Collaboration
How NOT to Discount Your Market: An Innovative Approach to Sales
Charlese Brown, MBA
charleseweddingmagazine.com
A Charlese Wedding and Home Magazine White Paper
Collaboration
How NOT to Discount Your Market: An Innovative Approach to Sales
Executive Summary
This Charlèse Wedding and Home Magazine™ White Paper is designed to help large corporations see the benefits of collaborating with smaller companies to increase sales for the future.
Charlese Brown, MBA
Marketing Expert
Business spending trends are turning away from traditional modes of promoting their products and embracing the newer entry – the technology of the internet. However, large corporations have not yet realized the benefit of spending advertising dollars with smaller, lesser known companies. Here, a strategic analysis will be presented which will propose a viable solution that large companies can use to become more business friendly with smaller companies.
This white paper will explore the following questions:
- How can large corporate conglomerates seek out “smaller” significant players?
- What are the advantages to giving the “small” guy a chance?
- How can spending with smaller enterprises create and complete the innovation cycle?
“Strategy” has a credibility crisis. In many companies the very notion of Strategy – with a capital S – has become devalued.
----- Hamel, Prahalad: Competing for the Future
What is the future for the advertising market? All bets are on the internet component. In the first three quarters of 2007, the top ten companies held back ($670 million dollars) on their television advertising with an emphasis on online spending. Supply and demand is still the motivating factor behind what companies spend to promote their products. More people are turning to cable and internet sources for purchasing. Fewer people are watching regular television where commercials play a key role. Holding back on spending in the first three quarters of 2007 allowed companies a chance to observe the trends that buyers are taking. This “time out” also gave companies time to restructure an overall strategy and to come back stronger.
US Online and Total Media Advertising Spending
2006-2011 (billions % of total media spending)
| Year | Internet | Total Media | Internet of Total Media |
| 2006 | $16.9 | $281.6 | 6.0% |
| 2007 | $21.4 | $287.5 | 7.4% |
| 2008 | $27.5 | $295.5 | 9.3% |
| 2009 | $32.5 | $301.5 | 10.8% |
| 2010 | $37.5 | $309.0 | 12.1% |
| 2011 | $42.0 | $316.0 | 13.3% |
According to future trends, big businesses will be relying heavily on online spending to get the word out about their products. It seems obvious that the natural shift would be toward more digital formatting. While competing for the future, have big corporations missed the obvious? The premise surrounding spending money is to make money – more money. Is it really necessary to spend millions of dollars? Let’s analyze past data.
| Estimated Annual U.S. Advertising Expenditures 2004-2006 (In millions of dollars) |
| | 2004 | | 2005 | | 2006 | |||||||||||||||
| | $ | % Sh. | % Chg. | | $ | % Sh. | % Chg. | | $ | % Sh. | % Chg. | |||||||||
| Newspapers | 46,614 | | 17.7 | | +3.9 | | | 47,335 | | 17.5 | | +1.5 | | | 46,555 | | 16.5 | | -1.6 | |
| National | 7,629 | | 2.9 | | +3.7 | | | 7,465 | | 2.8 | | -2.2 | | | 7,084 | | 2.5 | | -5.1 | |
| Local | 38,985 | | 14.8 | | +4.0 | | | 39,870 | | 14.7 | | +2.3 | | | 39,471 | | 14.0 | | -1.0 | |
| Magazines | 12,247 | | 4.7 | | +7.1 | | | 12,847 | | 4.7 | | +4.9 | | | 13,168 | | 4.7 | | +2.5 | |
| Broadcast TV | 46,264 | | 17.5 | | +10.3 | | | 44,293 | | 16.3 | | -4.3 | | | 46,880 | | 16.6 | | +5.8 | |
| Network (i) | 16,713 | | 6.3 | | +11.2 | | | 16,128 | | 5.9 | | -3.5 | | | 16,676 | | 5.9 | | +3.4 | |
| Spot (nat'l) | 11,370 | | 4.3 | | +14.3 | | | 10,040 | | 3.7 | | -11.7 | | | 11,626 | | 4.1 | | +15.8 | |
| Spot (local) | 14,507 | | 5.5 | | +7.3 | | | 14,260 | | 5.3 | | -1.7 | | | 14,887 | | 5.3 | | +4.4 | |
| Syndication (ii) | 3,674 | | 1.4 | | +7.0 | | | 3,865 | | 1.4 | | +5.2 | | | 3,691 | | 1.3 | | -4.5 | |
| Cable | 21,527 | | 8.2 | | +14.4 | | | 23,654 | | 8.7 | | -9.9 | | | 25,025 | | 8.9 | | +5.8 | |
| Cable Networks | 16,424 | | 6.2 | | +17.7 | | | 18,296 | | 6.7 | | +11.4 | | | 19,320 | | 6.9 | | +5.6 | |
| Spot (local) | 5,103 | | 2.0 | | +5.0 | | | 5,358 | | 2.0 | | +5.0 | | | 5,705 | | 2.0 | | +6.5 | |
| Radio | 19,581 | | 7.4 | | +2.5 | | | 19,640 | | 7.3 | | +0.3 | | | 19,643 | | 7.0 | | NC | |
| Network | 836 | | 0.3 | | +4.7 | | | 814 | | 0.3 | | -2.6 | | | 798 | | 0.3 | | -2.0 | |
| Spot (nat'l) | 3,540 | | 1.3 | | 0.0 | | | 3,469 | | 1.3 | | -2.0 | | | 3,642 | | 1.3 | | +5.0 | |
| Spot (local) | 15,205 | | 5.8 | | +3.0 | | | 15,357 | | 5.7 | | +1.0 | | | 15,203 | | 5.4 | | -1.0 | |
| Yellow Pages | 14,002 | | 5.3 | | +0.8 | | | 14,229 | | 5.2 | | +1.6 | | | 14,393 | | 5.1 | | +1.1 | |
| National | 2,110 | | 0.8 | | -0.1 | | | 2,163 | | 0.8 | | +2.5 | | | 2,206 | | 0.8 | | +2.0 | |
| Local | 11,892 | | 4.5 | | +0.9 | | | 12,066 | | 4.4 | | +1.5 | | | 12,187 | | 4.3 | | +1.0 | |
| | | | | | | | | | | | | | | | | | | | | |
| Direct Mail | 52,191 | | 19.8 | | +7.9 | | | 55,218 | | 20.4 | | +5.8 | | | 58,642 | | 20.8 | | +6.2 | |
| Business Papers | 4,072 | | 1.5 | | +1.7 | | | 4,170 | | 1.5 | | +2.4 | | | 4,195 | | 1.5 | | +0.6 | |
| Out of Home* | 5,770 | | 2.2 | | +6.0 | | | 6,232 | | 2.3 | | +8.0 | | | 6,731 | | 2.4 | | +8.0 | |
| National | 2,530 | | 1.0 | | +10.1 | | | 2,736 | | 1.0 | | +8.1 | | | 2,955 | | 1.1 | | +8.0 | |
| Local | 3,240 | | 1.2 | | +3.0 | | | 3,496 | | 1.3 | | +7.9 | | | 3,776 | | 1.3 | | +8.0 | |
| Internet | 6,853 | | 2.6 | | +21.3 | | | 7,764 | | 2.9 | | +13.3 | | | 9,100 | | 3.2 | | +17.2 | |
| Miscellaneous | 34,645 | | 13.1 | | +8.3 | | | 35,692 | | 13.2 | | +3.0 | | | 37,321 | | 13.3 | | +4.6 | |
| National | 26,907 | | 10.2 | | +9.6 | | | 27,822 | | 10.3 | | +3.4 | | | 29,380 | | 10.4 | | +5.6 | |
| Local | 7,738 | | 2.9 | | +4.0 | | | 7,870 | | 2.9 | | +1.7 | | | 7,941 | | 2.8 | | +0.9 | |
| Total National | 167,096 | | 63.4 | | +9.6 | | | 172,797 | | 63.7 | | +3.4 | | | 182,483 | | 54.8 | | +5.6 | |
| Total Local | 96,670 | | 36.6 | | +4.0 | | | 98,277 | | 36.3 | | +1.7 | | | 99,170 | | 35.2 | | +0.9 | |
| Grand Total | 263,766 | | 100.0 | | +7.4 | | | 271,074 | | 100.0 | | +2.8 | | | 281,653 | | 100.0 | | +3.9 | |
| (i) Network includes ABC, CBS, FOX & NBC (ii) Syndication includes PAX, UPN & WB / ION, CW & MyNetwork *Out Of Home replaces Billboards, to include billboards on buses, etc… | ||||||||||||||||||||
Figure 2 (Source: Universal McCann)
The internet seems like the mode of choice for most advertisers. Clearly, the thrust is skewed greatly. Media, such as newspapers and radio are feeling the effects of a difference in the “social media”, commonly referred to as online marketing. National media seems stable because of its reach. The overall tendency of advertisers to spend in areas unrelated to the internet is slowly moving toward slim and none. “Relate to the customer on his own terms” is advice given for advertisers from marketing experts. The online shift is forcing advertisers to be more precise in their approach due to the fact that people have become more reader savvy and are looking for the “meat”, not the fat. Is online advertising truly meeting the needs of more customers on their own terms? Traditional thinking proposed that advertisers paid costs according to the potential audience number. For instance, Super Bowl ads cost more because a lot of people watch the game and pay attention to the commercials. The online market still does not have a hard and fast formula which will track customers. Customers are essentially “hidden” and the sole mode of determination lies in sales. A company can run an ad on a particular website, obtain the website “visitor per page” data and still lack significant numbers that it is accustomed to using from other forms of media. Figure 1 clearly shows a huge thrust toward online advertising as opposed to the data presented in Figure 2. Figure 1 has even exceeded what was predicted for the spending for year 2006 from Figure 2. Marketers are scrambling about trying to make sense of the “numbers” game for the future of advertising sales to their clients. Predictions are more difficult to make in the online world because of the “emotion” variable. The only clear way to track success is to realize an increase in sales because of an advertisement in a particular location. One of the positions of this paper is to point out that money is being wasted on advertising where there are no clear numbers on
which to hold. By 2009, we probably will not be able to generate a data chart like the one proposed by Figure 2. The only component that can we can insert is the amount spent. Earnings from this spending are part of a futile effort to track. Everyday, more online activity is emerging. Generally, people do search for product information and for bargains online. However, there are a large number of people who do not have computers or internet service. How would corporations reach these people? Are large corporations interested in reaching this group? How can corporations seek out significant companies which already have this group captured? What is the plan “B” when the electricity to power this service is no longer available? To trust (over 50%) of one type of advertising is a gross mistake.
The 10% (a minimal number) households without computers have televisions. Research suggests that in household without computers, television is watched at a higher rate than in homes with computers. The research suggests that the rising climb in poverty is responsible for this 10%. Corporations that provide diapers, baby products, cleaning products, etc. still need to reach these individuals. That 10% is a very significant figure when you take in consideration billions of people. Some experts advise large corporations to use a multi-channel approach. This would enable advertisers to use other vehicles to carry their information with, of course, much less money spent on reaching this group. This paper is suggesting that large corporations utilize what is already in place. Smaller enterprises hold the key. Corporations should seek businesses which have made an impact on their local communities. Advertisements would be significantly cheaper and the goal of reaching a wider, more diverse, audience would be achieved. The advertising “mix” that companies use should never discount sub - target markets. That has been a traditional mistake. Too often, companies go under because they forgot to include that variable. This is same variable that can come along to side swipe the business. Cases in point: Caterpillar and Komatsu, Ford Motor Company and Toyota. There are more than several examples of how companies have not “included” in their equations the smaller enterprise. It is imperative that corporate giants look for companies in which to collaborate. The smaller businesses have already done the legwork and provided the foundation for the “grass roots” experience. Large companies should choose these business partners wisely.
Another common mistake is that advertisers tend to think that if they spend more on media advertising, the better it is for them. Recent inquiries into the advertising fee for magazine prices amounted into the hundreds of thousands of dollars. It is difficult to find a print publication is charging under $10,000.00 for a color ad. This begs the question: Why is food that is healthy for the body more expensive than food that is not? The general answer is that greed is driving the market. Advertising fees are competitive. The force behind the price has a lot to do with perception. It is hard to understand how this got out of control. Now that big companies have a secure lock on their market, a smaller enterprise finds it next to impossible to enter. When Reebok first entered the market, Nike had to do some serious regrouping. There will always be new entrants. The point of this discussion is to create a win-win design in which everyone can eat at the same table. This model also promotes employment, which is one of the indicators of our economic strength.
What are the Advantages of Giving the “Small Guy” a Chance?
Large corporations should continually stress innovation. The future competency of a company depends on this innovation. If a car is being assembled on an assembly line, it is up to the owner to personally speak with everyone on that assembly line. The advantage: “Good Business.” The person who installs the window now feels important. Psychologists suggest that one of the things people need is to feel needed. If advertisers turn solely to online marketing, the emotional piece will eventually fizzle out and go away. It is incumbent upon big businesses to include lesser known businesses into their portfolios. In a long run, the discounted group can turn out to be a corporation’s worse nightmare. Statistics released this month indicate a decline in the automobile industry in the United States as opposed to the increase in sales of our foreign competitors. If companies that are on top now wish to remain on top, they should form a new division on their marketing team that would survey areas for key “smaller” players and always be on the lookout for businesses that can help them move forward. Also, collaborations with small businesses will help them to operate more effectively. In general, people will begin to see the value and reliability of the company. This type of one-on-one conversation is a form of advertising posted as a trend for 2008. Companies have to make their products a community conversation. It cannot be argued that online activity, such as blogging, promotes some action. Collaborating with small businesses closes the loop. This is where corporate giants need to be – at the end, collecting on the deal.
Another clear advantage to this approach is, being first always make the difference. The leaders of this trend will be the giants that will make the historical marks on the future of advertising.
How would big business measure a Return On Investment (ROI)? The answer – invest slowly and carefully in your selected small business. Severe ties with customer-based reactions to measure ROI. This component should depend on a futuristic approach – how is the customer changed by the product? Does the customer return? Can one customer encourage others to buy the same product? The smart move would be to remain faithful to what has been working for you and to implement the collaborative piece gradually. What big businesses is looking for is staying power. If the smaller enterprise happens to be a fried chicken restaurant on the corner in the midst of nowhere, USA, the only thing that matters is how long it’s been there. Twenty plus years speaks highly of someone in the ownership capacity. That person certainly understands a little bit about how to make a restaurant work. Big businesses also can learn from that restaurant on the corner. It didn’t move. It stayed where it was well-received, where people could be met and greeted personally. This strategy will require strong leaders in the industry. This is a call to re-do the way old business has been done. For a long time, big businesses have “boxed out” small enterprises, largely due to the fact that corporate revenues indicate status. Competitions that recognize “The Business of the Year” have gross income as it criteria to select a winner. This is wrong. The economy has changed since just fives years ago. The playing field is being leveled. The future of big business is to collaborate. It’s time to change the rules of the game. ROI is to
invest in the future of your company. The reason why companies are finding it harder these days to measure ROI is because of the vast variability in the market. In a scientific experiment, there has to be a control group. This control group sets the standard by which all other variables are measured. It is a very precise method. To carry it further, when results are published, the results are accepted by the ability to reproduce those results. Research, that is considered good research, stands on the fact that other people can follow the directions of the experiment and achieve the same end. Business models should be no different. Anyone starting a business should be able to follow the exact same plan and achieve the same results. The challenge in front of the business world is to think more globally without the labor-intensive calculations that attempt to track every penny. The idea is to look at the solution to this problem in a more holistic fashion. Longevity holds the key to success. It creates trust, value, and reputation (branding). Supply and demand are at the heart of sales. At the rate that companies are entering into the market, consumers will find it difficult to remain with only a few suppliers. Web sites are easy enough to build. The younger generation has shown us the power of marketing tools such as video and personal web pages. The market has become overwhelmed with all of these new tactics. Those tactics do not have “staying power.” This does not mean that no new strategies will occur. Of course, they will. It makes sense to change. The concern is not to put all of the eggs, or most of the eggs, into one basket. Global economy is smaller than before – merely because of the world wide web. The word “demographics” will become as extinct as the dinosaurs. Companies can no longer track a target market if anyone has the slightest access to a web portal. The smart move would be to engage in a variety of methods to advertise to promote the product. Corporations have the power to push the trends onto newer grounds. If the big businesses do not take advantage of this opportunity, they will experience a shortfall – because they need the very group that they historically ignore.
Companies compete in building core competencies that transcend the resources of individual business units. Coalitions compete to create new competitive space. Economists, strategy researchers, and managers have too often assumed that competition is limited to the market for goods and services. Yet competition for foresight, competition to build competencies, and competition to shape industry evolution through a coalition are all examples of extramarket, or nonmarket, competition. The fact that this competition takes place outside a ‘market’ doesn’t make it any less real. An insensitivity to this broader scope of competition can prevent a company from adequately preparing for the future.
----- Hamel, Prahalad: Competing for the Future
Resources
1. Estimated Annual U.S. Advertising Expenditures 2004-2006
Universal McCann
2. Hamel, G. and Prahalad, C. Competing for the Future. Havard Business
Press. 1994.
3. Isidore, Chris. Automakers end a tough '07 with lower sales. January 3,
2008. http://www.cnn.com
5. US Online and Total Media Advertising Spending
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