The Experience Economy Article: Stop Advertising - Start Staging Marketing Experiences

Stop Advertising – Start Staging Marketing Experiences

By B. Joseph Pine II and James H. Gilmore

Both the popular press and the advertising industry’s own opinion journals fill their pages with articles on the decreasing efficacy of reaching consumers through advertising. For most, this causes consternation. For many, it causes spinning their wheels ever faster – paying more, for example, per spot on network TV to reach fewer and fewer households. For a few, however, it causes the forging of a new direction.

 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 pay up as a result by buying your product. It’s not experience marketing – making your marketing messages more experiential by, for example, evoking the senses in print or dimensionalizing your billboards. It is using real, compelling experiences – memorable events (whether one-time or ongoing) that engage each customer in an inherently personal way – that generate demand for your offerings, just like advertising used to do so well.

Staging Marketing Experiences

You’ve seen, heard of, or even experienced some examples yourself online: BMW Films, the videogames Chrysler uses to sell its Jeep Wrangler Rubicon, or the Jerry Seinfeld & Superman shows, as a small set of examples. Please don’t call these commercials, for consumers actually seek out these virtual experiences, not avoid, ignore, or put up with them while seeking real value in an activity the commercials merely sponsor. A rather intriguing example of a digital marketing experience is the U.S. Army’s website, www.AmericasArmy.com, where people download a game the Army created first as a recruiting vehicle and, second, as a way to counteract all the shoot-‘em-up Rambo-style games out there. When individuals succeed as new soldiers in this game, it merely serves as boot camp for the 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!

As good as the results have been with these endeavors, even more effectiveness can be found in the real world. 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 multi-hundred- million dollar unit of Mattel. When it wanted to extend its reach in the late ‘90s, rather than run a huge advertising campaign of uncertain results, 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 theatre with a live play centered on the doll collection and the girls who adore them; there’s a Café for a grown-up dining experience of lunch, tea, or dinner; there’s a photo shoot with the girl’s picture on the cover of American Girl magazine; 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, for more dolls, more clothing, more books and accessories all become memorabilia for the experiences visitors have. Moreover, these same visitors buy more from the catalog when it comes in the mail, frequent the website to purchase items more often, and tell their friends all about their American Girl Place experience so they can become loyal customers as well. Don’t take our word for it – the next time you head to Madison Avenue to go to the office or meet with your agency, visit the second Place opened last November in a 43,000- square-foot space at Fifth Avenue and 49th Street.

And when you head back to Madison, continue on 49th Street and have a cup of coffee at the ING Direct Café. This place was created by the North American arm of the big 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 (and maybe a biscotti) with the express goal of converting them into ING Direct customers. Does it work? Remarkably so: each of the three Cafes ING Direct opened in New York, Philadelphia, and Los Angeles generates around $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 US. 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. Like American Girl, ING Direct, and a growing number of other companies who are foregoing or shifting advertising dollars to marketing experiences, Starbucks understands that the experience is the marketing – the best way of generating demand for any offering.

Measuring Efficacy

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 their recall rate, divided by the costs of the campaign. In other words:

Efficacy = # People x Recall divided by Cost

Now consider the additional benefits of a marketing experience. First, we grant that more people can still be reached with a large-scale advertising campaign than will visit a physical place or surf a virtual one online. But of those people who do experience the place, they spend not 15, 30, or even (The cost! The cost!! Think of the cost!!!) 60 seconds, but minutes, scores of minutes, and even hours. And when they do so, they aren’t passively watching – or worse, getting up to pour a drink, flipping channels, reading a newspaper, talking, fastforwarding, or Tivo-ing – but generally giving their full attention by actively interacting with the brand. Moreover, the intensity of a live experience is so much greater than with a commercial, billboard, print copy, or any other form of advertising, all of which leads to much greater memorability of your brand, company, and offerings. Which in turn directly leads to greater sales. (We do admit the last couple of these factors are hard to measure – but, hey, since we’re talking about the advertising industry here, that should be nothing new or unusual. And you can at least make relative judgments of advertising vs. experiences for each parameter.) So think of it this way:

Efficacy = (# People x Time x Attention x Intensity x Memorability) divided by Cost

Advertising can, again, reach more people – but every other factor favors marketing experiences, and augers for shifting marketing dollars away from the big ad.

To yield greater reach, then, create a portfolio of marketing experiences, as Vans Inc. does with its many admissionfeed Skateparks feeding demand for its shoes, or LEGO System does with its various LEGOLAND theme parks, LEGO Imagination Centers, and derivative presences in toy stores such as its company-designed experience inside of the flagship Toys ‘R’ Us store in Times Square – not to mention a plethora of online experiences, such as its own flagship website, the Galidor platform with its own virtual world, and LEGO’s derivative placement with company-designed experiences at such websites as the famous HarryPotter.com or StarWars.com.

Making Your Own Calculations

Now go ahead and use a back-of-theenvelope calculation to figure out if marketing experiences make sense for you. Suppose you shifted a few million dollars of your ad budget to create a place in, say, an experience hub like Times Square, Michigan Avenue, the Las Vegas Strip, Orlando, or Los Angeles – places that get upwards of tens of millions of visitors per year – or even the Mall of America with its 40 million-plus annual visitors. (You can even calculate the value, if you wish, of the millions of impressions for passersby who don’t even go in, but do see your new place-as-billboard.)

Of those millions how many would venture in? For how long might they typically stay? How much of their attention, on average, would they give the place? How intense a direct experience of the brand could you stage? And how memorable would that be?

Now make the same calculations for an equivalent amount of money spent on your next (or last) advertising campaign, where time is fleeting, attention lagging, intensity variable at best, and memorability a crap shoot. Which do you think would be a better use of those funds? If on experiences, you really should stop all advertising and shift that money to where it will have the greatest bang for your buck – in staging marketing experiences.

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, such as with a new product launch. For example, ING Direct – relatively new to the North American market with lofty growth plans – does advertise in addition to operate its cafes (and sponsor a number of events). And, heck, your marketing experience is a new offering, so you may even want to advertise its presence!

Measuring ROI

Before you get all comfy, however, back in the familiar succors of advertising, consider one more formula: return on investment. ROI for any marketing endeavor is a fairly simple calculation:

ROI = Incremental Revenue divided by Cost

Now you may not be able to exactly measure the incremental revenue a particular advertising campaign yields – we’ll spare you the old saws – but you darn well 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 also 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 (members can climb for free, but they pay $15 to join) but for the most part gets its suppliers to pay for the experiences in its stores! And ING Direct, of course, charges for the coffee (and biscotti) in its Cafes.

While none of these will provide the figures, it’s pretty clear that in each of these cases, and others that could be cited, the company recoups most of its investment, and we dare say even makes a profit! So look at the return on investment this way:

ROI = Incremental Revenue divided by (Cost – Admission Fees)

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 CFO during your next budget cycle and demonstrate how you will achieve infinite ROI on your next marketing campaign! It’s not fantasy – it’s reality. Companies are doing it today by thinking imaginatively about (and designing creatively around) ways of engaging their current and potential customers that no advertisement can do. 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?

B. Joseph Pine II and James H. Gilmore, co-founders of 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.