Substantial Penalty for Early Withdrawal
When I was knee deep in local online marketing as President of Weblistic (prior to our acquisition by Spot Runner), the rate of advertiser churn was perhaps the biggest challenge of the business.
There were a couple problems . . .
No Penalty for Leaving
The traditional Yellow Pages model paginates a directory based on size of ads and then seniority of advertisers. So the largest ads were placed first in the category, and among ads of the same size, the advertiser who had been buying that size ad for the longest period came ahead of advertisers who had not been customers for as long.
This model served as a powerful customer retention tool, because even if an advertiser was having a bad year, or doubted the value of his advertisement, he was often reluctant to reduce his spending or to sit out for a year because he would lose the preferential position he had earned from years of faithful participation.
I remember seeing some directories with 50 or 100 pages of attorneys, plumbers, or roofers. The more businesses participating, the more painful was the thought of losing the position.
Online advertising generally does not have a meaningful reward for customer retention nor a substantial penalty for early withdrawal.
On Google, if you want a better position, increase your budget, bid, and quality. It changes moment to moment, so no one company owns the position.
This is tough, because advertisers are fickle. A bad day, and a major campaign can be tossed out the window.
Social media does nothing to change this. In fact, today’s darling Facebook will be tomorrow’s forgotten AltaVista.
A company wishing to have sustained success selling online advertising would do well to build a model that combines substantial rewards for customer loyalty and substantial risk of loss for failing to maintain a program.
One method of doing this is to sell exclusive positions and to drive meaningful, quality traffic to the site.
The trick is to balance the consumer’s need for accurate information and the advertiser’s need for consumer attention.
This is probably best accomplished in narrow niches combined with hyper-local targeting.