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...

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…