Justified allocations?

Kerry Knudsen

Kerry Knudsen

SUPPLY SIDE e-letter, December 2013

 

The summary of our November Readers’ Survey noted some of the visible differences between the wood industry’s supply side and its customers. As with the differences between the primary side of the wood industry and the secondary, these differences warrant some reflection from time to time.

Marketing magazine’s November 26 issue started me thinking about this. They were talking about identifying the “influencers” in a market. “Today, the marketer’s secret weapon for crafting a relevant Canadian message,” Marketing said, “resides in influencer outreach.”

Subsequently, just before Christmas, Marketing had an interview with AOL’s c.e.o., Bob Lord. AOL may not be marketing’s biggest influencer, but it is up there in the top 10. Lord arrived earlier this year at AOL, having formerly been c.e.o. of Publicis Groupe’s Digital Technologies Division, and having more than a decade of experience at Razorfish. Lord knows digital advertising.

Both Lord and Amazon’s Jeff Bezos, who bought the Washington Post in August, have been very clear about their differences with current digital marketing strategies. Both have committed to identifying their target audiences and providing responsive audiences with appropriate advertising, not blasting spam or “curating” the content of others. Further, both commit to content as the primary driver of audience participation. The days are long past when the value of a campaign was measured in clicks or “eyeballs,” and nobody cares about portals or landing pages but techies and out-of-work dot-commers. Bezos and Lord measure a campaign’s success with sales. “Sales” is the only proper market response to a successful campaign. No sales = campaign failure.

According to Lord, “Programmatic buying does not mean RTB (real-time business). It means automating the media process so that I don’t have IOs flying back and forth and I can capture data in a unique way and actually inform my audience target segments…

“We have an audience that wants to be matched up with an advertiser and a publisher’s content. We want to match those two things up.”

For our discussion, Canadian manufacturers of secondary wood products would not be measurable in the world of AOL and Amazon. It is a significant group in terms of Canadian manufacturing, but compared to the market for Ipads and energy drinks, it is not much. It is a very targeted, identifiable group, but not accessible by AOL or Amazon tactics (yet).

These manufacturers, your customers, tend to be small, family owned businesses. Over 60 percent have fewer than 25 employees. Most are local or regional suppliers. For them, a national or global marketing campaign would make no sense. Their “influencers” may be a local softball team, the local chapter of a club such as Rotary or the local news weekly or radio station.

This is one of those differences I mentioned.

Another clear difference between the market and people that serve that market, including Wood Industry magazine, is the market’s aversion to being bombed with electronic pitches. Actually we are averse to it, as well, but we send out such things as this e-letter and others. The point is … you have to accept that 15 years ago, when I first started surveying this market, only 10 percent even had an e-mail address. That was 1998. By comparison, I have had a functioning e-mail address since 1983 and was a Sysop (system operator) on Compuserve long before AOL bought it. Different experiences and skill sets produce different perspectives. For now, Wood Industry does not see the value in pushing toward a digital goal, but in pushing the market toward response, whether that be by print, by digital or by ancillary products.

Why response?

Years ago I noted the old refrain from Carly Simon, “These are the good old days.” They were then, and they are, now. Most of us are still shell-shocked by the events surrounding 2008/2009. The U.S. mortgage housing sector collapsed, the U.S. stock market collapsed, our long-term benefit from a 64-cent exchange rate evaporated and so on…

In every environment, up or down, there are the nay-sayers. Yesterday I heard on the radio that Deutsche Bank says the Canadian housing market is overvalued by 60 percent. Wow. That is a lot. According to the Globe and Mail, “Deutsche Bank economists Peter Hooper, Torsten Slok and Matthew Luzzetti came to that conclusion via an average of two measures, ratios of home prices to rent and home prices to income, compared to their historical averages.”

This is a great coincidence, because I have rated Deutsche Bank on an average of two measures: how well DB has done rating the value of the Euro to Greece and Spain, and how well DB has done in other areas of variance versus the Bank of Canada.

Is the sky once again falling? I don’t know, for being overvalued, our building permits are near record levels and holding, our resale (therefore remodeling) market is high and our housing starts are up. It may be time for Canada to stick its head in the sand on the advice of Deutsche Bank, but for me, I would prefer they go fix the U.S. health care debacle for them. At least that is something that needs help.

I have mentioned Marketing magazine, Advertising Week and Ad Age. We will be using material from those sources, as well as others, in upcoming discussions, and it does not cost much to subscribe if you want to keep up.

For example, as an industry, we don’t market much to the broad consumer market; we are all B2B. However, do you know how much holiday spending Ad Age ascribes to the much-vaunted “social media” advertising mix? Would you believe two percent? That is a pretty small niche to target unless you are certain you have saturated the bulk of the customers.

In case you don’t have enough to think about, here is a brain teaser that may help with your customer response.

Background: across all companies, about 25 percent of marketing dollars are spent on traditional advertising. The other 75 percent is spent on “other,” which includes trade shows, internet, seminars and events, and so on. Of “other,” over 50 percent is spent on each company’s own website.

The teaser is this: the web site is not functionally a marketing tool. It functions as a virtual front door to your company. People knock, go in and are met by reception. Some are there to drop off job applications, some are there to sell you something and some are there to buy.

If that is true, then the costs of the site should legitimately be assigned to infrastructure and administration. For many of you, that is simply a shell game. However, for others that depend on budgets from the home base, it is a strong argument to show your marketing budget is being eaten up by the equivalent of utility costs, and cannot reasonably be expected to provide the same ROI as can an effective ad campaign.

This is our second supply-side e-letter. To be effective, I need to make it clear up-front that we obviously have a dog in the fight when it comes to marketing. You know it; we know it. Rather than pretend otherwise, let’s just admit it. I will try my best to be objective and fair, and not use the editorial content of the letter (but look at those ads!) for promotion. However, I have had some remarkable successes in market response and I know a lot about trade-business sales – academically, by experience and by performance. I can’t share if I don’t share. It’s un-get-out-of-able. However, HOW you market is up to you.

As noted in our December e-letter to your customers, I think 2013 will turn out to have been a pivotal year in Canadian business. We have gained significantly on the U.S., overall, and it will be interesting to see the effect of the prospective Canada/European trade agreement. A new day is dawning, and my old farm background reminds me to make hay while the sun shines. After all, these are the good old days.

From the staff at W.I. Media Inc., Merry Christmas and Happy New Year.

Comments

  1. I like your comments : big difference between the B2B and social media stuff….

    In any owners place, we often wonder , what dollar spent will attract a client ? and get a result ?
    Advertising / marketing is all fun when an owner sees his ad in the magazine , but will it bring the result !? versus reducing expenses in a tough market !

    From my experience , theres’ a minimum to run thru trade publications .I call this market penetration where your company name is often seen and heard . On the other hand , all the social media stuff takes a lot of time and energy …which , in smaller organisations , is scarce resource . I’ve heard of some great results using social media in the wood business…something to investiagte .

    Phil

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