Why do newspaper advertising revenues keep falling, even as the economy has recovered in 2010 and 2011?
There’s some insight in a four-minute video, new to me but recorded in May 2009, spelling out one major retailer’s intention to move away gradually from traditional advertising to much more direct engagement of customers digitally.
Best Buy has been and still is one of the industry’s most reliable preprint/insert advertisers. Advertising Age estimates the electronics chain spent $666 million in advertising in 2010, about a third of that on preprints.
Traditional advertising worked fine for decades for the company, chief marketing officer Barry Judge explains in the video, but now “you don’t get to tell customers what they get to think anymore.” New marketing efforts will be conversational and interactive, he explains, even soliciting user comments on how to finish the rough cut of TV commercials under development.
Going forward, Judge concludes, “for us to be relevant as a brand we’ve got to live digitally.”
Best Buy began life in the 1960s as “Sound of Music,” a small chain in the Minneapolis suburbs. It has grown to more than 1,000 stores; 180,000 employees; and recorded annual worldwide sales of more than $50 billion. Best Buy has survived and flourished by adapting quickly, while rivals like the bankrupt Circuit City did not.
As Judge’s video notes, Best Buy can no longer beat Wal-Mart on “rock-bottom prices,” so it needs to make the case that its stores and informed sales force create a value-added shopping experience.
After disappointing sales in the second half of 2010, its current strategies include making some of the big box stores slightly smaller, developing its own online business and opening much smaller “kiosks.”
Newspaper inserts remain an important part of Best Buy’s strategy. But like other big retailers, including J.C. Penney and Kohl’s, it has been trimming preprint distribution for several years now to free up resources for assorted digital alternatives.
While the future is far from predictable, it is hard to watch the Judge video without concluding that the shift is just beginning and much more reallocation of marketing spending to digital is inevitable.
That’s already challenging to newspapers. One consulting firm estimates inserts are down 17.5 percent to date in 2011. In time, the digital refocus will probably nick television advertising as well, though it has been holding up much better.