Retailers and the brands they carry must let consumers know they exist – or else die an anonymous death. With the decline of traditional media, this task has become even more difficult for most retailers. The average time consumers spend each day with traditional media has continued trending down over the past three years1. From 2010-12, newspapers lost 8 minutes of daily engagement time with US adults, a 36% decrease. During the same period, magazines saw a decline of 25% (6 minutes), while radio slipped 4% (4 minutes). Although television grew engagement time by 14 minutes or 5%, it’s expected to decline to pre-2011 levels in 2013. This means there are fewer opportunities for retailers to let consumers know they exist via traditional media.
While traditional media has declined, Digital Media has grown daily engagement time by nearly 43% or 1 hour and 22 minutes. Most of this growth has come from mobile devices such as smart phones, tablets, and feature phones. In 2010, US adults spent 24 minutes on mobile devices (non-voice). By 2012, this had increased 1 hour and 11 minutes to easily surpass Print (newspapers and magazines), while narrowly besting Radio. No doubt, Mobile also took time from desktop and laptop devices, which lost 6 minutes of engagement from 2011 to 2012.
For many retailers and brands, these trends are troubling. As the channels on which they’ve built their business lose the attention of consumers, their ability to influence consumers weakens. They grow incrementally more anonymous with each lost minute of engagement. What more, they’re purchasing these available minutes at a much higher cost per minute of engagement (CPME). Based on the total ad revenue2 and time spent with each media format, the cost-per-minute engagement with newspapers was $2.4 million in 2012. Magazines, however, had a CPME of $3.8 million, an increase of over $1 million versus 2011. Television had a CPME of $708K and radio increased to $478K.
In 2012, Digital Media had the lowest cost per minute of engagement at $366K. Most retailers, however, were still focused on growing and maintaining their businesses via more expensive, traditional media. Their argument, of course, is that traditional media is more valuable and effective than the Internet. Perhaps, this is true – and I’ll even concede this point for the purpose of brevity. The question for retailers, then, is how much more effective is traditional media versus digital. Are newspaper ads 558% more effective than digital ads (based on cost per minute of engagement)? Are magazine ads 963% more effective? Are television ads 93% more valuable? What about radio engagement? Is it worth 31% more than Digital?
For most retailers and consumer brands, I’d contend that the cost for traditional media engagement is too high – by a lot. In fact, retailers seem dedicated to propping up their traditional media partners as their market reach and ability to engage with consumers declines. This is especially true for local retailers. In 2012, 22.3% of their $24 billion ad spend was on Print (newspapers, magazines)3. Direct mail received 43%, while TV and radio garnered 11.4% and 10.6% respectively. Internet (including mobile) only captured 8.2% of the local retail ad spend. From this perspective, retailers are getting less time in front of customers at a higher cost.
Many retailers are paying more for engagement because their primary media partners are losing the attention of consumers at a much faster rate than their ad revenues are declining. What does this mean for traditional retailers? It means that fewer consumers know that their brands and stores exist. Also, those who do know they exist cost more to reach. What’s more, their online competitors are able to engage a larger part of their markets for cheap. This isn’t a recipe for retail growth or profitability.
1. Digital Set to Surpass TV in Time Spent with US Media
2. IAB internet advertising revenue report
PWC and IAB
3. Local Ad Dollars 2013 – What Business Categories Are Spending and Where