The false dichotomy of engagement vs. broadcast (or why Pepsi sales are down)


To understand why Pepsi has now fallen behind both Coke and Diet Coke in sales for the first time in decades, let’s examine the tradeoffs between two communication choices: inbound customer engagement and outbound advertising messaging.

We’ve explained the Information Ecosystem before, a simple model showing how information flows (inbound or outbound) to any group (of a few or many). Spend 10 seconds examining the model above and intuitively you’ll see that communicators — advertisers, marketers, organizations, husbands and wives, parents and children — have four tactics at hand. You can broadcast outbound to many; pull research in from many; personalize outbound messages to a few, or engage in inbound communication from a few. Four paths, four tactics, all with their own value given your objective and audience composition.

The biggest mistake marketers make is falling in love with only one tactic. In the 1950s, broadcast was king, in a world where only outbound advertising at scale was possible and communicating with small groups or individuals was too costly. In the 1990s, some companies embraced 1to1 personalization as the future of all communications, eschewing broadcast advertising empowered by new databases that could record preferences of individual customers. Today, in 2012, many companies buy in to social media gurus who shout engagement is the new panacea.

But is engagement really at odds with broadcast messaging? Of course not. Both play a different role on the same field:


The colored circles on the Information Ecosystem above show the debate that often occurs in marketing boardrooms. We must do one or the other, the arguments go. Some see a world where consumers still watch 5 hours of TV a day and commute in cars for 2 hours, so mass-media advertising must work. Others see the shift to Internet, laptops, text, smartphones, apps, social networks and tablets, and think digital-based engagement and word of mouth propagation are the solution.

The truth is, for most companies, both points of view are right — because the dynamics coexist with each other.

When to pick engagement or broadcast

Engagement is a valid tactic if a few members of your audience (say, consumers) have higher value to you or influence over their peers. This variance was called by Don Peppers in the 1990s a “customer value skew,” and the steeper this skew, or range in difference among customers, the more sense it makes to treat different customers differently.

In financial services and airline bookings, where some customers bring much more money to the table than others, engagement makes sense; but for commodity products, or services that appeal to broad swaths of consumers, engagement is a tactic best reserved for emergency situations, a “Motrin Moms” meltdown where a company must be ready to swoop in if negative attacks scale rapidly. If your customers are really different amongst themselves, or have potential to be wildly influential, engage away; if not, downplay this tactic.

On the other extreme, broadcast push such as advertising is best for companies trying to send a message out to masses of customers who all may need relatively the same thing. This doesn’t mean everyone will want your product; but it does mean that even if you are targeting 5% of the population, the needs within that group are similar enough that outbound broadcast can stimulate demand. Education, awareness, interest, consideration are all dynamics driven by advertising to the masses, and the seeds for downstream word of mouth. Like a spotlight, you can target the outbound communications to small groups and do so with efficiency; but there is nothing wrong with pushing messages out to the masses since it is one of four valid communication pathways in the overall Information Ecosystem. The Super Bowl and Academy Awards got lots of chatter among consumers in 2012, and the starting point for both was a major television broadcast.

The lesson of Pepsi

Finding the balance is difficult. In 2011, PepsiCo slashed outbound ad spending on its Pepsi brand in half, down to $20.1 million, focusing more on social media engagement. In March of 2012, news broke that the Pepsi brand had fallen from No. 2 to No. 3 in sales behind Diet Coke — a huge black eye for Pepsi, this being the first time in two decades it trails two Coke brands. Now Pepsi has said it will boost 2012 ad spending up by 30%. “We need television to make the big, bold statement,” Massimo d’Amore, chief of Pepsi Beverages Americas, told the Wall Street Journal.

This is not to say Pepsi’s move toward social-media engagement was wrong; but it did err in overweighting engagement and gutting broadcast for what is, at core, a commodity product in a highly competitive category. Pepsi failed in its judgment because it did not evaluate its customer base value skew accurately — most customers have similar value to Pepsi (we can only drink so much a year) and a similar need (we’re thirsty), and few have influence over their peers’ beverage consumption habits. For a carbonated soda pop, treating different customers differently makes little sense.

The tactics of engagement and broadcast are not opposed to each other, and can fit in the same organizational marketing plan easily, provided the role of each is understood to manage customers in the appropriate manner. There is no ROI on being invisible in a marketplace that needs education; there is also danger in not responding to the small groups of influencers or customers with the highest value, so engagement may be required as well.

Do you need to tell everyone about a new thing? Or is there a steep customer variance in your target base that, if managed, could turn the tide of your business? Answer those two questions, and you’ll have an initial cut at how to invest communication resources.

Ben Kunz is vice president of strategic planning at Mediassociates, an advertising media planning and buying agency, and co-founder of its digital trading desk eEffective.


8 thoughts on “The false dichotomy of engagement vs. broadcast (or why Pepsi sales are down)

  1. Hi Ben,

    A really interesting piece. I agree – with some qualifications as follows:

    Social media marketing is no different to other areas of marketing. Though there’s still a lot of “see! see! I told you so!” around when social media campaigns don’t live up to expectations, very often it’s actually the concept and the execution that are at fault. If the idea is no good, it won’t work, simple as that.

    Related to that I’m certainly no advocate of marketers pulling all their money out of TV and giving it to those of us that work in the social space. It should be a case of and / and, rather than either / or, and different disciplines work better together when they work in tandem, and there is plenty of research that supports that point.

    Indeed, as you say, broadcast and engagement shouldn’t be mutually exclusive. eeven for mass market brands there is very much a role for both and I’d use Starbucks as a case study of someone that gets the engagement part right.

    The other day, the following stat appeared in Ad Age (http://adage.com/article/digitalnext/1-facebook-fans-engage/233839/):

    “Starbucks fans and friends of fans spent 8% more and purchased 11% more frequently in-store than non-fans who were also Starbucks buyers.” 

    Note the emphasis on friends of fans as well as fans, that’s an example of successful engagement at work

  2. I don’t believe that starbucks data from Dirk is relational/causal with starbucks. They do very little in social media. And their customer base and potential customer base is huge. I bet around 500 mil potentials. So posting once or twice on a facebook page and responding to zero customer posts does nothing to support Dirk’s comment.

    Scale is the reason Social fails for marketing/selling. Brian solis just released a 31 page piece of crap for Altimeter that uses 6 companies as examples who used influence to launch campaigns. Not one example gave results. They all said ‘Thy identified influencers using Klout and Peer Index and rached out to them’ that was it. One was the Windows phone release. That worked great.

    Even for small business scale is not there. It is a manpower issue. You just can’t respond and engage with volume using the platforms and technologies out there right now.

    Facebook is truly just a massive paid display advertising platform not different than yahoo. The sad part is with all the data Facebook has (which really isn’t much btw) they have lower click through rates than yahoo.

    Why is this? Because Yahoo knows more about you than Facebook. You give yahoo much more insight into what you like based on news and parts of the site you visit like sports. Facebook can barely grasp this based on your limited chat each day.

  3. Strangely, we still find ourselves having to convince brands that there is no one-size-fits-all formula when it comes to advertising. This illustration, equally as simple as it is important, makes that task infinitely easier.

  4. Engagement is a bottom of the funnel exercise, where you’re either trying to increase frequency or size of purchase, or trying to turn customers into advocates.

    In a highly competitive, commoditized category, engagement emphasis is a dangerous game, because you are preaching primarily to the choir.

    That’s why I almost always advise corporations to think of social as a loyalty/retention play first (somewhat similar to email) rather than a newfangled way to create customers out of thin air.

    I don’t have the data, but I’d be willing to wager that core Pepsi drinkers are flat or up, but occasional and new drinkers are down, which is exactly what you get when focus on the loyal few instead of the disloyal many.

    Terrific post Ben.

  5. Ben: This is a great piece that helps advance our thinking about engagement.

    I don’t think the issue is abandoning broadcast or discrediting engagement, but, instead about the balance between the two. And, most importantly, the connection between these two marketing approaches.

    Isn’t the big unresolved question whether engagement marketing reaches scale if you strike a chord with fans of a brand and they spread the word. And what sort of engagement causes this effect?

    Somewhere in the dialogue between pop icons like Gladwell, academics like Henry Jenkins, and most importantly, practitioners like Mike Monello, Brian Clark, and Griffin Farley lies the answer.

    Have you seen this presentation from Farley and Monello? A couple years old but still important to the engagement debate:

    http://www.slideshare.net/griffinfarley/planningness-propagation-planning

  6. Thanks, all. I think Dirk Singer said it best: “It should be a case of and / and, rather than either / or, and different disciplines work better together when they work in tandem…”

    Steve Wax, you are right, “the balance between the two” is key. I have not yet explored the Farley and Monello presentation but will dig in. One vector I did not address was time — the other challenge I see with engagement is it tends to spike and fade quickly (Skittles, anyone?), and as an ongoing strategy for a brand seems remarkably hard to maintain. After a consumer “Likes,” what then?

  7. Ben – great article. Totally agree with your assessment about engagement. Since most brands have acceptable alternatives, the question as you’ve alluded to is how do you engage with your audience over the long haul. As we’ve seen in the airline and hotel industry, and even at your local sub shop, the longer term solution is loyalty programs. Make the cost of switching higher for the consumer. I work at a grocery savings service called SavingStar (https://savingstar.com). We’re addressing this problem for CPGs with our product called One or Many which rewards shoppers with high value savings for multiple purchases of a product over one or many shopping trips. (SavingStar keeps track of all purchases digitally so shoppers do not need to manually enter bar codes into a website for tracking). We launched a One or Many campaign with Pepsi Max and Diet Pepsi last November – Buy $15 worth of product in November over any number of shopping trips, get $5 back. You can imagine that expanding it to a 6 month, year-long, or never-ending campaign would greatly increase the switching costs for consumers. Long term consumer loyalty in many cases will require brands to rethink their strategies to focus on providing additional value for shoppers.

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