Despite the uncertain outlook some argue that it is more important than ever to advertise your business
The majority of retail’s biggest marketing spenders have maintained or increased their spend in the past year. While marketing budgets might seem like low-hanging fruit when retailers are cutting costs, it seems the recession has prompted those that already believed in advertising to up their game. But which marketing channels are proving the most popular?
The supermarkets all increased their marketing spend between the year to April 30, 2009 and the year to April 30, 2010. Tesco and Asda increased their spend 25%, according to media auditor Billetts’ figures (see table overleaf).
Billetts business director Zeman Bhunno says this is of little surprise. “The food retailers’ spend is holding up because their business will be less affected by the economic downturn,” he says.
John Lewis, which only really started seriously marketing its business about five years ago, has also increased budgets further this year. According to Billetts, the retailer upped spend by £500,000 last year and John Lewis marketing director Craig Inglis says spend is up for the financial year of March 2010 to April 2011 compared with last year.
That spend comprises about a quarter on TV, a quarter on press, more than a third on online and the remainder on catalogues, direct marketing, events and outdoor.
For many retailers, TV remains the most popular channel, according to Manjiry Tamhane, partner at Ohal marketing response agency. “Typically it makes up 50% to 80% of the budget. Some retailers have maintained their spend levels while others have reduced it slightly,” she says. The TV market has gone through a deflationary period but has come out of that now.
In April, John Lewis launched a six-week £6m TV and press push to drive awareness of its ‘Never Knowingly Undersold’ promise. “We have more than doubled the TV budget this year and, because we wanted to do an emotional job, TV is by far the best media with which to do that,” says Inglis.
Tamhane agrees: “From our client base TV is a clear winner week on week. It tends to dominate when it comes to branding campaigns,” she says, adding: “Print doesn’t tend to be so effective, but it has been shown to work well when combined with radio and a strong promotion.”
Dixons Retail marketing director Niall O’Keefe says the market is changing: “15 years ago it was very simple - we would take a TV ad in the middle of Coronation Street and a press ad in the News of the World. Now you have many more TV stations out there and newspaper circulations have dropped significantly.”
At John Lewis, outdoor advertising has been used to support the company’s fashion ranges. “That brings a kind of stature and theatre to fashion,” says Inglis. Dixons Retail has found outdoor media particularly effective in promoting the company’s new megastores, and as a result outdoor spend rose hugely for both PC World and Currys. “It’s a traditional media but it can give you very large coverage very quickly and remains quite effective. It’s very reactive and very good for getting a message out to a community,” says O’Keefe.
Alternative marketing is also playing a part in retailers’ advertising plans. “Most participate in some kind of sponsorship, but the objective is rarely to drive sales. More often sponsorship is used to align the brand with the subject and values of an event or show,” Tamhane says.
For John Lewis this has meant the retailer becoming a sponsor for the Olympics, tying in with the opening of a store in Stratford. “We are an iconic British brand that is very firmly rooted in the UK and London is very important to us so it feels a very natural fit for us,” says Inglis. Similarly Best Buy is a sponsor of The O2.
Broadcast sponsorship is also increasingly popular. Currys has sponsored The Simpsons since last year, and The Gadget Show was sponsored by PC World and now Dixons.co.uk.
“It’s important to get a TV programme that is complementary to the products, or to your age group and demographics,” points out O’Keefe.
Of course, the one channel that some marketers are getting really excited about is online, which can encompass everything from banner ads, paid search through to social media. With a third of its advertising spend going online, it is John Lewis’s most important medium and spend has increased 30% on last year. The channel is mainly used for rational and product-driven marketing messages. Dixons Retail has switched some of its advertising budget from TV and press to online.
Summit Media managing director Hedley Aylott says it’s a growing trend. “There is definitely an argument for retailers spending less on TV and moving it online,” he says.
As well as increasing budgets on traditional and online methodsretailers are also beginning to commit budgets to their social media efforts - whether they are actively partaking or simply listening.
For Best Buy the use of social media is hugely important. “Investing in social media has and will continue to be a key priority for Best Buy as we see an increasing focus on peer-to-peer recommendations and word of mouth,” says Best Buy UK marketing director Kevin Styles.
However, Tamhane says for many retailers online spend remains relatively low at about 5% to 15% of their total budget. “It is slightly increasing over time but is used more sporadically than the big broadcast media.
“Online spend and return per pound spent is typically much lower than the traditional offline media channels. In some cases it does return a good payback, but off a relatively low spend level,” she says.
To achieve maximum effect, both online and offline marketing needs to be integrated. Argos spends about 20% of its budget online. “Our digital strategy involves continuing to expand and refine our more established online channels such as search, affiliate and email marketing while also exploring and testing the use of newer media, such as mobile and social media, while ensuring that digital forms an integral part of a consistent, overall communications plan,” says Argos head of brand marketing Siobhan Fitzpatrick.
But most importantly the retailer is combining methods - particularly TV and search - which is increasingly effective. “There is a symbiotic relationship, especially between TV and search. Argos expects to grow efficiencies from an increasing pay-per-click search budget via brand TV in order to drive more of the cheaper-branded search traffic at the expense of more costly clicks from generic search terms,” says Fitzpatrick.
Homebase is also aware of the importance of integrating marketing methods.
“We believe there is potential for us to improve our marketing return on investment by more effectively blending our online and offline marketing spend,” says Homebase marketing and strategy director Ajay Kavan.
However, the internet is also changing how customers react to marketing messages and, as mentioned earlier, word of mouth is increasingly important, with customers now less likely to take expensive advertising at face value.
“People are now more research-led when buying a product so customer recommendations, testimonials and video have almost become part of our lives now. It’s about how do you turn customers into marketers,” says Aylott.
Retailers are making their marketing budgets stretch further and work harder than ever before, which means constant analysis is key. “We constantly evaluate alternative methods of marketing and take advantage of those that work hardest for the brief and represent excellent value,” says Fitzpatrick.
O’Keefe agrees, concluding: “We do a lot more analytics into the effectiveness of the advertising we run, whereas 10 or 15 years ago we were spending a lot of money without really analysing the effectiveness.
“We can be sure now we have a good handle on the right time to advertise and how advertising can work across the portfolio of our business.”
|Marks & Spencer||£47.3m||£38.4m||23.11%|
|Source: Billetts Media Monitoring 2010|