Best Buy Marketing Chief explains advertising flight from print to digital

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.You can read more about this here :

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.

We have made it easy to comment on posts, however we require civility and encourage full names to that end (first initial, last name is OK). Please read our guidelines here before commenting.

  • Anonymous

    Newsrooms and sales departments? Where would those be? What decade are *you* living in?

    After all the cutbacks, tumbleweeds blow through the newsrooms of America, and the phones ring unanswered in the sales offices. There is no one left to take advantage of anything anymore. The industry has chosen the path of cut, cut, cut and cut some more, until now, like a starved prisoner staring at the celldoor left open, they no longer have the strength to get to their feet and totter unsteadily to freedom.

    Too bad. I was in a meeting a while back with major ad planners. One controls a budget of $300 million+, most of which in the past was allocated to the glossy, full-color flyers delivered with the Sunday papers. He stated that his print ad budget for next year was “Zero point zero zero.” That’s $0.00 to newspapers from $300 mill the last – well, God knows how many years.

    They’re moving to digital because the ad campaigns are trackable — and they are all under intense pressure to justify every damn marketing/ad nickel they spend. To show in the corporate-beloved flow charts and spreadsheets, how that nickel brought more customers into the sales funnel, qualified them, and then resulted in 25 cents of sales.

    Anything that does not do that will no longer receive ad spend. Simple as that.

  • Douglas Hebbard

    Why is the “shift to digital” always presented as “challenging to newspapers”? 

    Digital is not an closed platform out of bounds to newspaper publishers. On the contrary, with their newsrooms and sales departments, newspapers are in a great position to compete against up and comers – if digital is treated as an area for growth rather than a competitive platform.The problem is really that too many voices are advocating staying away from the new platforms, and Apple in particular, rather than talking about how newspapers are uniquely positioned to dominate the future. Maybe some newspaper people need to take some Prozac and move on.