When Spending Less Makes More Cents

Date: 2011-11-15 14:16:31 // Categories: ROMI,
By: Sean Baker
Date: 2011-11-15 14:16:31 // Categories: ROMI,

As a client, how often have you heard your agency tell you that you’re not spending enough in media? As an agency how often have we told our clients that they are not spending enough? Sometimes, that is an unavoidable conversation that needs to happen. All too often, it happens without due diligence to investigate the options and with dire consequences for everyone. Clients get frustrated, agencies lose business and opportunities pass us by. Less frequently, the conversation is the result of adequate research and results in unexpected guidance. Sometimes, the right thing to do is to tell our clients to spend less.

We recently joined forces with a big box retailer a few months before they entered into one of their key annual selling periods, back to school. Our first step was to analyze the business landscape. During our research we discovered key market factors that showed us our client’s status quo approach this year would likely fail in 2011. We found that as usual, school shoppers were motivated by price, convenience and selection but with gas prices continuing to rise, we believed that our target was going to be drawn even more dramatically to Walmart and Target for the lure of price savings and to avoid multiple shopping trips. In 2010, those two competitors spent a combined $223 million during this occasion for 62% of the market. Walmart owned 48% share at a spend of $93 million and Target owned 14% share with a spend of $130 million. The dominance of Walmart was demonstrated most dramatically when, between 2009 and 2010, they cut their spend by half from $180 million in 2009 to $93 million in 2010 while only losing 3% market share. In any event, the Target spend alone was approximately ten times more than our client spent during the same period in 2010.

After further research into the client’s 2010 plan, we learned that they spent 80% of their budget against a national television broadcast plan during a four-week period. Unfortunately, they were being dramatically outspent and their message was being drowned by competitive market pressures. We felt we could do a better job with less money. In fact, we believed that unless our client was prepared to compete head-to-head with Walmart and Target, to spend at the same level of 2010 would be irresponsible.

Accordingly, the client’s 2011 plan was constructed to spend less than half their 2010 budget utilizing a mix of national and local radio at heavy weights with a small flight of local, vendor funded, television. Further, the plans were timed to start locally, by market, to coincide with school shopping behavior, which starts approximately two-weeks prior to the first day of school and then sharply declines in the two weeks following that start date. Finally, our local plans focused against our top 24 markets, which represented over 50% of the business. This allowed us to impact the most important markets with media levels that reached our target customer with enough frequency to ensure our client’s brand was on the consideration set for the shopping event.

Reduced media costs, a smarter media plan timed to be relevant to shoppers coupled with messaging that was based upon the insights of low prices, convenience and selection resulted in comp positive sales in the back to school category for 2011 with increased return on marketing investment. So, after a little bit of homework, we found a way to have a very different conversation with our client. Sometimes it makes good cents to spend less.

If you would like to see if you can spend less on advertising and still reap the rewards, give us a call.

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