses. Your personal brand might be simple, e.g., “Extremely Reliable,” or “Willing to Put in the Extra Work to Make a Project Really Special.” Or it can be more complex—e.g., “A Great Asset on Complex Deals.”