Retail Advertising 101: Macy’s Cuts Ads, Profits Fall
Macy’s quarterly earnings were down for the quarter and it cut it’s second quarter outlook.
Maybe they should reconsider their advertising strategy. This year Macy’s is planning to spend 40% less with the Daily News than last year. We were not alone in this drastic cutback.
A newspaper and technology blogger summarizes Macy’s ad strategy.
Paul Ginocchio, a securities analyst at Deutsche Bank provided this detail:
In Paul’s hypothetical analysis, he estimates $254 million of the money pulled from newspapers would go to additional TV advertising, $22 million more would fuel online advertising and $40 million would be left to fatten Federated’s bottom line.
Paul says the operators of major metro papers – the New York Times Co., Tribune Co. and Washington Post – are the most vulnerable to a potential shift in Federated’s media mix. Chains in smaller markets not served by Macy’s or May – like Lee, Gannett and Media General – have less to lose.
Paul bases his projection on the way such national chains as Wal-Mart, Sears and Target spend their advertising dollars. But there may be a reprieve for newspapers.
Rather than buying advertising to generically tout its stores as great places to shop, Macy’s historically has used its ads to promote individual products to drive sales. To date, newspaper advertising has proven to be the best “call-to-action†medium for Macy’s, Kohl’s and other merchants employing this strategy.