Trade in ads for experiences

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There seem to be three different reactions to the decreasing efficiency of advertising in reaching consumers: Some have just denied it's happening; some have thrown money at the situation-spending even more per spot on network TV to reach fewer households; and others have tried to forge a new direction.

In the last category are those who've realized it's time to stop advertising and start staging marketing experiences.

What's a marketing experience? It's a physical or virtual place that's so engaging current and potential customers can't help but pay attention-and buy your product. It is using real, compelling experiences, memorable events that engage each customer in an inherently personal way.

You've heard of or even experienced some examples yourself online: BMW Films, the games Chrysler uses to sell its Jeep Wrangler Rubicon, or the Jerry Seinfeld & Superman shows. Consumers actually seek out these virtual experiences, rather than avoid, ignore, or put up with them while seeking real value in an activity the commercials merely sponsor.

One of the most intriguing examples of a digital marketing experience is the U.S. Army's Web site, AmericasArmy.com, where people can download a game the Army created. When individuals succeed as new soldiers in this game, it merely serves as boot camp for a greater experience-a second, multi-user game where players form a troop to go on a more complex and compelling mission. Those that do well here become perfect recruiting targets for the Army.

real-world examples

There are real-world examples that have been even more effective. Consider one toy manufacturer: American Girl, Inc., the makers of the American Girl Collection of high-end dolls. With very little advertising, it's grown from an ex-schoolteacher's dream into a hundred-million dollar unit of Mattel. When it wanted to extend its reach in the late `90s, rather than run a huge advertising campaign, it opened up the American Girl Place just off Michigan Avenue in Chicago.

Inside this 35,000-square-foot Place-please don't call it a store-are a series of wonderfully engaging experiences for girls, mothers and grandmothers (not to mention the occasional male who's either dragged into the Place against his will or who loves his daughter very much). There's a theater with a live play centered on the doll collection; there's a Cafe for a grown-up dining experience; there's a salon to style a doll's hair; and a doll hospital to fix one up as good as new. Before, during, and after all these experiences, shopping does go on-and the purchases become memorabilia for the experiences visitors have. Moreover, these same visitors buy more from the catalog, frequent the Web site to purchase items more often and tell their friends about their American Girl Place experience.

And when you head back to Madison, continue on 49th Street and have a cup of coffee at the ING Direct Cafe. This place was created by the North American arm of the Dutch financial services firm to expose consumers to its savings accounts and mortgages. Each of the baristas is trained to engage people in conversation about their financial needs over a cup of coffee. Does it work? Remarkably so: Each of the three Cafes ING Direct has opened in New York, Philadelphia, and Los Angeles generates in the neighborhood of $200 million in new accounts every year.

Of course, they wouldn't be such a success if a certain company in Seattle hadn't blazed the trail by creating a distinctive coffee culture in the U.S. So why does Starbucks-on as great a growth trajectory as any company in the past fifteen years-do virtually no advertising? Because the distinctive experience of actually interacting with the company in its outlets generates more than enough demand all by itself. Starbucks understands that the experience is the marketing-the best way of generating demand for any offering.

And it's demonstrably so. Think of the normal way of measuring the efficacy of an advertising campaign: how many people are reached and what is the recall rate, divided by the costs of the campaign.

pay to play

Now consider the additional benefits of a marketing experience. Yes, more people can still be reached by a large-scale ad campaign. But of those who do experience the place, they spend not 15, 30, or even 60 seconds, but minutes, scores of minutes, and even hours. And when they do so, they aren't passively watching, but generally actively interacting with the brand.

OK, "Stop all advertising" goes too far. There are good reasons, particularly when one needs to reach tens of millions of people in a fairly short amount of time.

But before you fall back on the familiar succors of advertising, consider one more formula: ROI is the incremental revenue from your marketing program divided by the cost. Now you may not be able to exactly measure the incremental revenue a particular advertising campaign yields, but you sure know its cost, so let's focus on the denominator here. When you stage a marketing experience, its cost is not the only factor, for the good ones actually generate revenue in and of themselves.

American Girl, remember, charges admission for the experiences in its Place. Vans charges admission-$5 to $14 for two-hour sessions in its Skateparks. Lego charges for its theme park experiences. REI not only charges non-members $5 to climb its mountain but for the most part gets its suppliers to pay for the experiences in its stores.

With a great marketing experience-so compelling that your customers gladly pay you to sell to them-you actually can drive the denominator in the ROI equation down to zero, and thereby have infinite ROI on all the incremental revenue you generate. Imagine going in to the CEO or Chief Financial Officer during your next budget cycle and demonstrating how you will achieve infinite ROI on your next marketing campaign!

It's not fantasy. Companies are doing it today by thinking imaginatively about (and designing creatively around) ways of engaging their current and potential customers. They've stopped fretting about the declining efficacy of ads and innovated a whole new medium: the marketing experience.

So what are you waiting for?

ABOUT THE AUTHORS

B. Joseph Pine II (top) and James H. Gilmore, co-founders of Aurora, Ohio-based Strategic Horizons LLP, are co-authors of the best-selling book "The Experience Economy: Work Is Theatre & Every Business a Stage" and an e-Doc available exclusively on Amazon.com, "The Experience IS the Marketing."

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