Pure Michigan sells its return on investment in new campaign

Travel Michigan is making more of an effort to show Lansing lawmakers how it is spending taxpayer money and the influence the ads have on tourism dollars.

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.