12 November 2008
By Bruce Atkinson
“When times are good, advertise, and when times are bad, advertise.”
It is an old adage for retailers but it has been a winning formula for many chains, advertising for growth in good times and advertising to maintain sales momentum when the tide turns.
According to the Australian Retailers Association, many retailers are following the strategy and increasing their advertising spending in a bid to boost customer traffic and lift sales.
Analysing a more extensive Sensis August business report, the ARA highlighted that 16% of retailers of retailers have increased their investment in advertising.
Other strategies adopted to address difficult trading conditions included reducing costs, an approach taken by 30% of retailers, and decreasing staff levels, a response by 11% of businesses.
Richard Evans, ARA CEO, says the Sensis survey had shown higher levels of concern about economic conditions from retailers than any other industry sector, consistent with a reported fall in sales and profitability in the quarter analysed in the August report.
Evans says the increase in advertising is a positive indication that retailers are starting to understand they can't compete on price alone in times of economic uncertainty.
“Rather than focusing on making products cheaper, retailers are injecting dollars into advertising campaigns and thinking strategically about how they can give consumers, who have limited discretionary spend, a reason to shop.”
Despite its relative importance in recruiting new customers and encouraging existing customers to return to stores, advertising is a mystery to most retailers.
John Wannamaker, a 19th century department store owner, is attributed with the observation, “I know that I waste half of my advertising budget but the problem is I don’t know which half”.
The comment still rings true today with few retailers sure about the effectiveness of their advertising and most concerned about the costs involved.
There is little doubt that many retailers are wasting a lot of dollars in advertising by targeting the wrong customer, using the wrong media or making the wrong proposition to customers.
The key to making advertising more effective and reducing the wastage is planning and, in tighter trading conditions where consumers are more circumspect about their spending, it is worth the effort to map out an advertising and promotional strategy.
It is worth noting that one of the key elements associated with appointing an advertising agency is the objective analysis of the business, its best consumer propositions, its target customers and its budget for communications.
Most retailers can’t afford a full service advertising agency but there are freelance artists, copywriters and advertising strategists who can be engaged at a reasonable cost to develop advertising campaigns.
There are also a range of service companies offering artwork, photography and other materials for do-it-yourself advertising that has the right look.
Some media also offer in-house guidance on creating advertising and can provide or recommend production facilities that don’t support marble and glass edifices in South Melbourne or North Sydney.
Newspapers, radio, cinema and outdoor advertising are all media that can provide assistance with production for advertising.
However, production puts the cart before the horse. The most important thing in advertising is the plan.
Advertising can work as a one off event, especially if you want to run a liquidation sale, but it is most effective when it is implemented strategically over a period to create awareness of the brand and to recommend trial by the customer, to encourage customers to visit the store.
Just as an advertising agency would do at the outset in planning an advertising strategy, a retailer taking the do-it-yourself approach to their advertising, must establish the point of difference for the business or, in marketing parlance, the unique selling proposition.
For what is the business best known or most valued by its customers? What attracts attention and, more importantly, what maintains customer loyalty.
The next step is to determine who your customers are and who you want to attract as a new customer. The key customer is obviously the one who will spend the most at the store and that usually means a customer who can be recruited for the longer term rather than a one off event.
A retailer then needs to determine what the advertising actually needs to accomplish. Is the advertising required to remind and attract back lapsed customers or to recruit new customers, particularly in a new demographic or new geography?
Is the advertising designed, for example, to build the retail brand, to develop store traffic and trial of the retail experience offered, to promote the store’s unique selling proposition, to clear specific merchandise or to generate sales across all categories?
Selecting the merchandise to be advertised or the offer to be made to customers is central to the purpose determined for the advertising.
While most retailers will reach for their calculator to decide on a discount that can be offered, there are other opportunities and they could include additional services, guarantees, gifts with a purchase or a topical hook that appeals to a consumer need.
A services example could be a valuation offer for jewellery for a jewellery store or advice on maintenance and care of furniture, curtains or giftware in home product stores or color matching and style guidance for an apparel store.
A topical hook example could be a fuel additive for higher fuel efficiency in a car, merchandise geared to an event such as fashion for the spring racing carnival or plants suitable for drought conditions.
Retailers obviously need to establish a budget and to have established criteria to evaluate the effectiveness of the advertising that includes sales, bottom line results and store traffic, the opportunity to meet and impress potential new customers even if they don’t make a purchase on the initial visit.
The selection of the media is determined by the most effective means of reaching the target customer, the budget available and, in some instances, the merchandise to be featured or the nature of the offer.
Then the challenge is to stand out in the selected media, to attract attention irrespective of the size of the advertisement and to gain a positive response, preferably an intention to act on the offer.
In print media as well as in cinema or outdoor advertising, the headline and/or any photo or illustration grabs the attention.
On television or radio, the story itself can engage or it might be music, headline or slogan or, with television, the visual elements.
Internet advertising can draw on elements of both print media or electronic media depending on how it is structured.
If you think of the most memorable advertising, humour is usually a key element. Remember the ‘Not happy Jan’ and go-go-mobile advertisements for Yellow Pages? Engagement can also be achieved with emotive elements such as animals or children.
Other memorable advertising can be repetitive and loud. JB Hi-Fi built its business on the breaking window television advertisement.
But even if advertising is not destined for a hall of fame on the basis of being memorable or even repetitive and irritating, a retailer needs to establish a consistent look and feel for their advertising.
With consumers exposed to close to 2000 advertising messages every day, they don’t have time to do the mental gymnastics to figure out that various different advertisements are for the same business.
A consistent approach to advertising improves the prospect of a response provided the advertising is evaluated to check that it is hitting the right spot with the message.
Obviously a retailer shouldn’t continue with a bad advertisement but, if the advertisement is right, a consistent look and feel provides quicker identification of the store and is more likely to encourage the consumer to focus on the offer made.
The choice of media will involve negotiations on rates and placement deals but it can also explore opportunities to reduce production costs by using in-house media services or recommended freelance production people.
There are opportunities to keep production costs low while still accessing design and writing expertise as well as the ideas and external view of the best advertising message for a particular business.
Inevitably, advertising should always be designed with a call to action and that means the real challenge for any retailer is to make to a battle-scarred consumer an offer they can’t refuse.