Steven Silvers writes:
Research firm Blackfriars Communications estimates that U.S. business will spend around $615 billion on marketing this year...
...Wow. Given the inherent hit-and-miss nature of marketing communications, it’s staggering to think about how much money American companies spend to create absolutely nothing in return. Every one percent of the “marketing industry” that is ineffective represents more than six billion dollars poured down the drain.
Even if you were to assume that two-thirds of all marketing was successful – and that’s very generous – then you’re talking about $203 billion being wasted on useless overhead and clutter this year alone.
I'm a bit surprised at his take on the subject. Marketing dollars, to my mind, can be ineffectively spent, just like research dollars (an error some think Google has committed) or human resources dollars or overhead costs (I love these offices, too, but are they all worth the money?). I think what Steve's getting at is that marketing is a "risk-based" venture, though his rant merely tells us that he's outraged and not why.
The question I'd posit back would be - "From a macroeconomic standpoint, what makes you believe that marketing spend is against the best interests of a small, medium or large company?"
Don't get me wrong, at first I was a considerably aggravated by his indignation, but I do believe there's some positive insight to be gleaned from thinking a bit deeper about the subject.
As a marketer, I've learned that the quote from John Wannamaker is just as apt today as it was when he first said it. "I know half of my marketing dollars are wasted ... I just don't know which half!"
Marketing (and market research) is not an exact science. There is some trial and error involved. Part of the loss is from those errors. There's also that little tidbit about 90% of all product launches being failures. Certainly there were marketing dollars expended there.
Then there's the "awareness" marketing, stuff that can't have a firm ROI attached to it. How can you say whether or not that money was wasted?
Of course, there's also the places where Marketing makes the correct decisions, and management gets in the way with their own ideas, not letting marketing do their jobs properly. A lot of money goes down the tubes there.
How do you fix these problems? If someone had that solution, I don't think we'd be here talking about it. I will say that this is a great reason to do as much planning and you can stand before spending a single dollar ... within reason. After all, is it worth spending the time to plan when purchasing ad time or promotional products or something could cost less than the time you'd spend working it all out? Cost/Benefit analysis and all that.
(Full Disclosure: I work for a company that is trying to solve some of these problems, at least from a waste and ROI perspective.)
A lot of "legitamate" marketing techniques are very untargeted and spammy.
I recently commented on marketing in the comments on SEObook, but parts of my comment also applies here:
"Good marketing is all about letting believe the lies they want or more accurately they need to believe in. It's all about playing to their world view and telling a story. Marketing is usually about everything except the truth.
Bottled water is the best example of this. The product is identical among all the competitors. The truth is that many of the bottled water companies are actually selling you city tap water rebottled. What differentiates the various names and brands is what lies or stories their bottles tell. In this industry it's all about brand and marketing or what lies the buyer WANTS and NEEDS to believe to reinforce their viewpoint. People want to feel "spoiled" and that their doing something "healthy" or treating themselves to the fine cool "Fuji" bottled water. Take away the marketing and it's probably bottled at some dirty plant in Texas...
A lot more then just targeting goes into what normal people would call legitimate marketing, but the truth is marketing is usually considered legitimate if it doesn't break any laws and it works. Like it or not almost all Internet marketing involves some sort of spammyness or less then perfect targeted marketing .... It's a competition people and marketing works.
PS - I'm not supported of spam marketing or of telling false stories to your clients; I'm just making a point and illustrating a reality."
I also find this post somewhat interesting. For starters, he doesn't even note that U.S. businesses actually spent $318 billion dollars less this year than last year (see the Blackfriars Communications report). Also, it's a rather general statement to say that "given the inherent hit-and-miss nature of marketing communications, it’s staggering to think about how much money American companies spend to create absolutely nothing in return." How does he know that these companies are getting nothing in return. I'm sure (as you point out) many companies advertise inefficiently and ineffectively, but many people do a rather good job of marketing their products or services. The reason why the marketing industry is large is because the benefits of marketing are large. Companies don't just spend billions of dollars year in and year out for no reason. Also, the Will Rogers joke is a fallacy -- you can have the greatest product in the world, but if no one knows about it you won't be able to sell it. And how do people know about it? They market it. And marketing takes money...and so on, until you get to $615 billion dollars.
Great post Rand. Intelligent marketers realize the failure rate can be drastically reduced by following a few simple steps:
1. Test Everything - Even if you're sure an initiative was/will be a home run, a well-structured test plan will back up your gut feeling. The numbers don't let emotion/preconceived notions into the equation.
2. Know your audience - Study every available metric and base your decisions on what your customers do, not just what they say. The smart marketer knows that what your customers or prospects say is usually different than what they do.
3. Take calculated risks - Have a well-thought-out plan. DEFINITELY have a backup plan.
4. Plan for success. Learn from failures. Repeat until you get the desired outcome.
Unfortunately, the article you referenced proved that not all marketers are intelligent.
I'll be honest. I think that anymore marketers are taught to "market" and not to "sell". Think about how much money is spent on "branding" each year. Branding is the answer to everything. When you can't figure out how to sell a product you spend money to "brand" it. I'm not surprised that a few hundred billions of dollars in marketing is wasted each year. You have to figure that there is a lot of money spent marketing products that people don't want, but if you compound that with the amount of money spent on branding products that don't need to really be "branded" in the first place. I would imagine that since there are very few good metrics to really show how much impact these non-direct "branding" efforts have it's easy to waste a lot of money in a hurry.
I concur with Blackbeard. Branding as a distinct sector of marketing is largely a farce, especially for small business. Your brand is not separate from your product, your service, your offer, and the way you treat your customers or clients--and those are the things you must obsess about. Thinking that your "brand" is something other than that results in a lot of money being dumped down the drain, and ultimately a weaker business.
I think branding has gotten a bad name from people who don't know what they're doing and call it branding. It's important to strongly connect it to the product, service or offer. That said, branding is not always a waste of money. You may not be able to measure it to the same degree you can with search marketing, email marketing, etc., but it doesn't mean it's not effective. Examples? Without searching, name 10 search engines. Or how about 5 online auction sites. Most people are going to have top 3 results that are very similar. Through branding activities that don't always have trackable returns, the companies that usually come to mind first have still strengthened their business. Does it make sense for every business/site? No. But is branding a joke? Absolutely not.
Have to agree a bit with exponential - even though branding isn't first and foremost in the online world, we see a lot of ad buys that are done for branding reasons, and they are somewhat effective. With online branding, though, at least you can accurately measure response to campaigns over time(as long as you properly segment and track).
A lot of money is mispent in marketing but that is the nature of the activity / industry. The reason for so much money being mispent in marketing is that there are not very many marketing "geniuses" and there are a lot of marketing "schemes" and charlatans out there. People who want their product to become popular and profitable are vulnerable and sometimes desperate for engaging and keeping their audience. So they try silly things and depend on silly people. Many marketing teams think they know what their target market is, wants, will respond to, will purchase, etc. but most of their assumptions are based on old and/or innacurate research, and legacy knowledge from schools (in other words there is a disconnect from the real world).
However with the amount of analytics, stats, research being conducted these days I think marketing will be able to get a better success rate in the next few years. There are tools now that can tell you everything about your customer short of breaking privacy laws (and some that will even do that).