Wednesday, December 09, 2009

Tapped out consumers: what's a marketer to do?

'Advertising is the art of convincing people to spend money they don't have on something they don't need'
-Will Rogers

With credit continuing to contract, unemployment high, and The Great Recession wobbling between green shoots and brown leaves, the macro-level challenges to the consumer's spending habits seem apparent for the near term: Less is more...more or less.

In fact, when one looks at the income quintiles of US Households, the extent of the Great Debt Deleveraging taking place should be obvious:

Household debt as a percentage of GDP has reached 100% only twice in US history...1929 and 2007. Much of what US consumers bought over the last two decades was bought on credit. Much of it, perhaps, because advertising was so successful at convincing people in the way Will Rogers said.

But if thrift and living within one's means is the new required reality, what can advertisers and marketers hope to do going forward?

I took a look at this question by asking myself the following question: if everyone were to live within their income means, what is the value of a consumer's time in terms of their prospect for consumption? In other words, what is the absolute customer value built in to each minute of engagement and attention?

Rather than focus on the cost to reach someone, I thought I'd focus on the potential spending value of that person's time (and thus, the potential revenue value).

The answer? 5 to 22 cents per minute (depending on which income quintile the consumer inhabits) everything...including water, taxes and energy.

See table and assumptions (click to enlarge):

An adjustment to the per minute income value is made by multiplying the unadjusted value by 1.33 This adjustment is meant to account for the one-third of a person's time that is presumed to be unavailable for engagement (e.g., sleep, hygiene). Income conservatively based on lower bound for each quintile. All data from US Census 2004

So What?

Of course people will still make use of some credit. And most customer value calculations would use a multiyear or lifetime value. But whatever you think of the math and the assumptions, the new reality of living within one's means means that advertising, PR and the larger world of marketing have a hopeful using media in a social, engaging way.

I don't mean to imply that every brand has to swap it's marketing dollars from print to a Facebook Fan page. I do mean to imply that there are new, lower absolute values to the return one might expect from an investment in communications that seek only attention or delivering impressions.

Many in media have been slow to embrace planning approaches that went beyond broad-based awareness building, focussing primarily on the spend necessary to get a debt-fueled consumer's attention. In that world, sales lift was generally a sufficient measure of advertising impressions success.

But that approach may be done. In an era of thrift, engagement becomes a primary objective for brand communications. Social approaches to brand awareness through engagement, done well, have among their qualities:

  1. Low cost per minute of engagement relative to the value of the person's time (due in large part to the ownership of the engaged in building awareness and interest among their social network) 
  2. High relevancy (due to personalization and ownership of the message taken by those engaged)
  3. Tight audience focus (self-selection by the engaged reduces the inefficiency of audience descriptions based on gender, age, and race stereotypes)
  4. Trust (resulting primarily from the interaction of people with one another rather than one-size-fits-all, one-way brand abstractions).
  5. Learning (derived from observation of and interaction with the people who incorporate brand engagement into their lives in different ways).
  6. Measurement against predefined value objectives (available from the firehose of data available in near realtime). 
For more on social media measurement see here, here and here. For more on assigning a value to a social media visitor, see here.

    Taken together, engagement-based approaches to communications may provide corporate marketers the best chance of realizing realistic revenue impacts in an era of less consumption.

    No group or organizational unit owns engagement around a brand. In every company, though, there are leaders and those who would be led. Communications, customer service, sales and marketing professionals are all potential leaders along a path of customer engagement.

    The leaders who emerge will be recognized by their obsession with asking questions and listening to the answers.

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