$50 Million on Relationships
Monday, December 22, 2008
What would happen if you spent $50 Million dollars on cultivating better online relationships instead of on banner ads?
Imagine that you are a big brand and your annual ad budget is several hundred million dollars. Now imagine that you took a large fraction of the online marketing budget, coming to a total of $50 Million, and invested it in building better relationships with your consumers? What do you think would happen? Would your business be better off in 2010, 2011, than if you had spent that $50 Million on banner ads and other online display advertising?
Over the weekend, I read a fantastic (albeit looong) article in Portfolio (no, I don't subscribe, I just got the article passed on to me), "The End of Wall Street's Boom" by Michael Lewis, the author of the book Liar's Poker. In this great article, Lewis traces the history of this year's stock market crash all the way back to the roaring 80's. He explains - better than I've read anywhere else, so far - how the sub-prime mortgage industry came into being, and how it turned the entire financial industry into one big toxic dump.
The most inspiring aspect of the article is the story of Steve Eisman. Eisman's small investment firm was one of the very few groups of people who not only had the vision to see how upside down the investment world had become, but also had the courage to put their money where their mouth was. Eisman was baffled by how crazy the mortgage market had become, and he invested heavily in betting that he was right. In my favorite anecdote, Eisman and his business partner Vincent Daniel, go to visit the C.E.O. of a major firm who decides the rating that investors use to decide whether certain mortgage bonds are worth buying.
I love the idea of a guy who's willing to call bullshit when he sees it. No matter where he is, or who he's talking to.
Have you ever been in a meeting with a client and wished that you could tell them that they were delusional?
What are the online marketing industry's sub-prime mortgages? What are clients betting hundreds of millions of dollars on in spite of its ineffectiveness (unless you think that a click through rate of 0.25% is a success)?
I think brands are wasting hundreds of millions of dollars on banner advertising.
As brands begin to take a more critical look at their marketing budgets in 2009, I'm going to be a champion for spending less on pretty banners and microsites, and more on fostering meaningful relationships with the people who actually care about your product.
I believe that the biggest reason that brands currently spend the majority of their online budgets on display advertising, is that it is a known quantity. People know what to expect. They know what is relatively good. They know how many "impressions" they can buy, and the know how many clicks they get. But, just because a thing can be measured, doesn't make it worth something.
I bet that first major brand to foster a vibrant community of true fans - people who listen when you talk, people who give you regular direct feedback about what you do, people who talk to other people about what your brand stands for - will change the game. (Barack Obama, anyone?) The key is to transform earned intimacy into action.
In 2007 and 2008 companies dabbled in relationships. But, most just viewed emerging social spaces like Facebook, as a more effective way to target display advertising. Even when they attempted to establish relationships, with some kind of group or forum, brands weren't interested in listening, they only wanted to collect, i.e. "Can we get more fans than our competitor?"
Building relationships is hard work. And it requires a lot more than just a wave of the social media magic wand. Relationships require time; and most importantly, relationships require people. I'm sorry, but a brand can't be in a relationship. Only people can be in relationships.
What if your brand built a small army of people within your organization who had the brand's backing and the skills to directly engage with the core consumer audience. $50 Million worth of real live human beings who were empowered to talk directly with fans, to respond in real time, and to become the voice of the consumer within the brand.
We have the tools we need to do this. We have ways to measure the effectiveness of our efforts. We have the money. What we need is a brand who's willing to stop the insanity and bet against the market. Any takers?
Imagine that you are a big brand and your annual ad budget is several hundred million dollars. Now imagine that you took a large fraction of the online marketing budget, coming to a total of $50 Million, and invested it in building better relationships with your consumers? What do you think would happen? Would your business be better off in 2010, 2011, than if you had spent that $50 Million on banner ads and other online display advertising?
Over the weekend, I read a fantastic (albeit looong) article in Portfolio (no, I don't subscribe, I just got the article passed on to me), "The End of Wall Street's Boom" by Michael Lewis, the author of the book Liar's Poker. In this great article, Lewis traces the history of this year's stock market crash all the way back to the roaring 80's. He explains - better than I've read anywhere else, so far - how the sub-prime mortgage industry came into being, and how it turned the entire financial industry into one big toxic dump.
The most inspiring aspect of the article is the story of Steve Eisman. Eisman's small investment firm was one of the very few groups of people who not only had the vision to see how upside down the investment world had become, but also had the courage to put their money where their mouth was. Eisman was baffled by how crazy the mortgage market had become, and he invested heavily in betting that he was right. In my favorite anecdote, Eisman and his business partner Vincent Daniel, go to visit the C.E.O. of a major firm who decides the rating that investors use to decide whether certain mortgage bonds are worth buying.
The C.E.O. [of rating firm Moody's] even invited Eisman and his team to his office for a visit in June 2007. By then, Eisman was so certain that the world had been turned upside down that he just assumed this guy must know it too. “But we’re sitting there,” Daniel recalls, “and he says to us, like he actually means it, ‘I truly believe that our rating will prove accurate.’ And Steve shoots up in his chair and asks, ‘What did you just say?’ as if the guy had just uttered the most preposterous statement in the history of finance. He repeated it. And Eisman just laughed at him.”
“With all due respect, sir,” Daniel told the C.E.O. deferentially as they left the meeting, “you’re delusional.”
I love the idea of a guy who's willing to call bullshit when he sees it. No matter where he is, or who he's talking to.
Have you ever been in a meeting with a client and wished that you could tell them that they were delusional?
What are the online marketing industry's sub-prime mortgages? What are clients betting hundreds of millions of dollars on in spite of its ineffectiveness (unless you think that a click through rate of 0.25% is a success)?
I think brands are wasting hundreds of millions of dollars on banner advertising.
As brands begin to take a more critical look at their marketing budgets in 2009, I'm going to be a champion for spending less on pretty banners and microsites, and more on fostering meaningful relationships with the people who actually care about your product.
I believe that the biggest reason that brands currently spend the majority of their online budgets on display advertising, is that it is a known quantity. People know what to expect. They know what is relatively good. They know how many "impressions" they can buy, and the know how many clicks they get. But, just because a thing can be measured, doesn't make it worth something.
I bet that first major brand to foster a vibrant community of true fans - people who listen when you talk, people who give you regular direct feedback about what you do, people who talk to other people about what your brand stands for - will change the game. (Barack Obama, anyone?) The key is to transform earned intimacy into action.
In 2007 and 2008 companies dabbled in relationships. But, most just viewed emerging social spaces like Facebook, as a more effective way to target display advertising. Even when they attempted to establish relationships, with some kind of group or forum, brands weren't interested in listening, they only wanted to collect, i.e. "Can we get more fans than our competitor?"
Building relationships is hard work. And it requires a lot more than just a wave of the social media magic wand. Relationships require time; and most importantly, relationships require people. I'm sorry, but a brand can't be in a relationship. Only people can be in relationships.
What if your brand built a small army of people within your organization who had the brand's backing and the skills to directly engage with the core consumer audience. $50 Million worth of real live human beings who were empowered to talk directly with fans, to respond in real time, and to become the voice of the consumer within the brand.
We have the tools we need to do this. We have ways to measure the effectiveness of our efforts. We have the money. What we need is a brand who's willing to stop the insanity and bet against the market. Any takers?
8 Comments:
The honest truth is that not every brand deserves a relationship. Many of the brands that dump money on banner ads don't stand for anything, hence all they can hope for is top-of-mind recall. Let's hope their competitors stomp them out of existence by following your advice.
Mike,
Well put. A think a lot of consumer brands want relationships with their consumers but aren't quite sure what that entails.
Plenty of brands (or at least their interactive agencies) spend quite heavily on social media directors and bloggers. The trick is enabling them to engage in real relationships and not just talking points.
I also wonder if this isn't appealing because if relationships for hire what happens when a community manager goes to another brand and brings their relationships with them?
An interesting offshoot to this is where this leaves the ad agency. Adrian Ho wrote a little on this in adweek...
http://www.adweek.com/aw/content_display/community/columns/other-columns/e3id78469d811368539a899e78f92093921?imw=Y
Basically - ad agencies aren't as effective working for brands in social media as the brands are in doing it themselves, so by recommending it - they also remove dollars straight from their own pockets.
Or - 50 million bucks at a 10% commission is conceivably 5 million bucks out the window in the name of getting better at relationships.
Probably not so black and white, but still an interesting struggle.
Thanks for the comments, everyone.
Paul, I think you raise an important point. The kind of brand/consumer relationships that are best are the kind that are wholly integrated into the brand. It should be internal, and it should be in the brand's corporate DNA.
Ad agencies who fight to hold on to their banner $'s are going to go the way of the American car companies who thought they'd never have to confront Global Warming or rising energy costs.
This is an awesome post--I plan on sharing it with my corporate decision-markers, and hopefully I can minimize the ineffective channels to which you referred.
You're definitely right about the numbers game. But the great thing about measurement is that even a 0.25% response rate can be worth it.
Consider the credit card companies. They send out direct mail to millions of people a year, at a cost of 30 cents per piece. But it's ROI is positive, and in that light it's successful.
This is how I've observed acquisition to work best. You cannot play the community/relationships game when you are trying to acquire customers and build brand awareness.
This is the crux of permission-based marketing (a la Seth Godin). Starting the first spark of the relationship is tough, especially if you are an unheard-of brand. Interruption marketing (i.e., Banners, TV, Direct Mail), though wasteful, works because you can exploit the click-through rates and build your base. Even Godin recommends this type of marketing to initially engage your customer. It's only then that you can start building permission and engaging your customers in a relationship (i.e., loyalty marketing).
Excellent post, Mike. I was in a meeting last week interviewing a guy that runs the brand's email channel.
When I asked him about measuring effectiveness all the way to revenue, he said that because the company started as a catalog marketer, the entire metrics system is built around rationalizing and supporting catalogs -- in this paradigm, getting any other channel well funded was a struggle, because you were playing on a tilted field.
I think the same goes right now for display and other similar ad buys. Gross impressions, reach/freq are old metrics based on the interruption models of mass media. These models have been in place for so long, you've got an entire industry that needs them to be true.
You quote a 0.25 clickthough rate as though that's bad. But I've been in meetings with large planning firms where they refused to divest from a .08 benchmark to try doing widgets/SM. Media planners don't make any commission from brand social media involvement, or the creation of web applications.
Interesting post.
I'd argue that the new display ad formats enabling richer more engaging interactions blur the borders between serving an ad and offering an opportunity to engage with a brand. When the banner creative and execution is geared towards content/conversation rather than a clumsy sell message we need to review your waste argument. Completely agree that agencies and brands approaching paid display media with this goal are currently out numbered by those still content to fight banner blindness with yet more flashing 'sell'ads.
It's important to get people to read your blog posts. Learning a few copywriting techniques can increase your readership. cheap jordan shoes By applying just one copywriting technique, you can boost your readership by up to 100% and more.
For instance, jordan shoes the most important part of the blog post is the title. The title is similar to the headline in copywriting. The title determines whether people actually read your blog post at all. A good title can dramatically boost the number of people who read your post.
Post a Comment
<< Home