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Business Costs & Regulation

Technology, Recession Changing Marketing Forever

Companies have more ways than ever to reach customers.

In the marketing and advertising world, new technology is sparking a revolution. The ability to reach customers anytime, anywhere, and to target only the most promising prospects is altering how would-be sellers and buyers interact.

Those forces are reshaping the $600-billion-plus industries. And it’s affecting companies of all kinds, posing challenges and offering new opportunities.

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One development key to the changes: The growth of data mining -- the collection and analysis of billions of bits of information, which lets marketers figure out the needs and wants of individual shoppers and how to appeal to them. Instead of marketing to all -- using the same television ad broadcast nationwide, for example, or an ad in the local newspaper -- and hoping to snag the interest of some potential buyers, marketers can filter their potential audience to find just those who are most likely to be interested. The consumers -- whether recipients of direct mail, e-mail, text messages on smart phones, Web surfers, magazine subscribers or others -- can be screened by age, gender, location, income, kids’ ages, household size, previous purchases and much more.

Such targeted campaigns, which are far more cost effective than broad-sweep campaigns, will nab 75% of spending on marketing and advertising by 2013, up from 55% in 2003, according to a forecast from communications investment firm Veronis Suhler Stevenson (VSS).

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The focus on targeted marketing “goes hand in hand with the fact that advertisers realize the best customers are the customers they already have,” says Larry Shaw, director of research for Borrell Associates, a marketing research and consulting firm. “You’re getting them to spend more money with you by marketing promotions and loyalty programs to them.”

The second critical development: The blossoming of the Web and new media. Today companies have at least 60 ways to reach consumers, up from about a dozen 30 years ago, says VSS. And most of those routes aren’t conventional ads. Rather, they are Twitter messages, product placements in movies, video games and the like, Facebook pages, online contests, coupons sent via cell phones and more.

The crowded marketplace “is a phenomenon of the last 30 years, but it has accelerated in these last ten,” says Jim Rutherfurd, executive vice president of Veronis Suhler Stevenson. “Companies are less sure who’s listening or watching, and they’re trying to find their audience in new places.”

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What’s more, consumers at this media buffet are choosing less ad-supported media than in the past, opting intead to subscribe to premium cable or social network sites, for example. By 2013, VSS forecasts 46% of all media consumption will be ad-supported. In 2003, 60% was.

As a result, businesses will have to reach consumers in nontraditional ways. “It’s about creating events around different opportunities, different media properties,” says Jack Myers, the editor of the Jack Myers Media Business Report. It’s licensing and merchandising of established brands -- the way Martha Stewart has done it or American Idol did by taking its show on the road.

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Traditional ads can still be successful marketing tools, but as Dean DeBiase, chairman of consulting firm Reboot Partners and former CEO of media analytics company TNS Media, says they’re just a jumping-off point. You need to have other components that build on them, according to DeBiase, citing as examples TV ads that feature Web site addresses and social networking opportunities. You need “something I can forward on to you [via e-mail], catching the whole social media wave,” he says.

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The recession has played a role in this dramatic shift in the industry, of course. The economic downturn took a toll on all types of advertising and marketing spending. It reached a peak in 2007 and probably won’t chalk up gains again until at least 2011.

But the economic slump worsened the hit that print and broadcast are taking from the technology changes. With money tight, companies put more of their resources into online and other media where ads can be closely targeted, getting a bigger bang for their buck. Newspaper ad revenue has plunged 40% since 2003 and will slide by an additional 20% by 2013. Magazines are faring a bit better: A drop of 20% since 2003, with 12% more decline likely by 2013. Network television ad revenue, which shrank by a whopping 15% in 2009 alone, will also continue to shrivel.

Meanwhile, online advertising suffered a milder blow and will grow about 7% this year, though it still only makes up about 10% of all media advertising. That’s why it’s important for marketers to sustain a mix of approaches. Craig Woerz, the cofounder and managing partner of media consulting company MediaStorm, says that consumers want to experience brands through multiple avenues these days. “Overall, digital is a key part of the mix,” he says, “but I don’t think anything can be the most effective as a standalone anymore.”

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For buyers of marketing and advertising, this new modus operandi is a boon. Not only is targeted marketing more cost effective, but results are more measurable. For example, now marketers expect to be able to tally the time and money customers spend on Web sites and to count not only the number of coupons redeemed, but how many additional purchases were made at the same time.

Small firms may particularly benefit from the ability to target local audiences. Ditto niche firms that market solely to consumers that fit a specific profile. “If your customer set is 5,000 people, you can reach those people pretty efficiently without all the excess expense” of a mass advertising campaign, Rutherfurd says. A dentist, for example, is wasting time and money advertising outside the local area, and can get the job done more efficiently through something like an e-mail campaign.

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