Madison Ave. questions retailers' advertising strategies - Brief Article

DSN Retailing Today, June 4, 2001 by Doug Desjardins

DALLAS -- Two leading experts on advertising say retailers spend millions of dollars each year on ad campaigns that have little impact or in some instances even lose money.

Analyst Robert Gordman told IMRA members that avoiding several common mistakes could help them get a bigger bang for their buck during the seminar "Half Your Advertising Does Not Work--But Which Half?"

"Most retailers base their ad productivity on total sales per page," said Gordman, president of strategic business planning for Meridian Inc. "But that doesn't always tell the whole story."

Meridian conducted a detailed study last year on the advertising of a large department store chain. The study tracked advertising in every segment of the business on a day-to-day basis and produced some surprising results. One of them was that bigger isn't always better.

"One promotion featured a 72-page supplement along with radio and TV advertising, but it produced incremental sales for only three to five days after it aired," said Gordman. "We found that small ad sections that run more frequently are far more profitable."

Gordman also discouraged retailers from running ads that appeal to coupon clippers.

"Coupons are just as likely to decrease sales revenues as they are to increase them," Gordman said. "We found that most people who used coupons were already loyal shoppers who would have made their purchases anyway even without the coupons."

Consumers also showed more interest in sales events that featured specific low prices instead of the standard 10% to 15% price reduction.

"We compared two similar sales events, and the one that featured a price point produced margins of 34% as compared to 23% for the percent-off campaign," Gordman said. "And even though it was in a better shopping week, the percent-off promotion made $200,000 less."

Gordman said some other common mistakes include repeating ad campaigns that don't produce results and putting seasonal items on sale in season.

Consultant Don Schultz was also on the venue to talk about the importance of targeting advertising dollars for both short-term and longterm goals.

"Short-term ads are simply designed to get people to come into your stores today and buy now," said Schultz, a professor of Integrated Marketing Communications at Northwestern University. "Long-term ads are designed to create brand messages that stay in people's heads."

"What you get back in the short term will show up in the fiscal year. Creating brand-equity is something that may not show residuals until five years from now, but it's just as important," he added.