Tuesday, June 24, 2014

99% of Marketing Spending is Wasted

John Wannamaker is credited with saying "50% of the advertising spending is wasted - the problem is I do not know which half".  But he was wrong.  99% or even more of the advertising $ that are spent are wasted but the 1% more than pays for the advertising.

The Atlantic printed an article that basically says internet advertising does not work.  See the article here.  They used examples of people searching for a product who already had decided what to buy.  I agree, this is a high % of the people.  What they did not use as examples of people who had non-buying intent but were good targets.

For example, if I type buy Nike shoes - I have likely decided to buy Nike's.  If I Google good running shoes, I am open to suggestions.  Or if I Google 10K races, I am also likely a buyer.  And advertisers use retargeting so I may get a running shoe ad the next day when I am searching something completely different.

I wrote an article a while ago on "The Fallacy of ROI on Marketing" and reused the concept in my book "Zero to $2 Billion - The Marketing and Branding Story Behind the Growth".  The gist of it is - consumers buy for a variety of reasons.  It might be because they saw the billboard or the truck or the Superbowl ad or the internet ad.  It is rarely just one impression - it is the "accumulation" effect.

Marketing success really is about math but you never know some of the variables.  In its simplest.  Spend $1,000 that is viewed (or presented) to 1,000 people and get 100 leads that turn into 3 buyers that generate $500 in margin each and you have a profitable business that can scale.   In this example, only 3 people in the 1,000 bought so it could be argued that 99.7% of the advertising spend was wasted.

Marketing is a bit like sales as far as success rates goes.   Great sales people have abysmal closing rates.  Many sales people can make good money for themselves and their companies by only closing 1 in 10 or 1 in 15 prospects.  It is about numbers.

And speaking of advertising, there is an interesting blog post on deception in advertising that has a cute infographic (now you see why I try to avoid fast food)


There is another interesting article in the Atlantic that says that people lie about what they read.  They do not really want hard news.  What they really watch is sports and entertainment.  I can sort of see this.  People want to be thought of as being thoughtful and informed and would not want everyone to know they follow more shallow topics mostly.

And in keeping with the Time Management theme.  This is an article on 40 ways to stop procrastinating.   I am concerned that posting the link will reduce my blog readership though.

And a shout out for one of my investments that made Profit Magazines fastest growing companies (#54) - Iotum (they do freeconference.com)


At 2:59 PM, Anonymous Anonymous said...

I have to agree with you Jim, and add that is why referral selling is so powerful. It's the business I'm in. My customers like the service I've delivered so well that they refer a friend of two.


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