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Sunday, June 27, 2004

The harder hard sell

Economist.com | The future of advertising

More people are rejecting traditional sales messages, presenting the ad industry with big challenges
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The advertising industry is passing through one of the most disorienting periods in its history. This is due to a combination of long-term changes, such as the growing diversity of media, and the arrival of new technologies, notably the internet. Consumers have become better informed than ever before, with the result that some of the traditional methods of advertising and marketing simply no longer work.
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There are plenty of alternatives to straightforward advertising, including a myriad of marketing and communications services, some of which are called “below-the-line” advertising. They range from public relations to direct mail, consumer promotions (such as coupons), in-store displays, business-to-business promotions (like paying a retailer for shelf-space), telemarketing, exhibitions, sponsoring events, product placements and more....this part of the industry was worth some $750 billion worldwide last year, estimates WPP, one of the world's biggest advertising and marketing groups.
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After the technology bust it was easy to dismiss the internet. But the phenomenal success of many e-commerce firms, such as Amazon and eBay, shows that millions of people are becoming comfortable buying goods and services online. Many more are using the internet to research products, services and prices for purchases made offline. Some 70% of new-car buyers in America, for instance, use websites to determine which vehicle to buy—and often to obtain competing quotes from dealers.
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Such consumers can be targeted by internet advertisers and, in some cases, their responses accurately measured. A surge in online advertising is being led by paid-for text-links dished up by search engines such as Google and Yahoo! The response rate from people clicking on paid links can be as low as 1%—about the same as direct mail, which remains one of the biggest forms of advertising. But there is an important difference: internet advertisers usually pay only if someone clicks on their link. This is the equivalent of paying for the delivery of junk mail only to households that read it.
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How are companies and the advertising industry responding to these trends in media consumption? Some people do not believe they amount to a sea-change, while others are simply hoping it will not come to pass on their watch, reckons Sir Martin Sorrell, WPP's chief executive.


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