Pure Michigan sells its return on investment in new campaign

Next spring, when Detroit takes the leading role in a national TV commercial as part of the state’s Pure Michigan tourism campaign, don’t expect it to look like other Pure Michigan spots.

No sweeping rural vistas or picturesque Michigan landscapes.

The Detroit ad, instead, will be more visually edgy, its marketers say, with close-up cuts and a faster pace meant to mimic an urban vibe.

The city’s status as cool — and no longer so challenged — is the message to be conveyed in the campaign. With bankruptcy issues behind it, and lots of economic development news in the making, the ad campaign is meant to sell potential visitors on the city’s opportunity.

And a strategy of talking about the campaign now is all part of pushing a more compelling business case, and showing an example of return on investment of state tax dollars, for the Michigan Economic Development Corp.

“We’re showing our cards to our competition,” said Dave Lorenz, the new vice president of Travel Michigan, the arm of the MEDC that manages the tourism campaign.

The department, he said, needs to share more information about a $33 million program that relies mostly on state dollars — especially since it needs to prove it can yield a return on taxpayers’ investment.

That belief is not his alone. MEDC CEO Steve Arwood told Crain’s this spring that the agency on the whole needs to do a better job communicating what it does. The culture change is the result of lingering questions about transparency and threats of state budget cuts.

To Lorenz, who took the helm of Travel Michigan this summer following the resignation of previous leader David West, transparency is more than a buzzword.

Last month, he testified before multiple House and Senate committees about plans for Pure Michigan’s 2016 campaigns, something he said had previously not been done as much in advance. Lorenz’s staff plans to develop more accurate regional travel estimates and publish its first true international data, the latter drawing on new information from Detroit Metropolitan Airport and the U.S. Department of Commerce.

“As much as we try to act as though we’re not government, we try to act as though we’re a not-for-profit entity just trying to do the best we can for our stakeholders … people are naturally reticent to believe anything that comes out of government today,” he said. “That’s why I shared so many things.”

That included data from Toronto-based Longwoods International, which contracts with Travel Michigan to evaluate the campaign’s effectiveness, and which suggest that Pure Michigan ads inspired 4.1 million out-of-state trips here last year. Those visitors are estimated to have produced roughly $85.4 million in state tax revenue.

For every dollar spent on Pure Michigan in 2014, Lorenz said, the state made $6.87. That’s the best result since the department started tracking ROI in 2006, he said.

Calculating ROI

Pure Michigan’s ROI figure is largely an estimate. There’s no definitive way to survey every out-of-state visitor to Michigan about whether a television or print ad motivated their trip.

The state knows how much it spends annually on national advertising — $12.4 million in 2014, data show. Researchers estimate the number of out-of-state trips and amount of state tax revenue generated in a given year, and calculate an average dollar figure ROI.

That dollar figure doesn’t include multipliers for secondary or tertiary economic benefits, Lorenz said, nor does it factor in taxes on hotel rooms.

Since 2006, Pure Michigan has invested $95.4 million and earned $4.81 for every dollar spent, Longwoods’ data show.

The state plans to maintain a focus on Pure Michigan despite a 27 percent budget cut within the MEDC this fall that led to the layoff of 65 employees across the department. Travel Michigan today has 10 employees, including Lorenz.

Those layoffs primarily are due to a revenue shortfall in its corporate fund, which consists of a share of gaming revenue from tribal casinos. The Gun Lake Tribe, which operates a casino in Allegan County, withheld a roughly $7 million state payment in June in a dispute over Internet lottery games.

Pure Michigan relies on about $1.2 million in corporate dollars, but the bulk of its $33 million budget comes from the state’s general fund, budget data show. Lawmakers determine the MEDC’s annual general fund appropriation during the budget cycle. That process has carried its own uncertainty.

This spring, House Republicans proposed siphoning off $185 million in MEDC funding as part of a road funding deal. The final roads plan signed into law last week didn’t divert any money specifically from MEDC but will shift up to $600 million from the general fund to roads by 2020-21. The Legislature has not said which departments will be cut.

Tracking Pure Michigan’s ROI is important not only to determine whether the campaign is worth continued investment, Lorenz said, but also because Michigan’s tourism industry is trying to attract more visitors in hopes of turning them into residents — something he calls the “halo effect.”

‘We’re the comeback city’

Tourism marketers hope Detroit’s turn in the Pure Michigan spotlight will do just that.

In the past, Lorenz said, much of the messaging surrounding Detroit was that the city was a cool place to visit, despite its challenges.

Now, “we don’t have to lead with the ‘Gee, I’m sorry’ message first,” he said. “It provides an opportunity for us to lead with, ‘Hey, we’re the comeback city. Detroit is a good place to visit, for these reasons.’”

The call to action to the viewer is: “Don’t you want to be a part of this as a visitor, or as a businessperson, or as somebody looking to start their entrepreneurial career?” Lorenz said.

Detroit’s commercial will be part of a roughly $12 million national TV ad buy, Lorenz said. It will be jointly funded by Travel Michigan and the Detroit Metro Convention & Visitors Bureau. In all, Pure Michigan expects to spend $17 million next year on promotion, including public relations and social media efforts.

Said Bill Bohde, senior vice president of sales and marketing for the visitors bureau: “We’ve got to change perception, and that’s the way to do it.”

Other commercials planned for spring and early summer will promote Michigan’s growing craft beer industry and its farm-to-table “foodie” culture. McCann Erickson’s Birmingham office will produce the commercials.

Detroit was not ready for an aggressive marketing campaign before now, Bohde said.

Several years ago, the Detroit CVB launched a campaign dubbing Detroit “America’s Great Comeback City,” an effort to promote the bankrupt city’s assets to a national audience.

The Detroit CVB’s proposed 2016 budget is $16.2 million, with $3.6 million set aside for marketing efforts, Bohde said. The budget still needs final approval from the agency’s executive committee.

Detroit still has challenges — a debt-ridden school system and blighted neighborhoods among them — but those problems will take years to fix, Bohde said. New tourists, new investors and new revenue could help expedite efforts to solve them.

“I don’t think there’s anything to lose here because of the momentum that we gained,” he said.

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Comments

didIsaythat
Sun, 11/15/2015 - 6:23pm
I assume Kroger pays something for the use of "Pure Michigan" in its milk commercials. Are they the only business that is tied to the ad campaign?
John Q. Public
Mon, 11/16/2015 - 12:26am
You can read the report here: http://www.michiganbusiness.org/cm/Files/Reports/Michigan-2014-Tourism-A... Page 59 is the "money shot." It's hard to tell if it's worth anything, because the methodology isn't revealed. Sometimes the ad budget rises, and so does visitor spending. Other times the ad budget rises and visitor spending falls. Still other times the ad budget falls and visitor spending rises. Throughout it all, though, with but a single blip in the 2012 region calculation, according to Longwoods ROI marches steadily upward. The MEDC will doubtless attribute that to the increasing efficiency of their ads, rather than to the fact that ads aren't the primary driver of visits or visitor spending. Even if we buy the premise that there's a direct multiplier effect--something the numbers don't support--look at the change from, for example, 2013 to 2014. The ad budget went from $13 million to $12.4 million, a drop of $600,000. Incremental state taxes dropped about $1.3 million. The direct multiplier that Longwoods proposes would indicate an "ROI" of about $2.17, and not the lofty numbers they claim. The national figures from 2011 to 2014 show that even though ad spending dropped 17%, visitor spending and tax revenue went up 40%. Did Pure Michigan really get that much more efficient, or are the numbers driven by factors more influential than ad spending?
USTraveler
Mon, 11/16/2015 - 7:41am
I was in northern Wisconsin this summer and heard a Pure Michigan ad describing Michigan's lakes and trees. In an area full of lakes and trees I wondered about the effectiveness of the ad placement.
Mon, 11/16/2015 - 7:42am
We just returned from a work/biking trip to Lancaster, Pennsylvania. That county is a tourist attraction and has enormous economic activity related to this. New restaurants, building onto hotels, buses with retirees from NYC and Philly rolling through the countryside pestering the Anabaptists. Tourism shifts money to unlikely places and made me want to look into the highly touted Pure Michigan thing. Pure Michigan began as an advertising campaign launched in 2006 by the state of Michigan as a subsidiary of our MEDC. The latest figure available to me shows costs to taxpayers 30 million per year. Supporters use the figure of 1.2 billion dollars spent in Michigan by visitors, peddling Pure Michigan as a handsome return on “investment.” Maybe. We can get a handle on Pure Michigan’s impact by inspecting the BLS labor statistics http://www.bls.gov/eag/eag.mi.htm#eag_mi.f.3. I tallied the total number of jobs in 6 states in the north central USA and the number of jobs in the Leisure & Hospitality categories. Total jobs in the states fell in four of those states, rising only modestly in Indiana and Pennsylvania. Jobs in tourism related businesses like restaurants, recreation, and hotels rose in all 6 states but to different degrees. Jobs in Hospitality (000) Jan 2005 May 2015 Gain over 10 years Mi. 405 421 16 Ill. 505 565 60 In. 274 301 27 Oh 498 547 49 Wi. 252 272 20 Pa. 480 551 71 It seems that the 5 states that didn’t especially advertise their tourist attractions had a much greater increase in the number of jobs than did Michigan. “Pure Michigan” probably repelled visitors rather than attracted them. Advertising is an unnatural process; it’s more fun just to do something to see if the thing makes money. The nicest thing about not advertising is that failure costs nothing.
Mon, 11/16/2015 - 7:48am
I don't understand why the above won't show the columns but Michigan gained only 16k jobs in the tourism businesses whereas Illinois gained 60 k, Indiana 27k Ohio 49 k and so on. Jobs in Hospitality (000) Jan 2005 May 2015 Gain over 10 years Mi. 405 421 16 Ill. 505 565 60 In. 274 301 27 Oh 498 547 49 Wi. 252 272 20 Pa. 480 551 71
Rich
Mon, 11/16/2015 - 8:27am
I have always detested it when tax money is spent to promote a commercial enterprise and not all taxpayers receive a return on the spending. In the case of Pure Michigan, the receivers of the benefit are the hotels, motels, restaurants, and facilities that people visit, all mostly commercial entities. Should these entities not pay for Pure Michigan costs rather than taking the cost out of general tax funds? The general tax funds could be better spent on education, or roads, or healthcare.
John
Mon, 11/16/2015 - 8:47am
Gee, maybe we invest more in public schools, we have more investment coming out:) Also, maybe we wouldn't have to invest so much in our prison system. Oops wait, prisons are run for profit as well..my bad.
Duane
Mon, 11/16/2015 - 9:07am
I believe there is real value in marketing and advertising, where it is a product, a service, a location, a culture, an environment, an expectation. We individually [whether here or somewhere else] can gain from the exposure and different prespectives [we can open up to the possibilities]. I support the idea of 'Pure Michigan'. What I wonder about is what is the current program purpose, who is the target audience, what is the desired results, what is the expect impact, and how do they know [how will we know] what is working? What is the theme, that thread, that links all the efforts together? What are all the efforts, is it just the TV spots? As for the Detroit focus, I am tired by trying to make Detroit into other than what it is or what it was [a residential town]. Promoting a failed City hoping it will draw people in to save the City can't been done by simple ad campaign. My concern is that new people want to be part of a bright future such as what we see in the Ann Arbor area, the Grand Rapids area, the Traverse City area. The risk is if the emphasis becomes Detroit as the image of Michigan than we are painted as a picture of failure, of discord, of hand out. Who wants to be part of that , who wants to make their family part of that? What does MDEC have as its purpose, how does it hold itself and the programs accountable, whose support do they feel need or do they feel they need no one else? Thanks for the article, it has drawn my attention back to thnking about the whole of Michigan and not just the parts.
Brian
Mon, 11/16/2015 - 9:26am
With this kind of deception going on with the State Police/AG Schuette's office https://theintercept.com/2015/11/14/michigan-prosecutors-lab-falsify-med... Michigan has no chance of staying relevant - cool edgy commercial or not. Anyone who is willing to group synthetic pot with cannabis is either incompetent or evil. Unknown origin? Kids know better. But, this war on the truth doesn't matter to the kids - why stay in MI and become a felon when they can move to Colorado, WA etc. with it's abundance of jobs in the cannabis/hemp industries?
Rick
Mon, 11/16/2015 - 11:02am
Thank Brian for the link. Pretty astonishing. I always knew Schuette was an idiot and only interested in higher office but this is really awful.
KG-1
Mon, 11/16/2015 - 11:32am
Since this program benefits Michigan Businesses, and since MiCoC CEO Rich Studley claimed that it was time to step up to the plate (when cajoling our non-representing "representatives" to act on the Snyder-Meekhof road funding "solution", then the obvious answer to Pure Michgan's money troubles is to yank 100% of its revenue stream from the General Fund, and have the businesses which will benefit the most from this program, to pay for it completely by themselves.
R.L.
Mon, 11/16/2015 - 1:58pm
Our hope is to better our educational system, and bring to mi. better paying jobs that will help to retain our many diverse talents. I have personally spoken with thousands of our young people and see why they choose to live where they do and thaanswers are many. Make education affordable and attractive to pursue with a future, after you graduate. R.L.
Matt
Mon, 11/16/2015 - 4:50pm
I am looking forward to the Detroit ads, maybe they can be timed to coincide with the national crime statistics? Could be tied in with a new video game release as a way to experience the game in real life. Breaking Bad did wonders for Albuquerque tourism. The possibilities are endless!
didIsaythat
Tue, 11/17/2015 - 9:48pm
Ohio has just come up with a new promotional slogan to compete with "Pure Michigan' it is.........(drum roll)..... "Ohio, find it here"
Linda
Sat, 03/05/2016 - 2:11pm
All this money advertising on Pure Michigan should go to Flint Michigan for pure Lead..... and pure water..... We can spend money on ads to make money but the state cant spend money to fix problems and help people who have health issues from their own mistakes to save money...