MBS Blog

Contrary to the recessionary trend in the general decline of overall advertising spend, some venues will see an increase. This is particularly true of internet advertising. It reflects the evolution of media enabled by technology, and the ability of companies to precisely target (sounding very military here!!) specific markets efficiently. The bottom line is more advertising bang (effect) for the buck (dollars spent).

The recent news regarding the imminent “death” of the so-called old media outlets such as newspapers, is just the beginning of the story. Next up in the creative destruction process could be other forms of print media, and perhaps television in its current form.

The internet is replacing other forms of media by absorbing, restructuring and repackaging them. Technological innovations…such as the Apple iPhone and other data phones…are allowing the media to be disseminated to a wider audience in a more direct manner. This has opened up new forms of advertising placement which are seeing a shift,  as the article from the Russian Daily,  www.kommersant.com indicates:

Ad Market to Dip in 2009

Demand for advertising will fall 11 percent in 2009, predicts Group M, based on events on November, when all ad deals for next year were placed on hold. According to Group M, the media division of WPP, the world’s largest communications holding, Russian advertisers will cut back their activities in all media except Internet contextual advertising. While total expenditures on advertising in Russia rose 18 percent to 275 billion rubles in 2008, it will fall in 2009 to 244 billion rubles. Group M will publish its report on the coming market within the next few days. 

Projections for Russia are based on countries such as Kazakhstan and Thailand, where the economic crisis began a year or more ago, explained Konstantin Vashentsev, research director for the Maxus agency, part of Group M. He said print and outdoor advertising would be the first to feel the brunt of the crisis. In Thailand, newspapers lost 11 percent of their ad income, and magazines 12 percent, the agency says. Outdoor advertising agencies in Kazakhstan have been forced to lower their prices 30-40 percent. 

The most impressive statistics on the ad market are in the Internet. In spite of Group M expectations of 10-percent growth this year, advertising has increased 55 percent in the first nine months to 4.4-4.5 billion rubles. Outdoor ad operators experienced a 14-percent rise in income, to 33.8-34 billion rubles, in the first three quarters of the year. Russia’s largest television advertiser Video International is also optimistic. It announced yesterday that it had reached an agreement with Reckitt Benckiser, owner of the Calgon, Cillit and Vanish brands and one of Russia’s top ten advertisers (with a budget of over $58.5 million in 2007), for 2009 ad placement.

Technorati Tags: recession, advertising, Video International, Reckitt Benckiser, Calgon, Cillit, Vanish, Kazakhstan, Thailand, Konstantin Vashentsev, Maxus, Ad market, Group M, WPP, Apple iPhone, data phones, Anton Olff, Russian Daily, www.kommersant.com, print media, television, internet, creative destruction process, media, technology, old media, newspapers,

We are in a recession…so what are we going to do about it? As individuals and organizations we have to improvise, adjust and overcome.  The “capitalist tools” over at www.forbes.com know what businesses need to do.

Many companies are thinking: cut expenses to the bone, particularly advertising and marketing expenses. Well…as I mentioned in last week in Recessionary Marketing (http://www.medblacksea.com/blog/2008/11/recessionary-marketing/ )  the best strategy might be to employ some “contrarian” tactics:

Don’t Skimp On Ad Budgets

Knowledge@Wharton, 12.01.08, 05:30 PM EST

Cutting advertising expenses can yield short-term gains–and long-term trouble.

With corporate managers under enormous pressure to control costs and maintain liquidity in the current credit crisis, advertising budgets often appear to be a dispensable luxury in the struggle to survive. Executives who succumb to that temptation, however, put the long-term future of their companies at risk, according to Wharton faculty and advertising experts.

“The first reaction is to cut, cut, cut, and advertising is one of the first things to go,” says Wharton marketing professor Peter Fader, adding that as companies slash advertising in a downturn, they leave empty space in consumers’ minds for aggressive marketers to make strong inroads. Today’s economy “provides an unusual opportunity to differentiate yourself and stand out from the crowd,” says Fader, “but it takes a lot of courage and convincing to get senior management on board with that.”

According to Wharton marketing professor Leonard Lodish, with demand slack for advertising services, the cost of these services goes down, making advertising expenditures all the more defensible in a bad business climate. “If your company has something to say that is relevant in this environment, it’s going to be more efficient to say it now than to say it in better times,” says Lodish.

Research shows that companies that consistently advertise even during recessions perform better in the long run. A McGraw-Hill Research study looking at 600 companies from 1980 to 1985 found that those businesses that chose to maintain or raise their level of advertising expenditures during the 1981 and 1982 recession had significantly higher sales after the economy recovered. Specifically, companies that advertised aggressively during the recession had sales 256% higher than those that did not continue to advertise.

For companies that do stay the course and continue to advertise into a recession or increase their promotional activities, the key is to craft messages that reflect the times and describe how their product or service benefits the consumer. For example, companies might be tempted to emphasize price in a recession, but that only works for companies like Costco(nasdaq: COST - news - people ) and Wal-Mart (nyse: WMT -news - people ) that are built around a core strategy of providing low prices year after year, says Lodish. He points to the current Wal-Mart campaign, “Save Money. Live Better,” as a successful approach to the recession.

Dean Jarrett, senior vice president of marketing at The Martin Agency in Richmond, Va., which developed the Wal-Mart ads, acknowledges the campaign began in 2007 before it was clear a harsh recession was building. “We can’t claim we knew a recession was coming, but ‘Save Money. Live Better’ is dead on-point with who they are and what they want to be.”

Eileen Campbell, chief executive of the Millward Brown Group advertising firm in New York City, says that while companies should probably not dwell on the recession and scare consumers into hoarding their pennies under a mattress, certain products require a straight-up approach–such as financial services. “If you are in the financial services category, to behave as you did a year ago is silly.” At the same time, however, many consumers are weary of negativity generated by the recession and would be receptive to a more upbeat message, she adds. “If you can put a positive spin on how you can genuinely help without invoking doom and gloom, I think that’s going to be more compelling

Technorati Tags: recession, capitalist tools, doom and gloom, financial services, Dean Jarrett, The Martin Agency, Eileen Campbell, Millward Brown Group, New York City, www.forbes.com, advertising, marketing, www.medblacksea.com, recessionary marketing, marketing expenses, liquidity, credit crisis, advertising budgets, The Wharton School, Peter Fader, Leonard Lodish, McGraw-Hill, Anton Olff, Costco, Wal-Mart,

If you want to peer into the future of marketing and advertising, then this article in the U.S. edition of the Wall Street Journal (www.wsj.com) is the vehicle. Although it could be construed that it only reflects a snapshot from an American perspective, the odds are that these modes will be replicated…or perhaps even improved…in emerging markets.

As internet access-particularly broadband-becomes more widespread in Russia, Ukraine for example, then additional avenues for reaching and informing consumers will increase.

Marketing in the World of the Web

Bemes, clouds and MySpace: Welcome to the brave new world of retail.

By TOM HAYES and MICHAEL S. MALONE

Retailers will eventually recover from the consumption tailspin that threatens this holiday season. But quite apart from the recession, there are other, profound changes underway in the retail sector. As the evidence mounts about the power of social networks to reconfigure individual behavior, the crucial question facing industry is: How to leverage this phenomenon into actual profits?

The second generation of Internet (”Web 2.0″) companies such as MySpace, Facebook, Linked/In and YouTube exploded upon the scene three years ago. Today, MySpace and Facebook together have more users than the entire U.S. population; and the online community concept is already becoming a powerful tool for everything from creating customer loyalty, to assistance in product design, to a sounding board for company strategy.

Corporations from IBM to Toyota and Johnson & Johnson have been rushing to establish their own affiliated social networks and bind their customers ever more closely. There isn’t a smart company today that isn’t implementing some kind of online community, wiki or blog strategy.

But companies with millions of members of online communities are now asking: What next? How do we sell them products and services, or mobilize them into massive de facto R&D, manufacturing and sales departments? We have been studying the challenge and have concluded that very few of the traditional techniques of classical marketing (call them Marketing 1.0), or even of eCommerce (Marketing 2.0) will work in the world of social networks. A very different set of tools, concepts and practices is needed. Call it Marketing 3.0. Here are five:

- From loyalty to attention. Before you can win consumer loyalty, you have to capture and reward consumer attention. Old propositions — network television’s tired offer of 22 minutes of canned sitcoms in exchange for eight minutes of untargeted commercials — won’t cut it. Consumers are demanding a better deal.

Some brands are starting to flirt with better exchange rates: Virgin Mobile gives a minute of free phone time for every minute of advertising a customer accepts. Ryan Air recently announced it would offer $15 coach tickets from the U.S. to Europe, subsidized by passenger attention to advertising and in-flight sales pitches.

Smart marketers will of necessity become obsessed with customer attention in the way they once obsessed over customer loyalty. The shrewd brands will create elaborate attention-rewards programs, and incentives to break through the noise and make that critical initial connection.

- From crowds to clouds. Once you get that attention — once you generate heavy traffic to your site, gather a large league of “friends” on MySpace, or spawn a dedicated following on Twitter — how do you monetize the crowd?

Smart brands are turning their crowds into “clouds”: organic, self-forming and often self-governing communities of interest. Companies such as Hewlett-Packard, Frito-Lay and Harley-Davidson use their clouds as feedback loops to get better faster by obtaining good, timely, often brutally honest customer insights. And the members of clouds can become true believers; they don’t just watch your commercials, they make them.

Right now, few companies are emotionally equipped to wring the best benefits of a cloud, because the most valuable voices out there usually belong to the malcontents. In the old model, customer-service departments aimed to placate or jettison disgruntled customers. In the cloud model, the idea is to cultivate and reward them. That’s not an easy transition.

- From places to spaces. Consumers are increasingly organizing themselves into new communities — not just the big generic social communities, but myriad idiosyncratic slices of narrow, passionate interest (i.e., BlackPlanet, Inpowr and MomsCafe).

These new market spaces, or “meganiches,” may seem small, even strange at first. But when they’re efficiently targeted, they can be highly responsive, lucrative and loyal. Well-established meganiche Web sites include Gamefaq.com for video gamers, Dpreview.com for digital photography aficionados, and Howardchui.com dedicated to mobile phone zealots.

With this shift toward self-organization by consumers, national advertising campaigns as we know them will increasingly become a waste of time and money for many companies. The trick for brands is to cohabit social spaces with these consumers. Social media, and its verb form, “friending,” requires entirely new forms of advertising: bottom up instead of top down, personal rather than public, and subtle rather than full frontal.

- From memes to bemes. In the Age of Broadcast, good advertising could occasionally manufacture memes of tremendous social impact. Think of “Where’s the Beef?” or “I can’t believe I ate the whole thing.” If you can’t recall an irresistible or effective turn of phrase of late, it’s because it is exceedingly difficult to spread a meme in today’s fragmented media environment. Marketing 3.0 is now the science of devising and managing directed business memes: call them bemes. Bemes are sent by members of social communities to each other and typically contain a reward or exclusive offer, which, when redeemed, also results in a reward coupon for the sender. This encourages members of social communities to propagate a “viral” ad. One well-documented beme was “The Subservient Chicken” from Burger King.

Brute force marketing won’t work inside social networks. The best online marketing now takes place among people who know and trust each other. Consider how rumors work. Like a rumor, a beme is a bit of useful information that rewards each person who passes it along. Want to be a sensation? Create a beme that consumers willingly accept and share with others.

- From silos to simultaneity. Too many retailers today persist in believing that online shopping is merely a virtual extension of real world shopping. That is a big mistake.

Rather, online and offline need to coexist, and we need to rethink how they relate. For example, to their surprise, companies like BestBuy (which even encourages customers to shop the aisles but buy online from in-store kiosks) and Macy’s are discovering that physical retailing is a perfect way to move units online. That is, the physical world has become the showroom for the virtual realm.

Retailers now must reimagine a world where consumers experience products in stores but ultimately buy them on the Web: Stores are for experiences, the network is for inventories. And what in turn prepares potential customers for what to look for in stores? Online communities.

All of this suggests that Marketing 3.0 is not only different from its predecessors, but actively undermines them. If your marketing program fails to adapt to this new world, it won’t just become irrelevant — it will actually work against you.

Anton Olff

Technorati Tags: marketing, advertising, Wall Street Journal, American perspective, internet, broadband, Russia, Ukraine, MySpace, retail, consumption, social networks, Facebook, Linked/In, Youtube, IBM, Toyota, Johnson & Johnson, R&D, eCommerce, Virgin Mobile, Ryan Aur, Europe, customer loyalty, rewards programs, Hewlett-Packard, Frito-Lay, Harley-Davidson, commercials, social communities, BlackPlanet, Inpowr, MomsCafe, Gamefaq.com, Dpreview.com, Howardchui.com, friending, Burger King, BestBuy, Macys,

Shopping in Ukraine over the last few years has been a delight. Every day was a revelation, as new varieties of products and brands filled the shelves with the promise of more to come. That has all changed recently. While the array of products-especially food and beverage products-continue to arrive in stores, particularly specialty outlets, the pace has slowed considerably.

Technorati Tags: food, beverage, imports, Ukraine, brands, consumers, WTO, trade, retailers, Furshet, Tavier B, Ukrainian brands, Russian brands, confectionery, Coca-cola, marketing, advertising, contrarian, emerging markets,