Is There Any Value Left in Advertising?

by francine Hardaway on September 8, 2007

I am always asked by the entrepreneurs I advise about the value of advertising. Especially if they are not in a technology niche, they seem compelled to see an ad in print or on TV. But even John Wanamaker, considered the father of modern advertising, knew at the beginning of the 20th century that half of advertising dollars are wasted. But he used to say we couldn’t tell which half. Well, now we have metrics and we can.

Here’s how I see it after thirty years in marketing, sixteen of which were spent owning an agency. Advertising works for certain kinds of products. 1) Those we need often, so if we see an ad, we can buy what we need at a good price. Grocery coupons fall into this category. So does point of purchase advertising for gas 2)Those we have been trained by someone else to “think” we need, like age-defying products or teeth whiteners. 3)Or those expensive enough that if we happen to catch people at the point where they are “in the market”, the advertising can cost little enough in comparison to the product to be worthwhile. These are product ads. Most American businesses these days aren’t products, however. They are services. And services are bought by referral, by word of mouth.

Advertising can also be used for branding — simply creating an awareness of a brand. This kind of advertising is very expensive, has to proceed over a long period of time to pound a word, product or image into a consumer’s mind. Most entrepreneurs can’t afford the luxury to brand themselves through advertising, which costs about $15 million a year. It’s not much less for local branding, because of the frequency you need to achieve AND the media you need to use to catch local people who read mostly national media.

And there’s all kinds of research to show that younger people (under 40) have become immune to ads, hate them, multi-task through them, Tivo them out, etc.

So for the companies I deal with, most advertising is useless. I learned this the hard way with all my clients who wanted to advertise. I used to beg people NOT to advertise, even though it was more lucrative for the agency if they did.

In addition, I am constantly being reminded in trade journals of how much the market has changed and how the advertising industry as a whole is in disarray. Because of the power of the Internet, the customer can undo all your advertising dollars with one YouTube video of your exploding laptop battery or non-performing product. Advertising dollars are chasing customers to the Internet, to try to control these changes, but advertisers don’t know what the ROI is on that yet, either. I follow this space, social media or user-generated content, very closely. Lately, the best advertising is done by one customer advertising to another. “Hey, this movie is great. Go see it.” Think Amazon’s user reviews.

So I have come to the conclusion that the safest and most cost effective thing to do for a small business or a service business is create buzz,e.g. viral marketing. And this is best accomplished through word of mouth, through good public relations, open houses, individual experience, demonstrations, free trials, kickass customer service, and every once in a while an unforgettable party.

The customer controls the message and marketing now, people. Give the customer something to talk about and it will be worth all the advertising in the world.

{ 4 comments… read them below or add one }

Mickeleh September 8, 2007 at 7:24 am

Much wisdom here. In my experience there’s a lot of money funneled through TV, print, and billboards — and Second Life—just to please the vanity of founders or CEOs.

Wannamaker’s dictum still applies. Metrics are overrated. We can measure the click that produced the inquiry or the transaction. But we have no idea how many prior impressions from what media lead up to that final click. It’s like a sculptor working a rock. Tap-tap-tap-tap-PLINK. Just because the rock breaks on that final tap, you can’t imagine that the first seven taps were wasted.

francine September 8, 2007 at 8:44 am

Ahhhh…don’t get me started on Second Life advertising! That, to me, is almost totally ridiculous. Coldwell Banker in SL? They must have nothing to do with their advertising dollars. Thanks for the comments; you are as experienced as I am, and if it passes your scrutiny, I must have something to say.

Shannon Seery September 9, 2007 at 7:18 pm

I agree that much of advertising does not produce the ROI that could be realized through authentically communicating and making real connections with individuals through social media.

I focus on ’employer branding’ and help companies market themselves as a desirable employer, mainly through their corporate career site currently. Few corporations are enabling 2 way communication on their sites, and yet there is no message more influential to a job candidate than being able to have a discussion with a real “current employee” and to get a “peer endorsement” – “hey this is a great place to work, and here’s why”.

We are in a time when we have Google at our fingertips to help us gather information that can be used to help make any decision. We don’t have to buy a book, see a movie, or stay in just about any hotel room without first getting getting some information from our online “peers”.

The greatest ROI will be seen from engaging in discussions with and truly understanding your users and community members.

Corey Kossack September 10, 2007 at 10:54 am

I’ve been thinking about this issue quite a bit, given the start-up nature of everything I’ve been involved in thus far. In particular, I’ve been thinking a lot about Kevin Pringles’ company, Chill Factor Clothing ( He just barely hit the market this summer, tried to do a series of tv ads (first with an infomercial company that didn’t produce the commercial in time and second with ShoppingAtoZTV, which he doesn’t know the results of yet). Kevin seemed to be focusing all his attention on these ways to “go big quickly”, and ignored the grassroots options of taking his hats to Camelback Mountain, the Salt River, etc. where people are REALLY hot and miserable, and maybe would buy a hat to cool themselves down.

As a startup, these decisions are tough, and you’re always looking for the quick way to “blow up” your sales, but I think we’re all learning that it isn’t that simple…

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