But We Have Always Allocated the Marketing Budget this Way

by Lyle Heller, CU-VO

As the time for developing next year’s marketing plan approaches, credit unions may find their previous marketing template needs significant adjustment.

Communicating the credit union message to members and potential members has changed dramatically, even in the past two years.

My local newspaper subscription expired long ago and it turns out that I am not unique.  As a result, using newspaper advertising as a means of communicating with me does not happen.

The matter of allocating newspaper advertising budgets may be an area where the past budget allocation formula may need revising.

Professional Advertising of Arlington, VA in an especially thoughtful article discussing effective newspaper advertising states “With all types of media, Consistent Advertising = Familiarity = Trust = Members. People won’t buy from you until they trust you.  Trust and confidence take time to build up. To be successful with newspaper advertising, you need persistence, patience, and a budget to keep your newspaper advertising running to build that trust.  Your ad should appear in the same place in the newspaper at least weekly for an indefinite period [forever]. Expect to run your newspaper advertising for two months before you see an increase in sales. It takes some time to build trust. And if you quit, you have to start all over again. Don’t waste your money starting a newspaper advertising program if you can’t give it time to work.”

Their article has a number of items of interest; the use of newspaper advertising, the concept of trust, and the need for persistence.

They state that 57% of US adults read a daily newspaper.  That piqued my interest.  I discovered the assertion was correct for 2005.  However in 1999, 78% of US adults read a newspaper and in 2009 only 15% of adults under 40 read a newspaper. (30% of adults over 40)  In 2005 it is asserted that 1,600 US daily newspapers had a circulation of 58 million.  In a ten year span the newspaper readership has dropped to half.

Further, in 2008, the Nieman Journalism Foundation at Harvard stated “Print is still king: Only 3 percent of newspaper reading happens online”.  That statement also caught my attention.

Take a look at what has developed with mobile devices in the meantime.  Tablets and android devices are recent phenomena.  IPad sales as of April 2010 were only 300,000 units and as of June 2011 that number now exceeds 25 million.  Android devices now exceed 135 million units.

While the 3% finding by Nieman should spark debate, the trajectories for print and online readership are clearly pointed in opposite directions.

There is a whole new source of connectivity to members and potential members that did not exist just two years ago.

As a result, budgeting for marketing media takes on a new dimension.  (In general, a credit union makes expenditures with an expectation of a return.)

Suppose a $300 million credit union allocates .025% of its assets to newspaper advertising or $75,000.  A credit union earning .74% on its assets will have a per member contribution of about $74 per year.  In other words, the newspaper campaign should yield 1,200 new members to provide a positive return for that expenditure (investment).

Suppose that credit union allocated $6,000 of its marketing to improve its online advertising and the result yielded 90 new members.

Which result would be economically preferable?  Which scenario is more likely?  Which is more risky?

In 1999 the key questions for newspaper advertising related to effectiveness of the ad, not the reach of the medium.  Questions, such as gaining attention through design, ad size, placement, and timing, were among the major considerations.

In 2011 the key question is one of “continuing or reducing” the level of credit union newspaper advertising due to a diminishing and aging audience.  Newspaper readership is less than half of 1999 levels and Internet related devices now arguably exceed newspaper readership.  While Professional Advertising’s formula Consistent Advertising = Familiarity = Trust = Members still holds true, the mix of media may need to be changed.

Join us next time as we discuss the familiarity and trust parts of Professional Advertising’s formula.

This series is authored by Lyle Heller of CU-VO.  Mr. Heller holds a Bachelor of Science degree in Mathematics from University of Wisconsin – Whitewater and a Masters of Business Administration in Production and Operations from Marquette University.  Mr. Heller served as Executive Vice President of two CUNA organizations.  He has lectured at the university level in Quantitative Decision Analysis, Simulation, Systems Analysis, and Marketing for more than ten years.  Additionally, he was a top-ranked winner of the 2005 Wisconsin Governor’s Business Plan contest.  CU-VO is a strategic partner of CUNA Strategic Services to provide video overlays to credit unions.  Learn more at www.cu-vo.com and follow CUVOTweet.