One of the best known quotations from the advertising and marketing business goes along the lines: “Half my expenditure is wasted. Trouble is, I don’t know which half.”
Depending which side of the Atlantic you’re on, it’s attributed to US retail magnate John Wanamaker or to UK industrialist Viscount Leverhulme, founder of what we now know as Unilever.
Both men were products of the 19th century. They even died in the same year – 1925 – yet the quote continues as a truism close to 100 years later, no matter which of them was the originator. Admittedly, it’s a memorable statement, but is there any genuine basis to it?
Surely in this modern age of accountability and efficiency, no industry or profession can be so cavalier about the value it supposedly provides? Surely the benefits of advertising and marketing spend are now quantifiable and every budget dollar, yen, or euro can be shown to earn its keep?
Surprisingly enough, no. And if anything, Wannamaker/Leverhulme were conservative in their estimates of 50% wastage.
US researchers Rex Briggs and Greg Stuart tackled the subject in 2006, resulting in their book What Sticks: Why Most Advertising Fails and How to Guarantee Yours Succeeds. After examining more than $1 billion of marketing spend by 30 major corporations, their conclusion was that overall effectiveness rated no higher than 37%.
A wastage factor of 63%!
Briggs and Stuart found that nearly two-thirds of marketing expenditure was wasted because of “poor understanding of consumer motivations, coupled with inaccurate messaging delivered with an inappropriate media.”
In making decisions on the effectiveness of spending, advertisers would have been better off just tossing a coin. At least that still keeps the 50:50 ratio.
Getting consumer motivations wrong is a serious problem. So is inaccurate messaging. So is an inappropriate media mix. If this is the best that marketing can do, it’s a sad commentary on the professionalism of its practitioners.
The Briggs and Stuart results were from roughly the time that marketers were first confronting the implications of digital and social marketing. These added complexity and may have distracted from correcting the underlying consumer messaging and media-mix mistakes that the researchers identified.
Digital and social media also add a new factor to waste levels – fraud. More recent analyses show fraud levels of 23% for social display ads and 31% percent for video ads on smart phones. Fraud now boosts waste levels way beyond the 63% that Briggs and Stuart originally calculated. Is the click real or fraudulent? Human or bot?
Although this deficiency is acknowledged, rarely do we encounter discussion of the wider context – the apparent belief that advertising is an unaccountable cost of business.
Imagine any other profession (if we can call it that) tolerating the belief that half of its effort is wasted? Who would work with an accountant who files financial statements that are right only half the time? Who would work with lawyers who lose half their cases? And who would consult a doctor whose diagnostic hit rate is worse than a coin-toss?
Surely the time for 50% wastage is long over? Even more so for 63% wastage. And it’s no longer good enough to plead, “Yes, we know nearly two-thirds of your advertising, branding, and PR spend is wasted – but we are diligently trying to fix that.”