The Theory of Constraints is a methodology for identifying the most important limiting factor (i.e. constraint) that stands in the way of achieving a goal and then systematically improving that constraint until it is no longer the limiting factor. -- from LeanProductions.com
I have been a direct marketer for over 30 years. Think of any advertising medium and chances are we have been there and done that; catalog, print, short form DR, long form DR, even billboards as a DR medium. Ninety percent of all we do now is direct marketing via online marketing, but we still do some television.
OK, that is a brief introduction for those of you who do not know me. I am not a service provider so I can afford to be honest. I am not promoting myself and do not covet any sort of industry award. I have no position in this industry to protect or promote. So what you are going to get is the unvarnished truth.
This post was inspired by a television sales rep that came in to our office trying to sell us some air time. We are in test mode for a half-hour discount shopping show. He wanted to charge us cash for some overnight time in a local market … you know, 1:00 AM on a Tuesday sort of stuff. He has been selling time for many years and had his patter down.
But he has not kept up with the times. If the sales interaction was a street fight, he was bringing a proverbial knife to a gun fight. He was completely unaware of what his competition was. Oh, he knew about other television opportunities competing with his time just fine, but when I told him that he was competing for our cash with radio, print and most of the entire Internet, he asked how?
There are approximately 10 trillion Internet ad impressions per month in the US alone. And that is roughly following Moore's Lawand doubling "advertising supply" every 18 months. The other side of the supply/demand curve has demand for "cash buys" only increasing 12 percent per year. What does this mean?
Well, it means that supply is exceeding demand by a huge multiple and that nearly 80 percent of online advertising inventories go unsold. Put another way, demand is way below supply. The seller of television time did not grasp what this meant for him. The interaction between us kept getting more strained.
I asked him if he was aware that newspaper print advertising revenues were below the levels of what they were in 1950. Also, demand for magazine ad pages have been declining every year for a decade. Understand, ad page decline means a decline in demand. Ad page supply is nearly infinite as magazines just add more pages if demand is there (up to a point).
And what about online, digital video? Have you noticed that you not only can upload your video on YouTube for free, but if you let them place banners on that video, they pay you! Now, will you get views? Not many, but I promise you Tuesday at 1:00 AM in a Chicago market is not going to generate many views, either.
So we have a media landscape that has demand falling way below supply. You would think most marketers would be licking their chops and feasting on this over-supply, right?
But the point is that this television rep wanted to treat his media as if the rest of the world did not exist. After thirty years of rubbing shoulders with fellow marketers, I have come to the conclusion that many if not most have also compartmentalized the media landscape. This has led directly to the major constraint facing marketers today. What is that?
The #1 problem that dwarfs every other problem for marketers is the high cost of media. It is this constraint that has led marketers to forgo profitability on their initial customer acquisition and kick the can of profitability down the road.
So as the Theory of Constraints says simply and elegantly, until this limiting factor is under control, profitability remains a dubious proposition. And one way to begin managing this cost constraint is to understand the entire media landscape. Once marketers begin to think and treat media as somewhat of a fungible commodity, then each type of media, be it print ads in newspapers, mobile ads, short and long form television, online display, email, magazines … you name them, they all are in fact competing for marketers' cash.
Maybe the real constraint is not high media costs, but awareness.
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