Marketing
Issue No. 37 - October/November 2007
If I spend on advertising, will it pay off?
by Dr David Corkindale and Dr David Corkindale
There is a famous saying from nearly a century ago: “I know that half my advertising is wasted, the trouble is I don’t know which half.”
Has the situation changed? Probably not.
A similar statement could be made about half of marketing being wasted and — since marketing is often equated with advertising, which can be a large part of the marketing budget — let’s focus on that.
Meanwhile, the Australian Marketing Institute has set itself the task of providing members with a ‘Toolbox’ to enable them to calculate the financial pay-off. Will this work?
The case against advertising
A major US investment banks recently did a study on 23 household, personal-care, food and beverage brands.
It reported only 18% of them found their advertising spend paid off in terms of producing a positive RoI, even when allowing for the effects to last up to two years.
Advertising in this instance means mass media, like TV exposure of advertisements for products.
There are other, similar studies with similar findings and, if many small businesses troubled to find out how much extra business they gained from advertising they, too, might be disappointed with the apparent pay-off from this sort of activity, whether it be on TV or in other media.
Finance directors demand accountability.
They want to know that when they approve a budget to spend a scarce resource, they will see a return — one that compares with other investments like a new fleet of fuel-efficient trucks.
Does marketing have a difficult problem on its hands?
The case for advertising
Many businesses rely on some form of advertising to make themselves known to potential clients or to remind people of them.
Being in Yellow Pages, for instance, is a necessary cost of being in business for many. Many retailers seek to pull customers in by advertised special offers.
They have conditioned people to...
