• by joe.h , Alan Gerson , Bob Heyman , October 14, 2009

We may literally need the greatest thing since sliced bread

After nearly 50 years of selling to avid consumers indulging in an orgy of consumption, marketers now face the post-credit-bubble consumer: awash in debt and possessions, hoarding cash, and skittish about the future. The challenge, one of the biggest in half a century of advertising, is selling into the "New Frugality."

To understand our future, we look to the past. We can begin by cracking open Roland Marchand's cultural history, Advertising the American Dream: Making Way for Modernity, 1920-1940.

Marchand's 1985 evaluation of the phenomena of marketing during the 1930s reveals insights that could easily have been written yesterday, and will help us define and manage the New Frugality: "The economic downturn forced advertising agencies to reinvent their economic models, ratchet up competition, shutter some units, and give others a chance to shine," Marchand writes. "The agencies that survived were the ones most able to mine for insights, manage new media, and create messages that tapped into the dreams - and anxieties - of the wrenching times."

- Clients demanded the same level of service even as they spent less.
- There were harder sells.
- Value messages became more explicit and direct.
- Price became the most prominent element.
- Contests, promotions and premiums came to the fore.

Marchand also found that businesses that pursued aggressive marketing with a focus on advertising had a much greater chance of surviving. As the country entered the Great Depression, Ford was outselling Chevy 10 to 1. Ford chose to invest its resources in manufacturing, while Chevy chose to invest in advertising. By the end of the Depression, Chevy had outstripped Ford, and the company remained ahead for the rest of the 20th century.

It is easy to forget, but the '30s were an era of innovation and of new media (radio). In the average household, the radio was left on an astounding four hours a day. Radio became the top-rated amusement, replacing even the piano. To exploit this new medium, P&G invented the soap opera, which continues to do well today.

Product innovation was at a fever pitch throughout the decade, with everything from Wonder Sliced Bread to Campbell's Chicken Soup to Spam being introduced from 1930-37.

With innovation and new products, marketers were able to woo the purchase-averse consumer. But the hallmark of the '30s, from a marketing perspective, was the creation and deployment of contests, sweepstakes and promotions. These allowed merchants to drive trials, harvest leads and foster what we now call brand engagement.

In a telephone survey conducted April 20-21, 2009, more than half of the respondents - 53 percent - told Gallup pollsters they now spend less money than they did before the economy tanked. Some 32 percent said not only are they spending less, but they also plan to make this newfound prudence their "new normal" in years to come. The headline of a recent article in The Wall Street Journal read, "Frugality forged in today's recession has potential to outlast it."

Today, marketing strategies that use incentives and rewards to capture attention, create interest, drive a valuable consumer action, build loyalty and promote evangelism are gaining recognition for their measurability and their ability to deliver results. These promotional marketing strategies are actionable and emotional, produce tangible results, and can be executed across every media and marketing environment.

In the essential "reset" of consumer expectations and behaviors caused by the economic situation of today, incentive- and reward-driven promotional strategies, not necessarily limited to sweepstakes and contests, will achieve parity with advertising as a major component in marketing strategies in this decade.

Contests and promotions are a proven way to appeal to the newly frugal consumer. The appeal of something for nothing has consistently motivated consumers in hard times, and today it motivates users to click on display and search ads, it increases response rates, and allows marketers to capture valuable consumer information. Contests and sweepstakes can drive product trials and result in the acquisition of other valuable marketing information, especially when presented as part of an integrated, incentivized and reward-driven long-term marketing communications strategy.

Today, savvy promotional marketers are offering their clients unique integrated digital marketing platforms that wrap a sweepstakes around a video or rich-media message. Besides making the video commercial or promotional message central to the entry process - which guarantees a focused and engaged viewing of the video message - these platforms can also include incentives to sign up for newsletters, answer survey questions, or refer a friend who might want to take advantage of the promotion, coupon opportunities, and viral video options. This allows the power of the promotion to be fully harnessed against a number of valuable and targeted consumer actions, building lifetime customer value, while at the same time building a targetable registration database. Interactive promotional approaches that teach the user about product features, advantages, benefits and uses not only successfully engage the user, they increase both recall and retention. Users enjoy these interactions, and they remember them.

The "New Frugality" makes each customer you acquire more important than ever. Focused steps to remarket to that customer can be key to profitability. If the cost of customer acquisition can be reduced, margin becomes profit in direct proportion to that reduction. Money spent promoting loyalty among that customer base through product- and brand-centric promotions, incentives and rewards can pay off for years through high margin sales and customer retention.

Communications strategies that target the database developed through sweepstakes and contests provide a powerful framework to build what direct-marketing campaigns have long prized: lifetime customer value. The database provides opportunities to enroll consumers in loyalty programs, provide rewards for future purchases, offer incentives to make those additional purchases, and provide additional contests or sweepstakes that present brand- and product-centric rewards and experiential prizing opportunities. Today, promotional marketing can be merged with search, re-energizing your SEM strategies to attract the newly frugal.

Key to reaching and keeping customers in the age of the New Frugality will be, as in past hard times, promotional strategies that marry the concepts of prize, reward, loyalty and incentives. It's not enough to sell to customers today. What we must do is sell to customers for a lifetime.

Alan Gerson is the CEO of Enteractive Solutions Group (www.enteractivesolutions.com). A longtime senior executive at NBC, Gerson left NBC to become executive vice president of the Home Shopping Network and president of HSN's diversified marketing and media services division.

Bob Heyman is founder and CEO of The Digital Engagement Group, which offers e-marketing coaching and training as well as social media campaign execution (www.digital-engagement.com). He is coauthor of Net Results (New Riders) and The Auction-App (McGraw-Hill). His latest book is Digital Engagement (American Management Association).