The Deforestation Of The American Consumer
If Advertising (equals) Chainsaws, and Consumers (equals) Trees, what is to become of our forests?
Our advertising efforts of late are today’s “media chainsaws” in the modern consumer landscape, and our resources (the consumer) are not infinite. Our practices are creating deforestation of our consumer. Our ad practices are as errant as was the logging industries were in the late 1800s (all the way through to the mid-1900s). Reforestation was not realized nor widely practiced in the U.S. until the 1970’s when the U.S. government determined that we were causing a non-sustainable imbalance of our resources. If we run out of trees, that’s a problem.
When Thoughts Turn Into Thinking
Our desire for immediate gratification from today’s consumers has us starring straight into the bottom of the sales funnel, trying to squeeze the dollars from those consumers who are ready to buy now. This low-hanging fruit is very appealing and tempts marketers to do anything to attract them and make a sale. But when we look at this model, we find that it: 1) Cheapens our Brand, 2) Lowers Our Value Proposition, 3) Increases our expenses, and 4) Lowers our profits. It’s a slippery slope. What happens when we run out of customers?
“If I wanted lots of water, I wouldn’t go to the end of the garden hose; I’d go to a lake!”
But for some reason, activities at the bottom of the funnel are titillating and addicting. There is so much activity. They are buying, selling, creating, analyzing, competing, forecasting, all at a frenzied pace. It feels good, right? Fish where the fish are.
It seems relevant to mention that most of us in the Agency business know that we, as business owners, must make profits. We also know that our vendors need to make a profit too. But don’t our clients have the same need? They certainly do! So it seems that we must come up with better ideas than a flash sale, or a more significant discount that lowers profit. Instead, our tactics eradicate consumers, increasing expenses, ruining our product design and brand perceptions with a more-for-less mentality. We believe the consumer at the end-of-the-funnel only responds to price. This is not true.
Consumers at the end-of-the-funnel are finicky.
Consumers are both price-conscious and brand-conscious. They will pay more for a gallon of milk when lessor-priced milk is available, and they will drive 3 miles and pass three gas stations only to save .02 cents on a gallon of gas. Or vice-versa. They are “cheap” on some things and “lavish” on others. They are price conscious because they are conditioned to be sensitive to price. And they are brand loyal, only to a point. Ultimately, price is very important, and it is always on the list of benefits sought when buying, but it is seldom MOST important. But endof- the-funnel marketers act as if there is an infinite supply of consumers if only we can “pitch” the offer just a bit cheaper. “But Wait! There’s More!!”
Understanding The Why: Price Elasticity of Demand
Price Elasticity of Demand is an Economics term and measurement used to show the responsiveness, or elasticity, of the quantity, demanded of a good or service subject to a change in its price. Albeit a complex equation, the easy to know explanation is that an initial cut in price can produce a healthy increase in units sold, which is known as “Elastic,” which is good. It means that the relationship between Price and Demand creates positive outcomes, growth, expansion, or stretchiness. And since we can’t have enough of a good thing, we do it again, and the laws of Price Elasticity of Demand slap you in the face. So we try another price reduction thinking we can double down on our recent good fortune, but the outcome is now “Neutral Elasticity,” which is neither good nor bad. It feels like nothing happened. So we do it again. And voila! We become “Inelastic” or “Negatively Elastic,” which means negative growth and typically, the death knell for a campaign, a product, and perhaps the consumer. This syndrome is predictable.
All products and goods respond differently, but the Econ math works predictably well. The law needs to be observed by economists, not by an ad agency or a marketing department.
For example, some goods, like luxury goods and high-end wines, jewelry, designer handbags, and luxury cars, have impermeable elasticity. Decreasing product prices decreases people’s preference for buying them because they are no longer perceived as exclusive or high-status products. Similarly, a price increase may increase the high status and perception of exclusivity, thereby making the good even more preferable. So it all depends on the goods.
Other related effects include:
Snob Effect: expressed preference for goods for consumers who want to use exclusive products, where price means quality
The ‘All Aboard!’ Effect: preference for a good increase as the number of people buying them increases
The Network Effect: the value of a good increase as the number of buyers or users increases
The Shrinking Value Effect: the low price of a good indicates that the producer may have compromised quality/quantity, that is, “you get what you pay for or less.”
When we think of all our resources in marketing (the product, the price, the value, the budget, the brand, the trends, etc.), do you ever consider the consumer? As much as we should protect and safeguard our brand or budget, we should also safeguard our consumers. Our consumers are not all waiting at the end of the funnel. Most are at or near the top of the funnel. They are just about to jump in. And somewhere along the way, our advertising practices cut them down. We turn them away. We condition them to think price only. It’s pathetic and not sustainable.
“When did “the cutting edge” of media get so messed up? When did our tactics become our strategy?”
Philip Gabbard is a partner at Fat Unicorn Society, El Paso’s leading digital media company. In addition, Philip is an author, speaker, and multi-media thought-leader. For questions or comments, contact Philip at email@example.com.