The holidays are here and as business activities slow down momentarily it is a good time to reflect on things we take for granted.  I’d like to spend a little time thinking through the trends in print advertising in this Blog entry, as this topic has become a hotbed of conversations lately. Those advocating the new digital world enjoy forecasting the imminent demise of print as they point to the struggling newspaper and magazine industry. Print-based companies say print advertising remains the most effective way of communicating to consumers as they point to studies that show that consumers heavily rely on this resource to plan their shopping. Which is true? Let’s look as advertising spending statistics to help us make objective decisions regarding the best approach for planning advertising and promotional events.

In anticipation of the impact of the recession most companies have reduced operating costs aggressively and advertising budgets were not spared the scalpel. A recent article in the Los Angeles Times cited that newspaper, magazine, radio and outdoor media ad spending was down 24%, 25%, 21% and 15% in the first half of 2009. These numbers are large and invite a number of interpretations into ad spending trends in traditional media.  The article goes on to say that the two growth areas in advertising spending statistics were in on-line advertising (no surprise here) and (drum roll please) newspaper inserts; up 6.5% and 4.6% respectively. While ad spending in digital media continues to grow it seems that the media that retailers have traditionally relied on is doing just fine.

As for whether newspapers will disappear over the next few years an interesting commentary by Dan Kennedy points out that the typical newspaper still posts gross profits of between 10% and 20%; a respectable figure. He adds that most major newspapers, such as the Tribune, have amassed large debts during the consolidation of the Newspaper industry that can’t be serviced by the recent decline in ad revenues. He posits, however, that most newspapers will survive by returning to their roots of concentrating on local and regional issues and leaving the expense of global news coverage to news services, such as AP and Reuters and modifying other aspects of their business model.

While the recent decline in print advertising spending has stabilized and newspaper inserts are likely to be around for the foreseeable future, retailers should not ignore the long-term trends in advertising spending. Advertising spending statistics  completed by the Newspaper Association of America shows that print advertising spending has been stalled or been in decline for several years while on-line ad spending has generally been increasing over the past 5 years.  This is a real trend that retailers need to be aware of.

Upon final reflection, it appears that if you disinvest in print advertising prematurely you may do so at your peril and if you ignore on-line advertising you’ll lose revenues from the fastest growing channel.  The conclusion seems to be that retailers should start planning to make sure their business processes and systems support advertising across all channels and do so without breaking the ad budget. That is, plan to do more with less. We will explore how to do more with less in future Blog entries.

Several years ago there was a lot of buzz in the retail industry regarding cross media promotions that impact marketing events. During a span of two to three years the Interactive Advertising Bureau (IAB) sponsored a large study with around one dozen cases with major manufacturers and retail companies ranging from McDonalds to Kleenex to Pharmaceuticals in order to determine whether promotions that are planned across more than one media channel can return better results. You can find some of the case studies at the IAB website. Each of these studies were funded by both the IAB and a company engages in retail advertising and the results showed that allocating marketing dollars across more than promotion channel indeed did return superior performance.

The conclusion of the study was overwhelmingly positive. Reaching out to targeted consumers using more than one media channel increases sales. Because the studies were designed as a budget reallocation study to determine the most efficient mix of media spending, they came up with the saying “Same Budget, Better Results” to highlight the outcome of the study.

In summary, the study concluded that across all of the case studies and categories that they represent, the optimal mix of expenditures for promotions are as follows:

As its name implies, The IAB studies were focused on determining the efficacy of advertising on the web so stakeholders in the print media felt that the study did not represent print media fairly. Still, while the allocations may be disputed, the companies that sponsored the studies came away convinced that they need to pay attention to more than one advertising channel. We also believe that this is the case.

There is an interesting discussion that has started up on RetailWire on one facet of print advertising – the weekly circular. In whatever form it is distributed in the future (via newspapers or as a circular bundle with no news) there is a strong case to be made that so far no other medium is successfully replacing it, so far. As a couple of responders state, weekly circulars are the primary vehicle retailers have to go to market and sales often decline when the circular is pulled.  Our retail contacts have told us the same. 

Newspapers are getting smarter by allowing retailers to target ads by geographic criteria.  Not to be outdone by the on-line community, the Newspaper Association of America and MORI Research published preliminary results of an advertising study  that concluded that “Newspaper advertising remains the most powerful tool for advertisers who want to motivate consumers to take action.” The study notes that 59% of adults identify newspapers as the medium they use to help plan shopping or make purchase decisions and that 82% “took action” as a result of newspaper advertising. And finally, a poll from AdWeekMedia and Harris Interactive sites that TV ads are helpful to 37% of respondents, and Newspapers coming in 2nd at 17%.

Where does this leave us? Probably the safest conclusion for the retailer’s bottom line is that no one advertising channel reaches everyone and that synchronizing ad placements across channels yields to improved event performance. The next questions that we will address in this discussion is what is keeping retailers from executing the best possible promotional events while keeping their ad budgets level or even by doing more with less. Please visit us again as we continue our theme of Smaller Ad Budget, Better Results. We will discuss organizational/business process issues, technology implementation and business models that will get retailers where they need to be.