During a recent discussion with a health club manager I was reminded of retailing pioneer John Wanamaker’s famous quote, “I know that half of my advertising is wasted; I just don’t know which half.”
When I asked the manager about the impact of new, somewhat niche, competitor moving in to the market a few months ago I was somewhat surprised with his response. He told me that he had lost a few members, maybe half a dozen, but paradoxically, they had signed up over a hundred new members during what was traditionally a slow part of the year.
Knowing quite a few club owners personally I am well aware of their predilection for hyperbole. Retention numbers, sales figures, lead generation… you name it they will exaggerate it. But I digress.
It occurred to me that the new competitor moved into the market with the usual fanfare… advertising, promotions, PR, and media exposure. However, without a compelling or unique value proposition that immediately resonates with the consumer all that attention merely creates attention and initiates the purchase process (problem recognition -> information search -> alternative evaluation -> purchase decision -> post-purchase behaviour).
All of the attention got people thinking, “Maybe I should do something?” They go to the new club to check it out but if there is no compelling offer they go on to look at the alternatives. If a competitor (who did not even advertise) has a more compelling offer they will purchase from them. That is exactly what happened here.
The new club’s advertising actually increased the sales at a competitor’s club because they had a more compelling offer.
That’s not to say that their advertising didn’t secure them any members… they did OK but imagine spending good money only to line the pockets of your competitor. That money is not only wasted (i.e. not getting you new members) it is advancing the competition.
The lesson is that if you are going to spend money on advertising you’d better have a more compelling offer than your competition. Getting people to your door is one thing… getting them to spend (and then stay) is another thing entirely.
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