Imagine a scenario where marketers spend the majority of their budgets buying media that is outdated and no longer effective — and meanwhile fail to understand the value of the media in which consumers spend the vast majority of their time, energy, and passion. It sounds irrational, but this is the situation we’ve got in today’s media — and it may be a contributing factor to the underperformance of the national economy.
One of the most insightful studies released this year by Boston Consulting Group found that the 23 million small businesses in the U.S. allocate only 3% of their advertising spend to digital. Larger companies spend more, but digital still comprises only 15% of their marketing budgets.
Meanwhile, it’s clear that the effectiveness of digital media has surpassed that of legacy — and it’s no longer even close. “Overall, consumers now spend an average of 10.7 hours a day with all forms of media, with 5.6 hours, or 57%, dedicated to digital, including social media and mobile internet usage,” reports GlobalWebIndex. Average daily usage of digital is 9.6 times longer than the use of print per day, according to eMarketer, but yet more is still spent just in newspaper ads than on all digital and mobile combined.
So marketers are spending the vast majority of their budgets on media that consumers are no longer engaging with — and this misalignment could be having a major adverse effect on their businesses.
Many small businesses are overwhelmed by the behavioral change of their target customers. Their lack of adaptation has profound unintended consequences:
1. Billions of dollars of precious local marketing dollars are going into a virtual sinkhole. Local auto dealers are the biggest category spenders in most markets. In Portland, Maine, the 78th largest market in the U.S., auto spends less than 10% of its dollars on digital. Do they really think that millennials are watching the 6 pm news or the reading the Portland Press Herald?
2. This misaligned spend is de facto waste for these local businesses, who are not reaching their target audience. The waste impact means that fewer consumers are educated (or romanced, or entertained) by great marketing about a product or service.
3. The impacts of the misaligned spend means that fewer products and services are purchased. This goes far beyond “opportunity costs.” The misaligned spending adversely affects company’s sales, profits, and ultimately hiring. According to Alan Mutter, “eMarketer expects the consumption of newspapers and magazines will continue to fall in 2013, as they have for the prior three years. Newspaper consumption, which averaged 30 minutes a day in 2010, is expected to drop to 18 minutes in 2013, reflecting a decline of 40% since 2010. Magazines, which averaged 20 minutes in 2010, are forecast to slip to 14 minutes this year, a drop of 30% since 2010.” Thus, while digital spending is increasing, proportionally to consumer’s time and what they value, marketers conservatively are spending 10 times too much on print.
In a recent meeting I had with a bank president who still spends the majority of his marketing dollars in print and local broadcast, he outlined that his target audience was women decision-makers. He later went on to explain how his wife gets all her information from her smartphone during the day, while at night, she second-screens on a tablet while watching television. The irony was apparent.
There are a number of factors for this lack of progress:
1. Perception: Certain demographics are more effectively reached via legacy media.
The idea that older consumers are more print-driven for news consumption has been conventional wisdom perpetrated by the newspaper industry and agreed to by the digital world. But the most recent edition of the Reuters Institute’s Digital News Report blows up that belief. The one demo newspapers thought they could claim has in fact been lost: more 55-plus Americans get their news from digital sources than from print sources. In two words: game over.
2. Excuse: I get called by a dozens of digital media companies each month, and I can’t measure them all.
In each sector, there are emerging market leaders. The difference between digital tools and non-digital tools is that the vast majority of digital tools can provide explicit measures of the consumer interaction, whereas legacy media can only offer the audience size and anecdotal evidence: “The guy walked in with the ad in his hand – see, it works!”
3. Reality: Most marketing decision-makers are senior folks who were trained and gained their experience at a time when buying the top TV station and the local newspaper did the trick.
Those days are gone. That smart, affluent 30-year-old is watching Hulu or Netflix and may have never touched their local newspaper or visited their Web site. An ad needs to be adjacent to a digital experience and wrapped around or placed beside content they seek and value.
Marketers need to better evaluate what it truly takes these days to win the consumers’ hearts and minds, and rethink their relationship to digital platforms. When marketers align their ad spend with the behaviors of consumers, the impact will drive sales, drive profits, and drive the economy.
Josh Fenton is the co-founder of GoLocal24, a digital news company focused on local media in midsized markets (not hyperlocal).