Does Advertising Work (even though you think it doesn’t)
Nigel Hollis writes
Successful advertising rarely succeeds through argument or calls to action. Instead, it creates positive memories and feelings that influence our behavior over time to encourage us to buy something at a later date. No one likes to think that they are easily influenced. In fact, there is plenty of evidence to suggest that we respond negatively to naked attempts at persuasion.
Instead, the best advertisements are ingenious at leaving impressions.
So advertising works slowly at a time not correlated with seeing the ad. Hmmm, that’s just what advertisers would say if advertising didn’t work at all.
What is Hollis’s evidence that advertising works ?
“I often respond by pointing out that U.S. companies would not invest $70 billion (yes, that’s the size of TV’s ad market) in something they thought didn’t work.”
With the same approach, one could prove that huge compensation packagers for CEOs are in shareholders’ interests. I can think of an explanation based on principal/agent problems for why firms would advertise more than the shareholder value maximizing amount. It is more fun to be the CEO of a very famous firm than to be the CEO of a firm which sells its product because it is cheap. How can we test the shareholder value maximizing theory of advertising against the CEOs ego theory?
OK I admit that Hollis has another bit of evidence — the advertising skeptic who provoked the post remembers brands. I have thought of that. As a matter of principle, I remember funny ads but forget the brand. OK, I admit I remember a few Alka Seltzer ads (never bought the product) and ads for Lavazza, Segafredo and the Y10 (never bought any of the products).
I also remember the slogan “You always get your way at Oursman Chevrolet.” This doesn’t do Mr Oursman any good, because he sells Chevys in the Washington, D.C., area, and I buy Fords in the Rome area. But you can see how it was good for his ego.
It seems to me that there is a whooole lot of advertising which includes the bosses name.
My other claim is pretty much the opposite. I would guess that closely held firms advertise less—that advertising is a kind of managerial slack reduced by close alignment of ownership and control. I don’t live in the USA so I ask for information—has anyone seen a Walmart’s ad?
A natural experiment, what happened to their advertising when investment banks went public?
How about advertising by investment banks when they went public? What happens to advertising when KKR or Bain take over a company?
I sure have a guess.
Now I am not saying that there are no valuable brands (my daughter asked why a sign said coca cola when she was 3).
But it sure seems likely to me that advertising budgets are distorted up (compared to shareholders’ interests) by vain managers.
Wal-Mart advertises all the time but keep in mind they have entered a panic mood to some degree as their path to hugeness is no longer getting them the saem returns.
Robert
“does advertising work?”
have you been paying attention to election results lately?
do you think people just walk into stores and buy some thing in a plain brown wrapper they need?
it works. they know it works. and the ego in question here, i think, is the one who thinks it doesn’t work on him.
i never bought Carter’s little liver pills, but then I wasn’t eighty five with some vague ailment that “maybe this would be the fix that works.”
and i don’t buy “intimidator” cars advertised in New Yorker, but someone does.
most ads worse in reverse for me; ie, i can recall many ads that offended me so much that i swore i’d never buy their product…& i dont even recall the pringles ad that soured me on their chips anymore, but i still refuse to buy them…
[post edited for format and minor spelling changes]
rjs
well, “Republican” ads work in reverse for me. but they seem to work just fine on their target audience.
I guess my real thought was that, I would guess, firms advertise more (and especially try to build brands more) than is best for their shareholders. It seems to me that the principal/agent problem I described must exist.
Also how can we measure the effectiveness of advertising ? You are sure it works, but what would be proof ?
I don’t see how advertising could work on me. I don’t remember the brands. Also I don’t buy much. You might ask people who know me if they think I am influenced by advertising. My ego ? Sure. Also true ? I promise you i am a very unusual consumer.
Robert
as am i. I am not sure I have even seen any advertising, except on angry bear, in the last fifty years.
(clearly this contradicts my assertion about dominance cars in New Yorker. well, i only look at the New Yorker because a friend sends it to me. she’s hoping i’ll get the idea. and there will be a test on Friday. but i don’t read the name of the cars, couldn’t buy one if i wanted, and managed to turn the trick of thinking “cars is stupid” at least thirty years ago.]
i don’t know if Vance Packard still has any currency, but he wrote about this in the 1950’s. I have no idea if advertising delivers value to shareholders… i think it does. Probably there is some MBA textbook somewhere that recounts the studies that have been done.
We rent a vacation cottage which we advertise with Google search ads and on a couple of vacation rental sites. That kind of advertising seems to work as we rent all of our prime season and a lot of our shoulder season to people who have made their initial contact with us via one of those mechanisms.
Do other types of ads work? I think they create a level of visibility that is important. For example, they let me know that the product category exists and that at least one party sells it. It is possible to discover products by just browsing at stores, but anything that increases the likelihood of being noticed increases the odds of it being purchased.
Given my quite extensive list of corporations I am boycotting due to annoying or offensive ads, and the number of emails I have sent them listing my specific complaints, I actually think attempting to advertise to me causes a loss in sales, not an increase. Basically, I ignore ads. If they are so obnoxious, loud, or distracting that I notice who it is that is pissing me off, they get on the banned list for a while. Repeat offenders, or world-champion annoyances (Wow! That’s a LOW PRICE!!) get you on the perma-ban list.
The office-supply firm alluded to above could be selling the cure to my terminal cancer for a penny, and I would spit in their faces and die a proud man before letting them get their hands on one red cent of my hard-earned money.
I have a similar policy for any corporation that screws me: mutually assured destruction. If they screw me out of a few bucks, or a few tens or even hundreds of dollars, and don’t give in when I explain the situation, I harass them until it becomes clear to them that it will be easier and cheaper to pay me off than continue to fight. As an added bonus, it is just plain FUN to have a faceless, inhuman enemy whom you can truly hate and have no shame in dreaming up all sorts of legal ways to harass.
There’s an old saying in advertising,
“I know that half my advertising budget is wasted. I just don’t know which half.”
A retired friend of mine was a long time player in advertising and more so in public relations.
His comment:
Half of all ads work — we just never know for certain which ones!