Tuesday, November 10

Advertising Sales: Razorfish Jumps A Conclusion

"What we're finding is that with Facebook and Twitter, marketers are assuming some deeper dialogue, but what's really going on is -- people want deals." — Garrick Schmitt, group vice president of experience planning for Razorfish

Really? We don't think so. Not exactly.

Schmitt is basing his conclusion on a study he edited, where 44 percent of consumers surveyed said that they follow brands online for deals as the main reason. This, of course, is partly true.

But where Schmitt might be making a mistake is in not understanding that there is a significant difference between the immediacy of a discount campaign and the sustainability of an engagement campaign. More likely, the relationship between the two is symbiotic. They work together.

Real World Experience Shows Engagement And Sales Are Symbiotic

• Case Study Snippet: Car Dealerships. In working with two car dealerships offering vehicle maintenance, one with a frequent direct sales approach and another with limited discounts but high engagement, we found that former dealership diminished returns on sales over the course of six months. Why? Consumers learned to wait for discount offers before making purchases, and demanded deeper discounts over the long term when the original discounts didn't seem so special anymore. The latter dealership increased sales over time as consumers identified them with quality first.

• Case Study Snippet: Resort Openings. In working with two casino resorts, one with frequent cash rewards and another with a bundled opening package, we found the former delivered a high return on the front end (first 30 days of opening) but then the campaign eroded as consumers demanded higher and higher cash incentives. The latter resort never offered a direct sale or cash incentive, but relied on heavy branding and anticipation that led to a 100 percent occupancy rate for the first 18months of operation.

• Case Study Snippet: Educational Value. In working to open a private elementary school in Las Vegas, the initial reaction was that the school would not do well because its tuition structure was three times higher than the next leading competitor. Not only did the campaign meet enrollment projections, but it also exceeded them by 21 percent. While we're certain every parent would have appreciated a discount on the $14,000 annual tuition rate, they didn't need one knowing that price point provided their child the best education in the area.

• Advertising Rule 6: People Lie. The real rub with looking at a study like the one presented by Razorfish is that people lie. In virtually every study we've seen, people indicate discounts, coupons, and cash back offers will entice them to buy a product or service. However, the reason people choose this answer is because everyone wants a discount from something they might buy. Yet, this is the very reason that Apple doesn't have to enter a price point war to drive sales.

The better conclusion from the Razorfish study would have been that engagement and discounts are often symbiotic.

In other words, once consumers are engaged and trust is established, they tend to respond favorably to purposeful discounts, assuming sales are not the only message used to produce an outcome or keep them engaged. So while Schmitt is right in that outcomes — not impressions — are the real goal of companies engaged in social media, he is wrong to think that discounts or sales are a primary communication solution.

The balance of the Razorfish study is useful intelligence. But again, we would caution anyone against applying the interpretation of that data, especially if it leads to the overindulgence of discounts and sales. After all, the other word for such marketing tactics tends to be familiar. It's called SPAM. Please don't do that.


Michael Sommermeyer on 11/10/09, 8:50 AM said...

Very nice analysis. Here is my real-world take: I love the 'get something for free' approach when I first see it. It's cool to think I'm part of the special few. But I fall back into the 'what have you done for me lately' routine pretty quickly. Quality trumps free stuff. That's why we're seeing a reversal of course for all of those people giving away their wares. At the end of the day, if it's free crap, it's still crap. And sometimes I follow a brand because I've become a fanboy (read Apple).

Garrick Schmitt on 11/10/09, 9:33 AM said...

Hi Rich --

Thanks for the thoughtful response to our FEED report. Very much appreciated. While the finding around "deals" on Facebook and Twitter is provocative, it's certainly not meant to exclude a holistic focus on the experiences that marketers should be creating for consumers (with engagement being one of the main goals). That's the major thrust of the report.

I do think that we have to recognize that there is truth in this particular insight into consumer interaction with brands on Twitter/Facebook and recognize that a DR or offer-driven approach may be what's expected (for now, at least). Starbucks is certainly proving that it works.

Good stuff. Thanks again for response.

Rich on 11/10/09, 10:02 AM said...


Very intuitive and practical. When the sales lose luster that is precisely what happens, even when it isn't crap.


Thank you for talking the time to leave a response.

There are a great deal of worthwhile information in your FEED report, and I don't want to take away from that too much. I value it, and I'm glad you see that I picked it up mostly because conclusions tend to stick in people's memories longer than statistical information they are derived from.

Depending on the brand, there are degrees of well-timed and well thought out discounts and incentives, assuming the company isn't trying to bribe followers (because they succeed in capturing a different type of consumer).

Starbucks is great example in that they started their account on Twitter, direct response dominated their messages, which lead to several quarters of sales drops (sometimes as much as 8 percent). The real pick up was after they began engaging consumers on a more personal level. Sales have since gone up. Just recently, they announced earnings per share to increase 15% to 20%, up from its previous forecast of an increase of 13% to 18% in 2010.

Nowadays, I think they may have gone a bit too far with their conversational approach because some of their messages are becoming a bit formula. But for the most part, they see a bigger pickup with that approach, and the occasional mention of a sale.

The most challenging aspect of social media, I think, is that many people are searching for a secret formula that does not exist outside of a strategic communication approach that generally creates very different plans for different companies (e.g., What works for Starbucks might not work for Wal-Mart).

Thanks again for sharing the report, Garrick. Razorfish is still very much on my watch list for great ideas.

All my best,


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