Aug. 11, 2014
Todays memo is a long one, but I promise you it's worth it.
Advertisers are attracted to online media when they’re not entirely happy with their investments in traditional broadcast media. To understand the reasons behind their disappointments, we need only to revisit the subject of last week’s Monday Morning Memo:
“Linear, no-threshold thinking” assumes that every statistic is scalable. It’s what causes advertisers to assume they can “test the waters” with small investments, then increase their financial commitments if the test results are positive.
If an ad needs to be encountered only once to trigger a sale, it’s a direct-response ad. Congratulations! You’ve successfully crafted a high-impact offer for a product with a short purchase cycle. Direct-response ads are scalable, meaning sales increase proportionately to the number of people reached. But not everything can be sold with a direct response ad. The simple truth is that most products and services require that their ads be encountered again and again.
Pepsi has been a household word since before we were born, so why do they keep advertising? Couldn’t they reduce their mass media spending and still maintain their sales volume?
In a word, no.
We know this because Pepsi tried it.
Bob Hoffman was the keynote speaker at the 2014 European conference of AdvertisingWeek:
“In 2010, Pepsi cancelled all its TV advertising and its Superbowl advertising to great fanfare and bet BIG on the largest experiment in social media marketing ever attempted, ‘The Pepsi Refresh Project.” TIME magazine quoted the CEO of a New York brand consultancy, ‘This is exactly where Pepsi needs to be. These days brands need to become a movement.’ Well, they became a movement all right. I estimate The Refresh Project cost them between 50 and 100 million dollars. It got them 3.5 million Facebook likes and a 5% loss in market share, which they seem to have never recovered. That year, they dropped from the second best-selling soft drink in the US to third. Pepsi’s marketing director said, ‘The success has been overwhelming. We have more than doubled our Facebook fans. We have more than 24,000 Twitter fans.’ The L.A.Times didn’t see to agree. They called it ‘a stunning fall from grace.'”
Hoffman went on to say that TV and Radio are best at creating demand, while the web is terrific at fulfilling demand. The interviewer then challenged Hoffman by saying, “But it is changing. And it’s changing fast. Ten years ago 93 percent of the public got their news from television and only 7 percent got their news online. Today it’s 26 percent online.”
Hoffman’s response reflected his 40 years of experience directing ad campaigns for McDonald’s, Toyota, Shell, Nestle, Blue Cross, Chevrolet and Bank of America:
“What we often confuse is the use of digital media with its power as a marketing or advertising entity. The fact that more people are using online for news is not a de facto proof that it’s a good advertising medium. Let me give you an example of that: the old-fashioned telephone. Everyone in the world had a telephone. It was a hugely popular means of communication. That didn’t make it a good advertising medium. It was a lousy advertising medium. The fact that people us it for communication or to get information or to have conversations doesn’t necessarily make something a good advertising medium.”
Now let’s get back to the subject of why so many advertisers are frustrated with their TV and Radio campaigns.
In last week’s memo we described motorcycles going out of control when...
