The Future of Advertising Is Now

Strategy+Business' summer issue is chock-a-block full of articles in their special report section, A Field Guide for the New Marketer. One article in particular, "The Future of Advertising Is Now" by Christopher Vollmer, John Frelinghuysen and Randall Rothenberg, takes a look at the changes across the board as they claim the long hyped digital revolution is upon us. Read more to check out some exerpts.

With the fragmentation of choices available to consumers and the consolidation of retail channels, the long-delayed emergence of marketers from the television-centered advertising ethos of the mid-20th century is now reshaping every link in the marketing–media value chain. "The opportunity to use different media to create more meaning, more connection, with the consumer is something we’ll be looking to do more and more," says Katie Lacey, until recently the vice president of marketing for carbonated soft drinks at PepsiCo. Long a standard setter in television advertising, Pepsi last year relaunched its PepsiOne product without television. It is one of the leading major marketers (carmaker BMW is another) learning to thrive in the post-TV environment.

But, as ever when value chains are reconfigured, there is evidence of a widening gap between well-positioned firms and those for which disruption means dislocation. The winners, among brand marketers and media companies alike, are those learning to reconfigure their efforts in several key ways. They:

* Shift spending and management attention to digital media, and use those media to more effectively influence consumer purchase behavior.
* Develop formats to promote interaction with audiences, especially their most likely consumers.
* Create new research approaches and metrics that measure outcomes, not inputs.
* Combine "above-the-line" advertising (TV, radio, and print) and "below-the-line" marketing (promotions, sponsorships, events, public relations) in new two-way, integrated campaigns.
* Create their own branded entertainment assets and appeal to customers directly through them.
* "In-source" new skills and capabilities to achieve greater sales impact and other measurable results.

In studies by Yankelovich Marketing and Forrester Research, 70 percent of consumers say they like products that block advertising, especially TiVo and other digital video recorders (DVRs). Owners of these devices say they fast-forward through 92 percent of the commercials they receive. But relevance renders advertising worthy: Fifty-five percent of the respondents in one Yankelovich study said they would pay extra to receive more personalized marketing. In a Washington Post survey of working women conducted by Nielsen Media Research, 44 percent of the respondents (all of whom conduct at least part of their work online) rated the Internet a "very important" medium for prepurchase research on health-care products. That was more than twice the percentage saying they considered magazines, the next most significant research medium, "very important." These results paint a bleak picture for companies whose marketing models depend on one-way "push" delivery of advertising impressions.

Advertising thus grew as a faith-based initiative, with ad agencies and clients alike believing it worked best when it raised awareness of brands and goods across a large swath of a target population, with success calculated using various survey-based input measures, such as page impressions; cost-per-thousand viewers or readers; and gross ratings points (GRPs), an indicator of audience size. Volume was the highest value. Rosser Reeves, head of the Ted Bates ad agency, voice the prevailing view this way in 1960: "If 90 percent [of the audience] do not remember it, the story is not worn out."

With slowing economic growth during the 1970s, marketers started to reassess their laissez-faire attitude about measuring marketing performance. But it wasn't until the 1990s and the rise of the Internet that the accountability revolution commenced. It was still in its infancy eight years ago, when Randall Rothenberg, one of the authors of this article, wrote in Wired magazine:

"The new media technologies, by drastically reducing production and distribution costs and making possible almost continual and instantaneous refinements in message, promise to increase the efficiency of accountable advertising.… The spurious distinction between image advertising and retail advertising will erode, then disappear, as each advertisement, every product placement, all editorial can be tied to transactions."

Today, the accountability revolution is approaching its second stage. Marketers are more explicitly moving their strategy and spending decisions down the "purchase funnel" of consumer behavior. (See Exhibit 4.) They are no longer satisfied with media placements that merely build "top-of-the-funnel" responses from consumers (awareness and consideration). They favor media that can substantiate an ad’s influence on customer preference, purchase, and retention. This means a growing penchant for online media, especially those that can deliver a reliable indication of customer response. Media companies are increasingly asked to go beyond reach and frequency metrics like GRPs to more tangible and quantifiable evidence of return on marketing investment. No longer do marketers ask, "What is the cost of the GRPs I am buying?" Instead, they ask, "How many toll-free calls or online registrations did that ad generate, and how many were converted into sales?" Then, as they become more sophisticated at tracking the relationship between advertising and sales, they allocate their media buys on the basis of how well their offerings drive consumers through the purchase funnel.

To gain the requisite statistics, marketers don’t simply go online; they enter their customers' worlds. P&G's Tremor, an in-house unit that fosters brand trial and consideration via a network of some 280,000 trend-setting teens, has proven so successful that P&G now offers its services to noncompeting marketers, including Coca-Cola and Toyota. These interactive communities of "alpha consumers" offer marketers multiple benefits. They generate buzz for new products by reaching key influencers; they bypass traditional media to connect with hard-to-engage segments (such as multitasking youth); they communicate brand messages in ways that consumers interpret as more authentic; and they deliver deep customer insights.