Jul 24, 2005

Which comes first, the market or the ad?

Chris Meserole of Democratic Vista emailed me a few weeks ago. (The excitement of receiving mail from a reader is the subject of another post, to be sure.)

Before he moved on to more important, meaningful things, like writing his thesis at Harvard, he worked in marketing a company in LA that did entertainment and brand management. Mostly film and music related, but they also managed companies like Pony. And so he posed this question:
One of the things I used to wonder about then was the distinction between marketing and advertising -- or put differently, where the line was between resolving an inevitable gap between producer and consumer on the one hand and creating an artificial demand on the other.

Do you ever think in those terms? If so, how to do you dinstinguish them?

To start, advertising is a subset of marketing in general. Most ad agencies would have you believe otherwise, but what they do is just part of the puzzle, along with promotion, direct mktg, sales, etc.

The "inevitable gap" Chris mentions is rapidly shrinking today, but back when the traditional model of marketing was still valid, ads were pretty much it. You ran them on TV and in print, you created demand in your product, you got better shelf placement, you made money, and you bought more ads. Agencies got paid 15% of your media buy, and everyone got rich.

Today, that system is changing. Many people like to proclaim with much gravitas that advertising is "dead." Certainly, the old routine is broken. With 9 bazillion channels and Tivo, TV doesn't guarantee reach anymore and people read fewer magazines and newspapers (no stats there, just a guess). Plus, folks today have become quite skilled at avoiding ads. They may enjoy watching them, but I doubt those commercials generate much in real sales. It's become subpar entertainment.

So the gap needs to be closed in other ways and creating demand has transformed into finding ways to meet desires people don't even know they have. (Does anyone really believe that market research told Apple that millions of people wanted a stylish, easy to use, mp3 fashion accessory? I think not.)

I believe what Seth Godin says, that today business IS marketing. Everything a company does, from designing products to training customer service staff to sending out bill statements plays an increasingly important role in creating or sustaining a relationship with people who become or remain customers.

}}} You close the gap by giving the customer ways to get closer to your company, because otherwise, she will go elsewhere...quietly if she's nice, but often the reverse is the case.

}}} And you "create demand" by focusing on needs, by producing something useful or relevant that stands out in the crowd of all the other smart people with the same idea.

In the Western nations, the majority of people have what they need (again, thanks Seth), but they are obsessed with what they want. To rationalize our decisions, we change those desires into necessities, and the consumer marketplace acts like a co-dependent spouse, "Go ahead, buy that 450-horsepower Ford Stomper. You need all that muscle to drive the kids to the multiplex. In fact, you deserve it."

In my opinion, this kind of crap will soon see its last day, because I think people will eventually get pissed when they realize how sick the game is and role they've played. Will they buy less stuff? Probably not. But they will start to look for companies that tell the truth about what they sell. That's the value of all the two-way communication going on today in blogs, podcasts and such.

So marketing is becoming the big kahuna in the business world. And advertising is changing itself to stay employed, slowly trying to sneak into domains they once wouldn't have touched with a ten foot pole, like direct mail, online ads and even stupid fake blogs.

What's truly interesting about this phenomena is how many companies obviously haven't made the adjustment. Just read the ad press for a few days and your jaw will drop at the sums of cash still being spent for 30-second spots the fewer and fewer people will ever see, much less pay attention to. Amazon recently did a very smart thing by taking their ad budget and putting it toward free shipping. I read somewhere that the move is costing them revenue, but conceptionally it's right on the money.

I used to get bummed out that I never had the cojones to try to work in general advertising. Turns out my self-doubt will probably keep me employed for years to come.


Richard Thompson said...

The entire structure of marketing/advertising is an offshoot of a production economy that makes THINGS. Like you said, everyone (in the west) pretty much has everything they need. So we have moved to a self-indulgence/you deserve it trend in marketing. This is running out of steam. No is is duped anymore. Sure, people still want more things, but they are having qualms about how much it's costing them, hence the price pressure on manufactured goods ($40 DVD players, etc).

I think the next step is a bit like what Amazon did, but on a human scale. People will start shifting their ad dollars (ie their disposable income) to SERVICES. They will consume fewer things and spend more on achieving a life-centric comfort/experiences. The challenge for us marketing hacks is how to sell wet-ware. We were trained to sell widgets. Selling services is different. We can't just transpose the rules we've used to sell stuff. We need to invent new ones.

Chris Meserole said...

Tim, thanks for the great response. I wish I could comment in more detail, but the truth is I'd just be echoing your own thoughts. Aside from some of the newer industries, most business models are now so entrenched -- and the competition so even -- that marketing really is the only variable factor left. From airlines to computers to energy, it'll be interesting to see which companies sustain meaningful consumer relations and how they do it.

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hugh said...

"Advertising is a subset of marketing"... Wow, I posted the same thought, only a few hours ago. Great minds think alike etc.

Yep, I totally concur with what you're saying. Advertising as an industry will suffer simply because it isn't getting involved with the marketing process early enough.




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Why don't you just switch on the filtering?

Nearly missed a comment from Mr gapingvoid in all that...

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