This Christmas, Best Buy Betting on Power of TV to Sell TVs

Move Could Give Retailer a Competitive Advantage, However, More Marketers Are Warming Up to Glow of Tube

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NEW YORK ( -- For those of you sick of hearing the TV-is-dead drumbeat, here are two words: Best Buy. The retailer is shifting millions of dollars into TV -- yes, you read that right -- in a move that not only goes against the grain but is notable given Best Buy's aggressiveness in digital and social media.

IBM helped create a new marketing-mix model.
IBM helped create a new marketing-mix model.

"TV has now become an almost unconventional medium, because people have followed the news," said Drew Panayiotou, senior VP-U.S. marketing at Best Buy. "There's been an enormous amount of news [around] social and digital. ... Yes, we've been successful in social media ... but in my 16 years of marketing, I've learned that if you take an unconventional view of marketing channels, you get unconventional results."

The consumer electronics giant wouldn't give exact figures, but it is increasing its spending by a low double- digit percentage. In 2009, it spent $150 million on TV advertising, according to Kantar; network TV ads accounted for $65 million of that figure. To free up funds for TV, the retailer is pulling money away from inserts and trimming distribution in parts of the country where newspaper readership has suffered.

In bulking up on TV, Best Buy is bucking a trend. According to Ad Age's Leading National Advertisers report, spending by all U.S. advertisers on network TV fell 7% in 2009, while spending for spot TV, syndicated TV and cable TV was also down. Free-standing inserts saw a 3% increase between 2008 and 2009 while internet spending, the only other media category to see an increase, rose 7%.

Still, while investing more in TV may be counter to what some major marketers are doing, Steve Farella, CEO of independent media agency TargetCast TCM, points out that TV, generally, is bouncing back this year. "We know the upfront was tighter, and the scatter market is unbearably tight. Those two things together let us know that people have increased spending in television," he said.

Mr. Panayiotou, who joined Best Buy from Walt Disney Co. in January, said the move resulted from the company implementing a new marketing-mix model as a means of making its spend more effective. Best Buy, working with IBM, ran the model earlier this summer, and some of the results came as a surprise.

"[The model] said, overall, the mix was off. It said if we shift dollars away from inserts to television, we would generate a pretty good lift in revenue and related profits," Mr. Panayiotou said. "When you have big budgets like we do, a 5% to 10% improvement is a big deal."

Mike Gatti, executive director of the Retail Advertising and Marketing Association, believes the reallocation of dollars to TV could be a competitive advantage for Best Buy. "It's almost like companies pushed the needle a little too far. I'm hearing companies say they feel they're not getting as much ROI as they expected out of their digital campaigns," he said. "We're seeing a shift back to traditional media. And TV still has a gigantic reach."

Based on the model's recommendations, Best Buy has also tweaked its digital spending, putting more money into display advertising. And it's also considering putting more money into events. Mr. Panayiotou said that the model made other suggestions, which the retailer is still evaluating. His team is looking at everything from events to the loyalty program, digital to online search.

The consumer-electronics giant has just begun to implement these changes and expects it will see results headed into the all-important holiday season. MDC Partners' Crispin Porter & Bogusky, Best Buy's creative agency, will also pick up additional work, as new spots are required. Publicis' Starcom handles media buying.

This is just the beginning of a new way of thinking at Best Buy. Mr. Panayiotou said that part of the media evaluation involves determining what media can best help the retailer meet certain business objectives, whether it's a new product launch, driving traffic to stores or building brand loyalty.

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