This year the cost of a 30-second Super Bowl ad was $3.5 million – up from $3 million the year before. Since 2001, the price of a Super Bowl ad has gone up by 59% (from $2.2 million per 30-second spot).
The ever-rising price of a Super Bowl ad is another sign of why it’s wrong to try to compete on price. Even in a down economy, it is possible to raise your prices if your customers value what you offer and if you know your competitive advantages.
We tell this to our clients all the time: “Price wars have no winners.” If your only way to compete is to cut your prices to the point where you can barely make a profit, then you need to re-think the game; or find a new market to play in.
If you look at the example of the Super Bowl, the customers who buy Super Bowl ads (marketers – ad agencies and the companies that hire them) clearly are not “price sensitive.” Most companies would think “it’s crazy to pay $3.5 million for a single 30-second TV ad,” and yet the Super Bowl TV ads were all sold out.
Why are customers willing to pay almost any price for a Super Bowl ad?
3 Competitive Advantages of the Super Bowl in the TV advertising market:
- Unmatched audience and reach: Super Bowl ads are guaranteed to put advertisers in front of millions of eyeballs (this year’s Super Bowl was watched by 111 million Americans) and the ads get additional attention from news coverage, viral campaigns and social media commentary about the commercials themselves. The Super Bowl has become an unofficial national holiday dedicated not only to football, but on a smaller level, to advertising itself.
- Prestige play: Buying ad time for the Super Bowl is often a sign of prestige. By buying a Super Bowl ad, big companies can show that they have powerful brands with mass audience appeal, and emerging companies can get a big splash of media attention. Running an ad during the Super Bowl sends a signal that a company is willing to be a big player in the media landscape.
- Nothing else compares: There is only one Super Bowl. No other TV advertising opportunity is quite like it. If you want to put an ad in front of millions of highly focused consumers who will be more likely than usual to actually watch and remember the ad, the Super Bowl is the time to do it.
For all of these reasons, it’s no wonder that the Super Bowl can charge whatever they want for ad time.
Where do you offer something specific that can’t be found elsewhere that is perceived as very relevant to your customers? What will make your customers feel like they got something very special? How well does your company communicate that?
If you can you give your customers an unmatched, one-of-a-kind experience, and communicate your competitive advantages in your marketing messages, you’ll be able to command more profitable prices, year after year.
One final thought on the Super Bowl: It’s obvious that the Super Bowl is a good business for the TV networks that broadcast it, and although the Madison Avenue advertising agency world always gets excited about Super Bowl Sunday, I’m not convinced that these Super Bowl ads are actually a smart use of money for the advertisers themselves.
Do most of the companies that advertise at the Super Bowl even know what their ROI is for their Super Bowl ads? Or are these companies’ ad agencies selling their clients on expensive ads based on the nebulous concept of “brand awareness,” which is hard to calculate and hard to value? I personally find very few ads that deliver a message of relevance. I am not going to run out and buy chips because some sloppy guy is licking his fingers after devouring a bag. Did that send you racing out to the store? I surely didn't.
According to a recent article in the Economist (“The winning streak: HBO and the future of pay TV”), HBO (Home Box Office) is facing a complex, ever-changing climate, with more innovative competitors than ever before. Even though HBO is critically acclaimed, wildly popular and highly profitable (104 Emmy nominations in 2011, 28 million subscribers, $4 billion in annual revenues, responsible for ¼ of the operating profit of its parent corporation Time Warner), it still needs to adjust to make sure it stays relevant to the rapidly changing market for TV entertainment.
HBO has become known for setting the standard for smart, intense, “adult” television that doesn’t have to meet the limitations of broadcast TV – many writers claim that HBO offers them far greater creative freedom.
As a result, because of this creative freedom, HBO is a creative playground of choice for some of Hollywood’s top talent. Screenwriter Alan Ball worked with HBO to produce the show “Six Feet Under” soon after winning an Oscar for the film “American Beauty.”
3 factors causing HBO pressure:
Eroding consumer buying power: The economy has taken a toll on the disposable income of millions of middle-class American households, making people less willing to pay for TV. According to the Economist article, in 2010 the proportion of Americans that pays for television dropped for the first time ever. Many Americans are looking to cut spending in any way they can, and cable TV (and especially premium subscriptions like HBO) are often at the top of the list for spending cuts.
The end of the “home box office?” Although HBO is best known in recent years for its award-winning original TV series, a large part of its programming schedule consists of broadcasting movies – hence the original “Home Box Office” name. But this movies-on-TV business model is coming under pressure in the age of Netflix instant video streaming and video-on-demand. People have more choices than ever for how to watch movies, sooner and sooner after they are released in theaters, and they don’t need to subscribe to HBO to do it. We’re reaching the point where everyone has the ability to create their own personal “home box office.”
New competitors for premium TV: At the same time, HBO is facing intensifying competition in the original TV production business. Showtime and Starz have created critically acclaimed TV series of their own, like “Dexter” and “Weeds.” AMC has launched hit shows like “Mad Men,” “Breaking Bad” and “The Walking Dead.” Even Netflix is getting ready to introduce its own original series in 2012 called “House of Cards,” starring Kevin Spacey and produced by David Fincher (director of the film “The Social Network”) which won’t really be on “TV” at all – it will be available to Netflix’s instant streaming customers.
HBO still has a very strong brand. But “brand” alone is not enough to help companies overcome their challenges. Brands can lose relevance with customers for all sorts of reasons that are often beyond the control of the brand managers.
When working with companies, I often start the presentation by asking them, “Do you have a brand?” They say “Yes.” Then I ask, “Does your competition have a brand too?” They say “Yes.” Then I say, “Oops, now what?” Companies sometimes lean too heavily on brand. The worst mistake HBO could make would be to assume that “we’re HBO, and no one can do what we do better than us.” Because the fact is, the trends in technology and consumer behavior all point to a growing diversity of media channels, and greater ease for consumers to access the content that they want to watch, when they want to watch it – without having to wait for HBO’s programming schedule.
What HBO is doing to compete: "HBO Go"
HBO’s business strategy for the future appears to be centered on its new online streaming service, “HBO Go,” where subscribers can get on-demand access to HBO’s original TV shows, often before they air on TV. In the future, HBO could potentially sell its shows directly to customers, without even needing to rely on paid TV subscriptions.
As the pay-television system comes under strain, HBO is wise to consider creating its own platform to sell its content directly to the people who watch them.
The future of television could look very different in another 10 years. The same is true for your industry, whatever business you’re in. Are you making the adjustments today that will help you stay relevant tomorrow?
Chart via: Business Insider
There was a great article in the Motley Fool (“Five Companies That Know Why They’re Great,” by Matt Koppenheffer) that mentioned five companies that have done a great job of identifying and capitalizing on their competitive advantages. This article offers several ideal examples of how these high-performing companies have honed in on what truly makes them great, and have trumpeted their greatness to the marketplace in a way that keeps buyers coming back again and again.
One of the companies on the Fool’s list was Costco, which was also one of the companies written about in Creating Competitive Advantage. Costco is a discount warehouse retailer, and their #1 competitor is Sam’s Club, owned by Walmart. Even though Walmart is the 800-pound gorilla of retail, Costco has bigger sales and profits than Sam’s Club.
How do they do it? After all, retail is a price-driven business, right? No one can possibly compete with Walmart, right?
Wrong. Costco competes with (and beats) Walmart not by strictly competing on price, but by offering a highly targeted and refined shopping experience. Here is how Costco “knows they’re great,” and how they have structured their business operations around their key strengths:
1) Know your customer: Costco goes after a certain type of customer: small business owners who are status conscious and who have money to spend on bargain-priced premium items like Dom Perignon champagne, luxury watches and tech gadgets. The reason why Costco decided to focus on small business owners is that they realized that these people are often some of the wealthiest people in their communities: they have successful businesses, they want to buy good stuff, but they don’t want to spend a lot of money. Of course, not every Costco shopper is an entrepreneur, but this customer base has remained the focus of the Costco marketing effort. Even the Costco members’ magazine includes many articles offering small business advice.
2) Deliver bigger value, not just lower prices: Costco doesn’t just offer low prices, it offers exceptional bargains on elegant, sophisticated products that people really want to buy. Costco is not just a mass market retailer; instead they’re a curator of high-value offerings, priced at a discount. Most of the Costco members who I know don’t shop there for cheap prices, they shop there for the awesome merchandise and the limited-time-only “treasure hunts.” Whether it’s imported Italian leather sofas or designer clothing or high-end kitchen equipment or killer deals on flat screen TVs, people are often pleasantly surprised by what they find on sale at Costco.
3) Treat customer service as an investment, not a cost to be shed: Costco has been criticized by some Wall Street analysts for their high labor costs – and Costco does pay their employees quite well. But this is not a blind spot on the part of Costco’s executives, it’s a strategy. Costco delivers excellent service. Everyone in the checkout lines at Costco tends to be smart, personable and "on the ball." Costco employees go out of their way to hustle, to find items that customers couldn’t locate, or point people in the direction of the latest deal. It’s hard to find good customer service these days, but Costco delivers it.
Even in a price-cutting business like retail, there are ways to compete (and win) without focusing solely on price. Costco offers a different model for success in retail.
What could your business learn from Costco? Do you know your customers well enough, and are you focusing on the right kind of customer? Are you giving your customers the experience of a dim, dreary warehouse, or a dazzling array of “treasure hunts?”
For the past several years, young people have fallen out of the habit of wearing a wristwatch. After all, who needs a wristwatch when you have a cell phone? Most young, tech-savvy people prefer to simply use their smart phones as their time pieces, without strapping an additional item on to their wrist.
But according to a recent article in the New York Times (“The Wrist Watch is Reimagined. Will Young Shoppers Care?”), watch makers are trying to recapture the interest of young consumers by reinventing the wrist watch. HP and Fossil have teamed up on a new wrist watch with wireless Internet and Bluetooth capability that would alert the wearer whenever new e-mail, Facebook or Twitter messages arrive. The wristwatch wearer could check in on Foursquare at the push of a button or quickly send auto-replies to their online social network. The idea is that a wristwatch could soon become much more than just a way to tell time – it would be a “connected watch” that would be a portable Wi-Fi hotspot on the wearer’s wrist.
With all due respect to the people who created this product, it seems like a solution in search of a problem. Who needs a watch to tell you to check your e-mail? People already have all of these capabilities on their Smartphone’s without adding another accessory to the mix.
Years ago in a book called “Marketing Imagination,” Theodore Levitt cautioned that too often, companies get carried away with the idea of “innovation” regardless of whether the customer actually needs or wants the product. It doesn’t matter how fancy your technical features might be – if your product doesn’t solve a problem that your customers actually care about, you’re not going to sell very many of them. In other words, is your product relevant to the customer?
I would be curious to hear if the developers of the “connected wristwatch” have done any market research, customer focus groups, or other studies to identify the ideal target market and actual appeal of this product.
Wristwatches are still big business in America. According to the New York Times, the casual watch industry had sales of $2.35 billion in 2010, up 4 percent from 2008. However, sales have grown fastest among older consumers (33% increase from 2008-2010 among 35-44 year olds, and 104% for age 65 and older). Young people just aren’t buying wristwatches any more: watch sales have dropped considerably among 18-to-24 year olds – falling 29 percent from 2008 to 2010.
Perhaps instead of trying to add unnecessary bells and whistles to a product that young consumers don’t care about, the wristwatch industry should focus on its core market of older customers who are still actively buying wristwatches. There clearly is relevance in this target market.
Instead of trying to make a wristwatch into a Smartphone (but without many of the features that make Smartphone’s great), the wristwatch industry should take a hard look at the inherent competitive advantages that make people want to buy watches.
What is it about watch that makes people decide to buy one and wear it? Is it a kind of personal fashion statement, a sign of status and stability, or an emotional connection?
Millions of people still choose to use a wristwatch instead of just glancing at their Smartphone’s to tell time; watch makers need to find out what is unique about the experience of using a wristwatch, and decide how they can market that experience as a sustainable competitive advantage.
The flip side is a watch created many years ago by Tissot, a division of Swatch Watches. They created the first ever touch screen watch, long before “touch screen” was in fashion which allow the user to touch it for the barometer, temperature, altitude, etc. But they let that watch and its competitive advantage become Tissot’s best kept secret. Their marketing did not reach the relevant market for this watch, bikers, hikers, pilots, love the watch but most didn’t know it was available.
Innovation for its own sake often leads to wasted money and wasted time. Sometimes it’s better to get back to basics and take a hard look at what got you here – and use that traditional foundation to craft a long-term competitive advantage. And when you find relevance, shout it from the roof tops so your market knows its available.
Contact Smart Advantage for more information on how to do this for your company.
Drake University's D+ Campaign Gets Them Noticed
Drake University in Des Moines, Iowa recently unveiled a new marketing campaign, based around a visual of a “D+.” The campaign intended to focus on the perceived advantages of a Drake University education, but some critics have argued that it puts the school in a bad light.
Drake University administrators have defended the campaign, saying that even though some adults question the use of the term “D+,” the campaign tested well with the target audience of high school juniors and seniors who are deciding where to go to college – this is a “buzz” campaign gone right.
Drake University used creativity to stand out from the crowd in generating brand awareness, and it has translated into increased interest from prospective students: campus visits are up by 22 percent, and admissions inquiries are up by 63 percent.
This story illustrates a valuable point: your marketing messages cannot please everyone! In fact, some of the most effective marketing messages actually disappoint or discourage some people – but that’s OK, as long as you’re speaking effectively to the audiences that matter most to your business.
Taking a "Risk" Can Help You Break Through the Clutter
In the case of Drake University, they’re trying to reach an audience of high school students who get good grades and are interested in attending a private college. Younger people today tend to appreciate irony and sarcasm, and they have a sophisticated understanding of advertising – they’re able to see something like “D+” attached to a university’s marketing campaign and know not to take it literally.
Most higher education marketing looks and sounds the same – cameras panning across green, leafy campuses, students peering into microscopes and swirling flasks of chemicals, earnest classroom discussions. Most universities are too risk-averse in their marketing messages, and as a result, they never break through the clutter.
Kudos to Drake University for understanding its target audience and having the guts to speak directly to them with a provocative (and attention-getting) marketing message. How many other colleges and universities can say the same?
Part Two: Now that you got their attention - Make sure to Close the Sale
How to Start Strategizing for Your Marketing Message and Campaign
There are many components to successful advertising and marketing messages, but the most important is strategy.
With all the clutter and noise in the marketing landscape, it’s more important than ever for companies to have a keen strategic focus behind every marketing message they send. You need to have a rationale for each message – who are we trying to reach, and what are the results that we’re trying to achieve?
It’s not enough to take a scattershot approach. There are too many undisciplined ads out there that are seemingly trying to get laughs or drive up YouTube views, but that aren’t actually connected to the strategic underpinnings of what the brand is about and what its customers want to buy.
Here are a few key questions to consider for any marketing or sales message:
- What are we trying to accomplish? “Boost sales” is not always the answer. What if you want to reward loyal customers, or improve awareness, or drive traffic for a one-day speciale event? There are many possible goals for any particular marketing message, but it’s important to be clear about which goals you’re aiming for – before you spend time and money on developing a message.
- Who are we talking to? Not every ad is for everyone. Even a big budget Super Bowl ad needs to have a certain audience in mind – “everyone” is not an option. Are you targeting males age 18-35? Older married couples age 55 and up? Women age 24-39? What do you know about the demographics and psychological profile of the audience? What do they want? What can your brand and your product help them achieve?
- How does this message connect to the brand? Every marketing message should stay true to the overall picture of your brand and your company. The strongest brands have a consistent look and feel – if you see an ad for Nike, you often know it’s a Nike ad even with the first glance of the ad. Just like certain musicians have signature sounds, strong brands have signature styles.
- How does this message fit with our overall plan? Marketing messages should not be created in a vacuum – you need to have an overall communications plan that outlines your key audiences, objectives, strategies and tactics.
- How will we know if it works? It’s increasingly possible to measure the results of every marketing message we send – whether it’s directing prospects to call a certain 800 number or visit a certain website. Marketing no longer has to be a guessing game or a shot in the dark.(Google Analytics Tool is great for keeping track)
- What are we going to do if it doesn’t work? What is the backup plan in case the message doesn’t get the results you want? Are you prepared to test a few different types of message? Send different versions to different audiences? (Double-Blind Marketing Research is a must)
- What happens if it works “too” well? Are you prepared for an avalanche of new business and new prospects? What if the phone starts ringing off the hook? (This is a great problem to have, but it’s still worth planning for.) And who could forget when KFC had to cancel grilled chicken orders after Oprah advertised their grilled chicken deal on her show.
Every marketing message requires time, planning and diligence. It’s not just about being clever with words and savvy about customers, it’s about having a disciplined, thorough process to connect the right messages with the right audiences.
Don't Forget About Your Competitive Advantages in Your Marketing Campaign
Smart Advantage guides you to uncover, craft, and communicate your Competitive Advantages. Companies we’ve worked with on our full process the past 2 years (since the start of the recession) have experienced an increase in sales of at least 10% in the first year. The majority have experienced much more, but to be conservative, 10% is an amount we feel any company can achieve. That 10% would drop predominantly to your bottom line. Depending on your current revenue, the ROI with Smart Advantage would exceed 100% (slightly better than what you can expect from an investment in Wall Street).
What is your Competitive Advantage?
It’s more important than ever for companies to differentiate themselves in the market, because all of your competitors are saying the same thing. So much of marketing messaging nowadays just runs together – it all starts to sound like “Blah, blah, blah…” and people tune it out.
I tend to pick on the insurance industry as an example of marketing that lacks differentiation. Many insurance companies sound the same – their taglines may be different, but the underlying message is identical:
- Allstate: Are you in good hands?
- Liberty Mutual: Responsibility – what’s your policy?
- State Farm: Like a good neighbor, State Farm is there.
- Nationwide: On your side.
The problem is that insurance has become a commodity – every brand sounds the same. Even worse, some insurance companies have fallen into the trap of competing solely based on price:
- GEICO: 15 Minutes can save you 15%
- Progressive: Helping you save money
And in fairness to the insurance companies (and their ad agencies), insurance is a tough product to advertise. You can’t “see” insurance. It’s not like a car or a washing machine or a bottle of Coca-Cola that you can touch and describe; insurance is a contractual agreement between two parties, where one party agrees to pay the other in the event of a loss. (How do you put that in a TV ad?)
This is why you see insurance companies trying to differentiate themselves – State Farm features the individual stories of their network of local insurance agents, and Liberty Mutual runs TV ads with a visual representation of “responsible” behavior (helping old ladies cross the street, or opening doors for others) to create a positive association with their brand.
Allstate Trying To Break Out and Differentiate: Adding Value
As a way of breaking out of the commoditized price wars and repetitive messaging of the insurance industry, Allstate recently introduced a provocative new TV campaign featuring a character called “Mayhem,” who carelessly wreaks havoc while texting behind the wheel, drops tree branches onto parked cars, and generally embodies the fears of car insurance policyholders everywhere.
This is an interesting message to see from an insurance company, because instead of focusing on price or the old standby of “responsibility,” Allstate is reminding customers of the uncertainties in the world, and is offering them a message of protection and value – “no one protects you from Mayhem like Allstate; you get what you pay for.”
Although GEICO focuses on price as the key message of its advertising, it also has a unique voice in the market. With its friendly talking gecko lizard as a spokesperson, GEICO has a highly recognizable brand mascot. With its urbane, sophisticated cavemen (who are annoyed and insulted by GEICO’s fictional “So easy that even a caveman can do it” slogan), GEICO has created a story-within-the-story to appeal to customers who are jaded by traditional advertising.
Even if you’re in a “commodity industry” like insurance, you don’t have to compete solely on price; there are still ways to use competitive positioning to put your brand and your company beyond the crowded conversation of your competitors. It’s so easy that even a caveman (I mean, “an insurance company”) can do it.
When trying to create competitive advantage, many companies fall into a familiar trap – they allow themselves to be defined by the limitations and assumptions of “the business that they’re in.”
For example, consider the soft drink industry – Coca-Cola, Pepsi and other smaller regional brands. This industry is faced with growing media scrutiny and public concern about the health effects of high fructose corn syrup, the main sweetener in most soft drinks. In response, some of these companies are reacting defensively – and in the process, they’re painting themselves into a corner because they’re making the conversation about defending corn syrup instead of making the conversation about their products, their brand, and their unique competitive positioning.
In one of Seth Godin’s recent blog posts, he makes the case that the soft drink industry should realize that they’re not really in the “corn syrup delivery” business, they’re in the business of “delivering joy in a bottle.” Instead of playing by someone else’s script (“big soft drink companies defending the status quo”), there’s an opportunity here for soft drink companies to write a new script – and talk about their unique packaging, their unique product offerings, their unique customer experience that brings joy to people all over the world.
And there’s the famous quote from Steve Jobs back in the mid-1980s that Apple was not in the business of building “computers,” they were building “bicycles for the mind.” At the time, this was a revolutionary concept – after all, most computers at the time were big bulky mainframes, crunching numbers and running spreadsheets – “business machines.” When Steve Jobs first started talking about computers as “bicycles for the mind,” the average computer looked more like a tank than a bicycle.
But today, computers are much more nimble, more elegant, and more focused on getting people where they want to go with sleekness and aesthetic appeal – and Steve Jobs and Apple have been the biggest drivers behind this. Talk about a competitive advantage!
Maybe that’s where Apple’s real competitive advantage comes from – not just innovative designs and stylish marketing and well-engineered user interfaces, but from their unique and deeply rooted understanding of what business they’re really in.
Sometimes the best way to find your competitive advantage is to completely redefine the terms of what business you’re in. You need to rethink not just your own company’s competitive advantage, but the innate purpose and bigger significance behind your entire industry.
How does this apply to your business?
- If you run a bookstore, maybe you realize that you’re not really in the business of selling books, you’re in the business of creating a community of like-minded book lovers.
- If you run an IT consulting business, maybe you realize that you’re not really in the business of technology, you’re in the business of alleviating people’s stress and anxiety about technology.
- If you run a car wash, maybe you realize that you’re not really in the business of soaping and rinsing cars, you’re in the business of making cars more beautiful (and making their drivers feel better about themselves).
No matter what business you’re in, there are ways to re-think your strategies so that you don’t get boxed in by the limitations of “the business you’re in.” Think bigger. Think loftier. Are you building “business machines,” or “bicycles for the mind?”
Too many companies, especially small-to-medium size companies that are not as familiar with the world of advertising, are being sold on “branding advertising” as the answer to all their marketing challenges. Advertising is an important part of building a brand, but it’s not the only part. It’s worth re-visiting the difference between branding and advertising – is your company truly building a brand, or just buying ads?
Let’s start at the beginning: what is a brand?
- Compelling identity, promising value: A brand is a compelling identity that creates an enduring emotional connection with your customers. A brand is a promise of value that delivers a certain distinctive customer experience. A brand is not owned by the company, it’s owned by the customers: if your customers don’t believe in the story of your brand, your brand doesn’t really exist.
- Advertising is not a brand: Advertising is one means of communicating the story of a brand, but advertising in itself cannot create, maintain or build a brand. Branding doesn’t just “happen.” A powerful brand doesn’t develop overnight, and it doesn’t happen by magic.
- A brand is not a logo: Although a logo is the most recognized and succinct expression of your brand identity, the full picture of your brand is more extensive than a single graphic.
- Your brand is part of everything you do: Building a brand requires you to develop a holistic awareness of your company’s operations, strategy and communications. Everything that your company does – customer service, stationery, website design, the way you answer the phone, the way you handle customer complaints – is part of establishing your brand.
The truth is that if you want to build a strong brand for your company, you need to develop a comprehensive sales and marketing strategy that is grounded in your unique competitive advantage. Companies that try to “build a brand” first, without having these other elements in order, are putting the cart before the horse.
You can’t create a brand and then hope that the rest of the company will follow; the brand emerges from the whole picture of what your company does and what your company is about. While you can make strategic decisions about what you want your brand to be, and you can make ongoing adjustments to the way you communicate your brand values, ultimately the brand is not a separate thing from the rest of your company.
Branding is an ongoing process. It takes time, effort and commitment – it’s not something that can just be conjured up with some flashy ads. Your brand is not just for an external audience, it’s almost as important to communicate and reinforce and “evangelize” for your brand with your own employees as well. A brand is something that everyone at the company has to “live” every day – and it’s not just about slogans and pep talks and making people feel good about their company; it’s about making sure that your employees at all levels feel connected to the larger mission and goals of the organization.
The most successful companies have strong brands that are clear, authentic, easily communicated and tied to that company’s strongest competitive advantage – these are brands that people believe in.
Do you understand and believe in your brand? Do your employees? Do your customers?
Unless you can answer “yes” to all three of those questions, advertising isn’t going to make much of a difference. First, figure out what your company stands for and what you do better than anyone else. Then you can worry about buying ads.