Advertising: Don't Spend More to Get Less

Screenshot from a Frito-Lay Doritos Super Bowl ad Photograph by PepsiCo via AP Images

You can buy 30 seconds of ad time in the upcoming Super Bowl telecast for about $4 million. That’s up from $3.8 million last year and a mere $2.2 million in 2000. I guess Fox Sports didn’t get the memo that the economy is still sluggish.

Or perhaps it did. The network can get away with charging premium prices for ads in the Super Bowl because of its uniquely massive audience. It’s the only place left where you can reach more than 100 million people in one shot (and expect them to pay rapt attention to boot). But media inflation isn’t the exclusive domain of the Super Bowl; the cost of advertising in every medium continues to rise. I can’t think of the last time a media rep dropped by my office to announce a rate reduction.

As if that isn’t bad enough, consumer attention continues to fragment. The recent explosion of marketing and media options has far outpaced population growth, resulting in fewer eyes and ears available for any given medium. That gives marketers the privilege of writing bigger checks to reach smaller audiences. My term for this dreadful phenomenon is fragflation—the combination of fragmentation and inflation that wreaks havoc with marketing budgets.

You might note that fragflation sounds a lot like stagflation, the correlation of high unemployment and high inflation that economists thought was impossible until it happened in the 1970s. Some experts think that the broader economy is headed into a new period of stagflation if our unemployment trends keep up and inflation kicks in. We may be able to dodge that bullet, but such is not the case with fragflation. It burrows on during good times and bad like a groundhog in a greenhouse, undermining everything that’s trying to grow.

Years ago my firm conducted a study of this phenomenon, evaluating the reach and costs of generating impressions year over year for a variety of clients. We found that fragflation could take an annual 4 percent to 6 percent bite out of a marketing budget, causing brands to go backward by simply standing still.

What’s a marketer to do? The simple answer to combat fragflation is to spend more. But that’s not practical on a sustainable basis, nor is it responsible. Fortunately, total audience reach is less important than effective reach. You can achieve greater success by targeting fewer people more convincingly than trying to reach as many as possible. And the dynamic environment that makes fragflation so insidious also presents new opportunities to brands that are alert. Though the effectiveness of your old media buy may be diminishing, you can overcome it with a new way of thinking: Don’t buy; build.

Think about it. When a brand advertises, it’s paying for access to a network—a cable channel’s viewers, a radio station’s listeners, a magazine’s readers, or a website’s visitors, for example. But in the new world, brands are increasingly able to build their own networks.

Consider Starbucks. The brand has more than 35 million fans on Facebook, well over 4 million followers on Twitter, 6.5 million members of its Starbucks Rewards program, and nearly 17 million mobile app downloads. Each of these vehicles has its limitations, of course, but so does a Super Bowl ad. The point is that Starbucks can reach tens of millions of people any time it wants to continue building its brand, offsetting the inefficiencies of fragflation. In fact, the company has recently begun leveraging its Starbucks Rewards network to give a boost to its grocery products and Teavana stores. The network-building approach is more complicated than buying ads through paid channels, and it takes a while to develop an audience, but it provides increasingly more efficient returns over time.

I know, I know, Starbucks is a huge brand with the creativity and resources to build its own network. But resource limitations aren’t stopping Legendary Whitetails, a small, family-owned business in Slinger, Wis., that targets a narrow niche of hunters, from developing a Facebook presence that will soon be pushing 1 million followers. By developing its own network, Legendary Whitetails can rely much less on things like expensive print ads and trade shows.

As I explained last month, we’re all media moguls now. In fact, the smaller the brand, the greater the benefit of building its own network. Starbucks can at least consider advertising in the Super Bowl, which is nothing more than a fantasy to the vast majority of brands. It’s not that you’ll ever be able to completely escape fragflation, as most companies won’t be able to entirely get away from renting access to other networks. But the sooner a brand can begin building its own network, the less it will have to rely on others and the less fragflation will cost it.