Sunday, February 1, 2009

Consumer Behavior and Robert Pittman on Investing in Media

Consumer Behavior
Robert Pittman had some interesting insights on consumer behavior. He provided an “action oriented” view of Maslow’s hierarchy by citing convenience and branding as key components of a consumer’s decisionmaking.

He defined convenience as physical, tangible productivity tools and branding as a means to prevent switching. Applying that to internet tools/ properties/ networks, the key trade off is effectively the relative “delta” of convenience vs. switching costs.

Advertising channels and consumer behavior
Robert pointed out that the internet is not killing TV, its really killing newspapers. Some thoughts put forth around this idea:
1> Pricing: He compared the cost per thousand impressions between TV/ radio and newspapers. He then questioned the rationale for the market difference.
2> Change in spend across channels: He presented data that highlighted the marketing spend across newspapers, yellow pages and the internet, with newspapers currently garnering more than twice the ad spend on either the internet or the yellow pages. Change in marketing tactics to adjust to the internet as a medium has not been drastic. Given the theme, this presents a tangible opportunity in the internet media segment.
3> Nature of advertising channels: The cable TV industry is larger than the broadcast TV industry; however, the cable TV industry is quite fragmented. This creates a difference in how advertisers approach these two channels.

Some takeaways
1> Critically analyze the value of internet properties
Is the internet properties’ lack of stick just a function of low switching costs?
Do internet properties really make us more productive or more effective as they interweave into our daily life?

2> Expect unrelenting, inexorable change
Citing the fact that TV show ratings lead their revenue impact, Robert sees a similar trend in the internet media. The internet is truly impacting consumers and consumer facing companies. Adapting to this change in consumer behavior will define which companies fail and which survive.

The talk led to questions, as usual:
1> The web and TV: How do we categorize the impact of online TV series viewers on series like The Sarah Connor Chronicles and Dollhouse? The former got the axe despite as many as 7 million viewers following the series online.
2> Channel relationships and Ad spend: Are the industry structures in place for the media planning industry to move quickly, seamlessly and effortlessly across the various advertising channels? Is it just a function of channel relationships, or it is also a function of the industry still being in the process of wrapping their arms around opportunities in the “new media” segment?

What do you think?

The Usual Disclaimer: This is purely a knowledge sharing resource and I have been careful to protect panelist/ speaker interests. Ethically, context is everything, and I will gladly retract anything that affects the parties mentioned. Call this my mini OpenCourseWare, if you will, where Open signifies life experiences.

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