Are You Spending Too Much on Ads

Advertising Q’s
What does it mean to say that “money is invested in advertising?” Is all advertising an investment? Illustrate.
When one says that “money is invested in advertising” it quite literally means that money is invested in producing ads. For example, as Olson (2001) points out, the cost of producing a 30-second TV spot is roughly half a million dollars. That’s a lot of money for one commercial—but major corporations will typically spend millions, if not billions on advertising every year. Today, advertising has moved into the digital sphere as well, with billions more being invested in online marketing (Edelman, Ostrovsky & Schwarz, 2007). Companies competing in the marketplace have to do something to stand out, to differentiate themselves (Trout & Rivkin, 2006).
One can invest in advertising in more ways than one, however—i.e., it’s not all about how much money is put up. To advertise effective, a company has to know how to appeal to its target market, and that means it has to conduct research to better understand that market it is trying to reach. It has to know the demographic, the psychographic, the geographic and the behavioral segments that make up its target. It has to understand what its consumers want, how they shop, how they think, what they do for a living, what their interests are. Otherwise, the company is just spinning its wheels, throwing darts a board blindly.
Sometimes a great ad can cut across demographics and tap into something universal that appeals to everyone. Comedy is one of the best ways to achieve that effect because comedy is a universal language that appeals to the old and the young, men and women (Freitas, 2016). Investing in advertising can simply mean to invest in great script writers, great idea men, and great creative talent. Researching the target market is not enough to make a commercial that people remember or to make people want to go out and buy one’s product. Research only tells the company more about the target. That information still has to be passed on to the creative talents who will use that information to create an ad that is irresistible. Sometimes, it does not even take that much money to make it all work—just the right combination of factors.
The Dollar Shave Club ad is a perfect example of a commercial that worked without requiring a great deal of cost. It was put up on social media—YouTube and instantly went viral. As Kornel (2018) notes, “Michael Dubin, founder of Dollar Shave Club and a student of improvisational stand-up comedy, paid about $4500 out of his own pocket to produce a hilarious video that went viral on YouTube” (p. 97). The result was that Dollar Shave Club instantly became a hit among young people who used razors to shave. The company starting giving Gillette a run for its money: indeed, Dollar Shave Club did not even have enough razors in stock to meet demand and the backlog was tremendous. The point is that humor can be a great well to sell a product—but to be funny a company has to hire the right talent, which is another way that a company can invest in advertising.
Essentially, the advertising team has to be able to find ways to appeal to the market again and again—but as the market is always changing, new consumers are always coming in, and even the tools that advertisers use alter over time, the ad team must be aware of the changes and keep up with them. The arrival of social media, for instance, has been a game changer for many companies. GoPro is a company that really built its brand around using user-generated content to sell its products. The company put up a YouTube page, started taking video from consumers to show how great its products worked, and developed a fan base and following for the action camera.
All advertising should be considered an investment—even though the famous saying goes that half of all money spent on advertising is wasted (Olson, 2001). The fact is that all advertising, whether it is effective or not, is a process. Just as one might invest in several companies, in equities, bonds, precious metals, real estate and so on to diversify one’s portfolio, some of those investments might perform better than others. But at the end of the day does one look back and consider that the investments which did not perform were wasted? No—because those investments were made for a reason: to diversify the portfolio and to hedge against risk.
The same idea applies to marketing and advertising. A company might invest some money in certain type of ad—say, print ads. More money might go to online advertising. Some will go to TV ads, and so on. Some of those ads or clicks will turn into sales—and some won’t. Knowing which work and which do not can be tricky, as Olson (2001) points out—but at no time should any of them be considered a waste. The company is there to use advertising to hook any consumers who might be out there. The company never really knows which are going to work and which are not. A range of ads might be produced just to cover the bases—to diversify the marketing portfolio, so to speak. When all is said and done, the company’s aim is to get its products in front of as many people as possible—and the ads are just another way to help make that happen. Different ads for different targets is the way it has always been and is the way it will always be—and that requires investment.
Does advertising cost too much? How can this be measured?
The question of whether advertising costs too much depends upon what one is getting in return. If the ads are not generating the type of business that one wants to see, then the answer to the question might be, yes, the ads are costing too much. If, on the other hand, one is Michael Dubin and the ad that helped launch his company cost only $4500 out of pocket, the answer is most definitely no.
Today, ads come in all shapes and sizes. Today’s young consumers are different, too, from the baby boomers or the Gen X’ers. They are willing to do all the advertising a company needs just by word of mouth—and if the company’s products and services are any good, this is all it takes in the age of social media to really get the brand out there because consumers will do the work themselves. As Tavukçuo?lu (2018) points out, “people tend to rely on the recommendations of people they know more than any other 
advertisement medium. Friend-recommendation and online reviews are the primary criteria considered before making most purchase decisions” (p. 322). In other words, advertising does not have to cost much—not at all.
What companies need to focus on first and foremost is the product or the service that is being offered. This is what needs to stand out. In the age of social media, people can see through pretense and false advertising rather quickly. Everyone is sharing information on YouTube, for example. People shop and share their experiences online. They talk about the latest model Dodge Challenger and whether or not it’s a good buy. They talk about clothes, food, restaurants. No amount of advertising can beat great word of mouth. To generate positive word of mouth advertising, a company has to perform on the product or service end first.
However, there are other types of advertising that do cost significantly. Traditional marketing, for example, can be quite expensive. Take for instance a TV spot that runs during the Super Bowl. These spots can cost millions just for the air time. The actual filming of the commercial may cost millions more. Is it worth it? Sure, a lot of people may watch the game and tune in to see the creative and funny ads that companies put out—but does it actually turn into sales?
A company can measure the effectiveness of advertising in a number of ways. Companies can measure the recall of audiences and obtain a recall score for their ad. The recall measure essentially measures the viewer’s ability to remember the ad when asked about it at a later date (Olson, 2001). The idea here is that if the ad works, it will stay with the viewer. Critics of this type of measure, however, argue that recall does not actually indicate whether the ad “works”—it just indicates whether or not the viewer has a good memory. Ads themselves “work” by entering into the individual’s subconscious—a concept that the father of advertising Edward Bernays borrowed from his uncle Sigmund Freud (Jones, 2000). Thus, recall may not be the best way to measure an ad’s effectiveness or if the company is spending too much on advertising. It does at least tell to some extent if the ad was memorable.
Another method is to survey viewers to assess their attitudes towards the ad. Were viewers favorably disposed to the ad or were they turned off by it. The perception of the viewer after seeing the ad might indicate whether the consumer will purchase the brand at a later date. Perception is a good gauge of how a consumer feels towards a brand or a business.
Other ways to measure an ad’s effectiveness can include measuring the viewer’s brain waves during the viewing experience, tracking eye motion, or moment-by-moment measuring in which a viewer turns a dial one way or another to indicate the extent to which he is enjoying the commercial from one minute to the next (Olson, 2001). But all of these measures focus on the ad’s creative appeal and not necessarily on whether the ad will actually generate business.
To measure the effectiveness of an ad campaign in terms of whether it is bringing in business, the company can track sales. Sales before the ad campaign and sales after the ad campaign should indicate whether or not the ad campaign was successful in generating business for the company. Measuring sales is really the best way to see if a company is spending too much on advertising. What is too much? Only the company can judge that—but if the return on investment is not significant, a company may want to think its marketing strategy.
In the age of social media, one of the best ways to guarantee that ad costs do not exceed the budget is to simply focus on social media. Getting out there in front of young consumers via social media is the best way to make one’s brand visible. Elon Musk, CEO of Tesla, helped turn the electronic vehicle company into a Fortune 500 business—and he did it all thanks to the power of social media. By making sure the company has a presence online, has fans and followers, and is always trending—i.e., is always being talked about—the business is sure to gain traction. This is a relatively low-cost method of marketing, and one that few businesses will ever think costs “too much.”
Is it unfair to criticize a competitor’s product in an ad? Explain.
It is perfectly fair to criticize a competitor’s product in an ad. This is what’s known as comparative advertising. Barry and Tremblay (1975) identified comparative advertising as the “explicit verbal and/or visual presentation of competitor’s names in the message”—typically in a negative way so as to show why the advertiser’s product and brand is so much better than the competitor’s. Some examples of competitive advertising in the past have been Coke and Pepsi, car companies, battery companies and so on.
Not all view criticism of a competitor’s product in an ad as seemly. In the 1970s, the major television networks frowned upon competitive advertising—mainly because they were selling air time to all competitors and they did not think it would be good for business to have one company mocking another company on their network when the network was trying to sell slots to both companies (Barry & Tremblay, 1975). However, as time went on, the practice became more popular and the networks quit frowning about it so much.
In terms of fairness, criticizing companies that are not producing legitimate products anymore is perfectly okay if you’re a competitor looking to take their market share away. In war, every tactic is open—and a strategy is needed to win not only the battles but the overall campaign as well. A business has to have multiple strategies, just like an army, in order to win the day. Comparative marketing is just one type of strategy that a business can use. Used too much, it can backfire. But used in just the right amount, it can help consumers see why one brand is better than another.
The key is to not come off as overly negative or as pretentious and self-righteous. For a company to criticize another company, the criticisms have to be valid. And in the age of social media, viewers can quickly see through flimsy criticisms—and they will let everyone on the Internet know about. They will post on Facebook, Twitter, YouTube and so on—so a company has to be careful about the things it says and how it presents itself. A business has to protect its own brand and reputation at the same time that it wishes to criticize its competitors.
Consumers sometimes like when companies engage in comparative advertising. They get a sense of how companies see themselves this way. A company, for example, that wants to sell a muscle car to consumers might make an ad in which a pathetic-looking hybrid is seen struggling up a hill. Along comes a muscle car and runs the hybrid off the road. The competitive advantage is clear: the muscle car has more power and more muscle. The company that makes the hybrid produces weak vehicles that cannot perform when needed. The takeaway from the commercial is that if you are looking for superior performance, you should buy the muscle car. A viewer who is torn between the two brands might find this type of comparative advertising to be helpful because it highlights a quality about the muscle car brand that the consumer may not have thought about before—the virtue of being able to get over a hill. The viewer might have just been looking at price, style, design, and other features, never stopping to consider how power is a quality that every driver will need at some time or another. In this instance, the company can benefit by criticizing the competitor’s product because it is simply making a statement about how its own product blows the competitor away at least in this one regard. Plus, the commercial is not too overtly negative and the competitor is not necessarily named explicitly. The message works to get the idea across and that is what matters.
However, other consumers might be attracted to the hybrid not because of its power but because of its lack of a carbon footprint. They might see such a commercial and be turned off entirely by the brand that makes the muscle car. If there are many consumers who feel that way, the company’s sales may begin to slip. This is unfair to stakeholders, who invest in the company and expect a decent return. The company should have done its marketing research to see whether its commercial would run the risk of alienating a key segment of consumers. Had it researched the market better it might have realized that electric cars are more popular than ever before among Millennials, who are going to be the key consumers over the next two decades. They care about the environment, and to make an ad in which their cares and concerns are shown to be weak and pathetic is a great way to alienate one’s consumer base.
Fairness in advertising can thus have more than one meaning. But no matter how a company looks at it, it should always aim to tell the truth and highlight qualities about its products that it believes truly set it apart from others. If the car company, for example, truly has no interest in marketing itself to the consumer who wants a hybrid because it is better for the environment, then the commercial in which the muscle car runs the hybrid off the road could be perfect. The main point is that the company should know how to reach its target market and it should be careful not to accidentally offend its consumer base by insensitively portraying a concept that a competitor embraces and that consumers embrace but that the advertising company has so far failed to realize is important. That is why research is very critical when it comes to marketing. Yes, it is fair to criticize another company in an ad—but is it always wise? Sometimes, yes, and sometimes, no. It all depends on how the company wants to come across, what message it aims to communicate, and what products it wants to sell to which consumers. Differentiation is, after all, the name of the game (Trout & Rivkin, 2006)—and if comparative advertising is a strategy that works for a company, it should definitely use it.



References
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