Consider how JCDecaux, a vendor of French outdoor advertising space, pulled the mass of refusing noncustomers into its market. Before JCDecaux created a new concept in outdoor advertising called “street furniture” in 1964, the outdoor advertising industry included billboards and transport advertisement. Billboards typically were located on city outskirts and along roads where traffic quickly passed by; transport advertisement comprised panels on buses and taxies, which again people caught sight of only as they whizzed by.
Traditionally outdoor advertising was not a popular campaign medium for many companies because it was viewed only in a transitory way. Outdoor ads are typically exposed to people for a very short time while they are in transit, with the rate of repeat visits low. Especially for lesser-known companies, such advertising media was ineffective because it could not carry the comprehensive messages needed to introduce new names and products. Hence, many companies refused to use such low-value-added outdoor advertising because it was either unacceptable or a luxury they could not afford. Having thought through the key commonalities that cut across refusing noncustomers of the industry, JCDecaux, a French company, realized that the lack of stationary downtown locations was the key reason the industry remained unpopular and small. In searching for a solution, JCDecaux found that municipalities could offer stationary downtown locations, such as bus stops, where people tended to wait a few minutes and hence had time to read and be influenced by advertisements. JCDecaux reasoned that if it could secure these locations to use for outdoor advertising, it could reach beyond existing demand and convert noncustomers into customers.
This gave it the idea to provide street furniture, including maintenance and upkeep, free to municipalities. JCDecaux figured that as long as the revenue generated from selling ad space exceeded the costs of providing and maintaining the furniture at an attractive profit margin, the company would be on a trajectory of strong, profitable growth. Accordingly, street furniture was created that would integrate advertising panels. In this way, JCDecaux created a breakthrough in value for advertisers, the municipalities, and itself. The strategy-eliminated cities’ traditional costs associated with urban furniture. In return for free products and services, JCDecaux gained the exclusive right to display advertisements on the street furniture located in downtown areas. By making ads available in city centers, the company significantly increased the average exposure time, improving the recall capabilities of this advertising medium. The increase in exposure time also permitted richer content and more complex messages. Moreover, as the maintainer of the urban furniture, JCDecaux could help advertisers roll out their campaigns in two to three days, as opposed to fifteen days of rollout time for traditional billboard campaigns.
In response to JCDecaux’s exceptional value offering, the mass of once refusing noncustomers flocked to the industry. As a medium of advertisement, street furniture became the highest-growth market in the overall display advertising industry. Global spending on street furniture between 1995 and 2000, for example, grew by 60 percent compared with a 20 percent total increase in overall display advertising.
By signing contracts of eight to twenty-five years with municipalities, JCDecaux gained long-term exclusive rights for displaying ads with street furniture. After an initial capital investment, the only expenditure for JCDecaux in the subsequent years was the maintenance and renewal of the furniture. The operating margin of street furniture was as high as 40 percent, compared with 14 percent for billboards and 18 percent for transport advertisements. The exclusive contracts and high operating margins created a steady source of long-term revenue and profits. With this business model, JCDecaux was able to capture a leap in value for itself in return for a leap in value created for its buyers.
Today, JCDecaux is the number one street furniture-based ad space provider worldwide, with 33
4,000 panels in forty-one countries. What’s more, by looking to refusing noncustomers and focusing on the key commonalities that turned them away from the industry, JCDecaux also increased the demand for outdoor advertising by existing customers of the industry. Until then, existing customers had focused on what billboard locations or bus lines they could secure, for what period, and for how much. They took for granted that those were the only options available and worked within them. Again, it took noncustomers to shed insight into the implicit assumptions of the industry that could be challenged and rewritten to create a leap in value for all.
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