How Much Do Brands Wa$te?

by Tom Nilsen on 06/29/2009

whatsticksPast marketing tactics have created wasteful brand spending on inefficient and largely ineffective paper & clearinghouse-dependent marketing tactics (coupons, direct mail, etc..). Dollar expended in these areas (before counting the incentive itself) would help pay off the national debt, Ready?

$375 Billion++ a year! That’s Right,  THREE HUNDRED and SEVENTY FIVE BILLION DOLLARS WASTED ON COUPON PLACEMENTS!

Do These Campaigns Bring In New Customers and Sales?

Who really cuts coupons out of newspapers?  Do consumers even subscribe to newspapers anymore?  Do people open most direct mail, or is thrown into the trash? Can existing trees continue to support all this waste?

The rate of return brands realize on most coupon placements is 1% or less. Sunday paper coupons are the biggest spend by far, and redemptions typically range between 0.5-0.8% . Direct mailers (commonly referred to as ‘junk mail’) may yield a whopping 2 – 5% interest level. Moreover, the consumers most attracted to these coupon(s) are those who regularly purchase the brand…and would have made the purchase anyway…without the costly piece of paper! Brands typically ‘subsidize the purchase’ without changing consumer behavior as intended.

Why Would Brands Use The Same Non-Productive Marketing?

Since the consumer products industry (CPG) has relied repeatedly on the same non-productive marketing tactics the related activities have created repeated dismal results. There are a myriad of reasons why they continue down this path.They include the following:

  1. fear of making any drastic shifts from ‘the norm’ (what we have always done, what our competitors do)
  2. the upfront expense of placing mass coupons seems relatively cheap (true in many cases, like Sunday paper coupons)
  3. common failure to evaluate the actual ‘cost-per-unit moved’ (ie. the true cost ‘per redeemed coupon’)
  4. the actual quality of those coupons/rebates redeemed (are we actually attracting new users, expanding consumption by existing consumer base, etc..)

With these traditional failures by marketers, the result is rampant waste.

Who Pays For This Waste?

Essentially, the consumer. Well beyond the price of products themselves (production, delivery, established margins by manufacturer and retailer), the consumer must also bare that inefficient burden of $375 Billion spent on coupon placements. Not the value of the coupon incentive (we’ll take it!)…but just the massive push to implode us with these paper-dependent incentives!

Is There A Better Way?

Shouldn’t brands use more productive and cost effective means to reach and retain new customers?  Indeed. . . which is exactly why we’re seeing a rush to the internet and social media to finally deliver real Innovation.

I realize this may be a stretch but imagine the $375 Billion++ a year being used more efficiently. How? Why not simply give it back to the consumer for being a “loyal follower” on Twitter. Sound crazy? Not as crazy as wasting the $375 Billion++ a year on old non productive methods that don’t create relationships and conversational currency. Conversations stick much more than any old marketing tactics.

Comments?

Footnote: My name is Tom Nilsen and I have spent 20 years in the marketing and sales departments of major brands such as Nestle, Sara Lee, Coca-Cola, Coors and others.  I am now with AvidPath (EVP-Business Development & Marketing).  Jay Deragon invited me to share my experiences on his blog. He has also been teaching me the dynamics of social media. This is my first ever blog post and I must say this is a lot of fun.  You can expect to hear a lot more from me on this blog. Your feedback and comments would be greatlty appreciated.  I can be reached at [email protected]

{ 11 comments }

mike June 30, 2009 at 10:30 am

I won’t lie…when I was younger I thought cutting coupons was a something that only my mother did, but I changed my mind once I got to college. Cutting newspaper coupons has helped me to maintain a better standard of living overall than others while in college (while my fellow scholars are chowing down on ramen 3 times a day). No lie, I’ll probably keep clipping coupons once I graduate this December, too. I do have to agree with the writer here on one relative point though; perhaps advertisers should find a way to seamlessly integrate coupons into new media as they have done with newspapers; especially since you really “get what you pay for” with new media, and are able to track demographic information a lot more accurately.

However, direct mailings from supermarkets and the like are as good as useless to pretty much everyone I know, though. Once they get to my apartment, they go straight into the trash. Away with them.

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Marc Marseille June 30, 2009 at 1:11 am

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Allen Gregory June 30, 2009 at 12:59 am

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PostRank - Soc Med June 30, 2009 at 12:23 am

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scott kato June 30, 2009 at 12:15 am

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John McCormick June 29, 2009 at 11:58 pm

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tstavrop June 29, 2009 at 11:54 pm

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Thomas Vogel June 29, 2009 at 11:32 pm

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Lisa June 29, 2009 at 11:25 pm

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james o kirk June 29, 2009 at 11:17 pm

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