Rant from a “Cockroach”

Madison Ave. style advertising has always had a fatal disease. It is finally starting to actually die, and we should rejoice. More efficient business practices such as “Reactive Mass Marketing” (what most of us inappropriately lable “Affiliate Marketing”) so thoroughly out-perform the old ways of doing business that some desperate things will be said in the coming years by Ad Agency gurus in order to project an air of relevancy a little while longer. It is simply a stall tactic.

After attending CJU and digesting the now infamous keynote address given by Greg Smith, CEO of Neo@Ogilvy, I recalled the book “What Sticks - Why Most Advertising Fails And How To Guarantee Yours Succeeds” in which a top ad veteran and a market researcher explain how they discovered that over 1/3 of the U.S. annual ad spend, approximately $112 Billion per year, is being completely wasted. They did not intend to say the $112 Billion delivered any partial value, they accurately meant to say that a huge portion of the money spent on Advertising had absolutely $0 value to the companies who spent it. What makes matters worse is that the old adage “…I know half my advertising is being wasted I just don’t know what half…” applies to the remaining 2/3rds.

When reactive marketers like me see figures like $112 Billion wasted, all we see is $1.1 Trillion in potential lost sales for these companies and a business practice so inefficient it is almost criminal.

The business of traditional Advertising is dysfunctional, unprofitable, and unaccountable. Everyone knows it. Even the guys responsible for selling advertising to the biggest companies in the world are publicly admitting to wanton waste and “gut-feeling” decisions based on utter guesswork rather than logic and data. What more does it take? If you are a shareholder or a board member of a company that is spending tens if not hundreds of millions of dollars in advertising, you have a right to know exactly how accountable those expenditures are because the cat is out of the bag and nothing will change unless shareholders demand better.

The authors of “What Sticks…” went to great lengths to provide research and analysis on $1 billion in advertising for 15 major advertisers (only one of which was a major chain store, McDonalds). They looked at these companies mistakes and offered improvement strategies that could help them waste less next time by marketing more and advertising less (and I don’t mean by spending less on advertising - you don’t think former agency guys would ever say that do you?). The unintended message of the book is: when examined carefully under the microscope of accountability, Advertising at the highest level was a horrific joke of a practice for some of the biggest names in business (and may still be today), and now we should wise up and find ways to waste a little less, to make the practice of Advertising viable a little while longer.

The authors of the book say Advertising should be saved because it has great potential. I say let it die, because it has been replaced by Mass Reactive Marketing which is vastly more potent, more cost-efficient, and 100% accountable thanks in large part to the Internet, Google, and Affiliate Marketing.

Unfortunately, Advertising and Marketing are not synonymous, as the book likes to suggest by constantly using the words interchangeably. Advertising is about name/product/service recognition and awareness. Marketing is about generating sales pure and simple. Advertising is very difficult to accurately measure and rarely profitable when weighed against the enormous costs. Reactive Marketing is very easy to measure and should always be profitable when set up correctly. Advertising can sometimes have a marketing benefit, but Marketing ALWAYS has an advertising benefit. To put it simply: Marketing is an accountable sales building practice that always provides significant Advertising value as a natural by-product if done correctly. By contrast, Advertising is a luxurious form of SPAM that we have learned to accept as a society because big brand names engage in it.

So why do companies still Advertise? Why don’t they fire their ad agencies tomorrow and use half their ad budgets for Reactive Marketing purposes to generate 150% more sales - get all of their advertising exposure for free - and use the other half of the ad budget they just saved to beef up the bottom line?

I’ve been in marketing and advertising for a long time, and I am not being facetious by asking this question. At first I thought it might be purely a branding strategy decision, but then I woke up.

Advertising is considered far too important in “Brand Building” than it really is. I understand fully the necessity to continuously build and bolster a brand, but in reality Branding has little to do with Advertising. Though exceptionally good advertising can bathe your company name in a positive and lasting emotional associations, the bulk of a company’s brand value comes from aspects of business that are well outside of the realm of advertising - namely the quality, price, and selection of the products and services you sell; the shopping experience you create; the customer service your customers experience, etc.; in fact, “Brand” is created from the accumulation of all these first hand experiences over time. Ultimately increasing sales, a.k.a. conducting effective Marketing, has a bigger effect on the value of a Brand than almost anything else because it increases first-hand buyer experiences and actual brand interaction.

So if Branding is only rarely influenced by any significant degree by truly great Advertising, why are so many companies today continuously spending obscene amounts of money on a clearly unprofitable practice?

I have thought long and hard about this question over the years, and the answer is complex. The answer to the continual waste question has to do with egos and “feelings” - people sense they know what is right for their business despite what logic or facts seem to say. The answer is also about organizational structure - something I talked about in a previous post. It is also about lack of accountability - thank goodness for capitalism and constant demand to improve margins from shareholders because this will change rapidly as the buzz saw of accountability continues to force
marketing executives to explain their decisions with real sales results.

The addiction to waste is also “all about the ‘O’ (sorry to our friends at Overstock.com for borrowing a slogan). The “O” I am referring to relates to the word “Offer”, a vital element of any marketing effort and even more important for reactive marketing.

In the importance hierarchy of successful marketing efforts, the most vital factors weigh in like this:

1.) Audience (60%)
2.) Offer (30%)
3.) Creative (10%)

This means that if you reached the perfect audience with a bad offer and poor creative, you would still have a 60% chance of success (success meaning making enough money to pay for and profit from the effort). Now if you had a great offer and the perfect creative going out to the wrong audience you would only have a 40% chance of success - or as I like to put it a 60% chance of total failure. Though creative can have up to 10% roll in the success of the effort, many online marketing initiatives make the creative optional, in which case the offer itself is the creative and assumes 40% of the success weight. The two items you absolutely must have with out exception are Audience and Offer.

Ooops. I almost forgot. There is one other important factor that can make all other factors in any Ad/Marketing campaign virtually meaningless: Timing

The new hierarchy of effective marketing components in the modern era goes something like this:

1.) Timing (97%)
2.) Audience (1.5%)
3.) Offer (1%)
4.) Creative (.5%)

Because most broadcast advertising is like SPAM in that Ad Agencies “push” their creative messages to the masses at times of their choosing, they are invariably mis-timed. Broadcast Ads only hit the right people at the right time through dumb luck - on average about 3% of the targets actually have a use for or interest in the broadcast ad message at the time they receive it. Reactive Marketing again reigns supreme because the “targets” (people like you and me) can go to the Internet any time and find the messages they need - we are in control of the delivery of the messages that are relevant to us at any given time.

Despite all of this, most marketing execs won’t divert the bulk of their Ad/Marketing budget to Marketing objectives because Marketing campaigns necessitate good consumer Offers - and most companies feel like they can’t afford any more offers. I find this unbelievably odd, however, since the alternative is to literally continue to throw 40%-50% of their massive ad budgets away by giving it to ad agencies, big media, and garbage bins. Giving shoppers a little money to buy more from you is actually perceived as being worse than giving huge chucks of money to ad agencies and the media for pretty and expensive spam.

Kudos goes out to all the clever Ad agency folks for selling corporate America on this twisted
perception - usually pitched as a fear of “Brand value dilution” or comparable fear mongering.

There are lots of ways to describe the word Offer, but I will go with this broader definition: “agreeing to give someone something for buying from you”. An offer can be something as simple as a flat discount off the retail price or free shipping (considered types of “real offers”) or something less compelling such as exclusive access to limited products, 2 for 1 deals, VIP
sales, etc. (considered “Pseudo-offers”). Many retailers hate “real” offers and consider them a “necessary evil”. Ad agency types, in an effort to protect a “Brand Building Effort” their practices have little control over, have conditioned their clients to believe offers reduce profit margins. They say things like, “offers degrade your brand…” and Marketing executives parrot those words. But do real offers really dilute your brand?

Offers are necessary in reactive marketing but they are certainly not as evil as say wasting billions of dollars on excessive creative and media costs, agency fees, errant broadcast messages, or even junk mailings. The question becomes whom does it make more sense to give your Marketing dollars to, your best customers or vendors? Which will create better goodwill, increase sales, create more buying activity, move products faster, and stimulate more awareness with the people who buy from you?

Regarding brand perception and offers, ask yourself how many luxury items you bought at a discount lately and how that degraded or bolstered your feeling about that brand. Ever buy a new luxury car at full price? Ever buy a diamond ring at full price? Did you feel any less about the product or shop you bought it from for negotiating a discounted price in order for you to buy? Did you ever feel better about both the product and the company that sold it to you after buying something nice at a discount? The reality is that the perception of a “good deal” is gold to building positive emotional attachments to a brand; the exact opposite from what Ad agencies have conditioned Marketing executives to believe in order to protect their own interests.

Soon board members and shareholders alike will demand even more accountability from their Marketing Executives for the millions or billions they spend on Advertising. It’s inevitable.

If I had given the keynote address at CJU, I would have opened and ended with a version of this thought, “…if you are engaging in Madison Ave. style advertising, the only reason why more of your advertising isn’t completely wasted is because you are probably marketing to some degree. Try marketing to the full extent you can, and see how much more advertising benefit you actually get. Don’t make it your goal to waste less this year, make it your mission to stop wasting money, time, and effort entirely.”

I for one am looking forward to some final epic battle between Advertising vs. Reactive Marketing.

All I can say is bring on the “Raid Can of Accountability”; I’m pretty sure I know who’ll survive

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