How much will it cost, and is it worth it?
| Published date | 01 October 1980 |
| DOI | https://doi.org/10.1108/eb057148 |
| Date | 01 October 1980 |
| Pages | 9-10 |
| Subject Matter | Economics,Information & knowledge management,Management science & operations |
ADVERTISING
THERE is no point in spending a
penny on advertising "unless that
expenditure is regarded as an invest-
ment against future return". Repeat
the phrase to yourself every night
before going to bed, it'll make you
feel better; and it might lead to a more
commercial attitude to your advertis-
ing budget and your advertising
agency (and if your agency doesn't
like it – you've got the wrong one!)
At worst, maybe advertising is a
necessary expenditure at least as part
of a programme to maintain stable
sales,
but at best, it is a carefully calcu-
lated investment for future growth. A
sum of money set aside to perform a
specific job of work for the company,
a sum measurable by results as tightly
as the performance of each salesman.
A sum which it is the responsibility of
your advertising agency team to be
fully accountable for to you
—
if you
give it a chance.
To some members of industrial
management, the foregoing may seem
a bit strong. I make no apologies, as
may be derived from having a brief
look at the major ways that advertis-
ing / promotional / marketing budgets
are being fixed by an alarming
number of companies at this very
moment. (I have tried to put them in
descending order of frightfulness so
that it gets better as you go along.)
(a) The "let's think of a number, and
halve it" school
This technique, if you can dignify it.
by any such word, is widespread, par-
ticularly among smaller companies
with managements who are so scared
that they dare not delegate either
authority or responsibility. "The
Chairman's decision is final", and he
doesn't want any interference from
anyone who might know better, or
even have a useful point of view
because that would unsettle him.
This expenditure is doomed to fail-
ure because it has neither objective to
be achieved nor commercial base to
be built from. It's sad, because not
only does it waste time and money,
but it gets advertising a thoroughly
bad name.
(b) The "let's think of
a
percentage and
stick to it" school
At least the adherents of this
method have some yardstick by which
they can relate advertising expendi-
ture to other categories. But it has no
relevance to marketing conditions, no
objectives, no chance of being meas-
ured for effectiveness. Like (a) and
(c) it also has the major defect that
once voted, those in charge of the
budget are condemned to spend it
willy-nilly. It doesn't much matter
what on, as long as it's spent. If it isn't,
it'll be smaller next year, and so in
proportion will be the job of the fel-
low elected to handle it. Why not just
give him a rise instead – it'll cost less.
How
much
will it
cost,
and
is it
worth it?
Adam Knowles considers
advertising budgets
and makes constructive
comments on some
malpractices and myths
(c) The "add-a-bit-on-and-they'll-
not-notice" school
This is one of the consumer market-
ing techniques turned completely on
its head and introduced to industry by
the dropouts. It seems like an ideal -
the "self-liquidating" advertising
budget – but it is no more than an
extrapolated travesty of the budget
breakdown that any brand manager
of toilet soap prepares for his market-
ing director. Travesty, because in the
case of the brand manager he
is
simply
expressing that percentage of total
cost that will in his view be accounted
for by the advertising expenditure
necessary to establish or maintain
product sale. With the add-a-bit-on
school it is simply a con trick because
it has no bearing either on company
finances or projections, it falsifies the
product end-cost, and it has no rele-
vance to the likely real cost require-
ments of promotion.
(d) The "it worked last year, so play it
again Sam" school
I had a headmaster once who used
to out-perform the weather forecas-
ters with alarming regularity. The
technique was simple: the weather
tomorrow will be exactly the same as
today. Fine; even in this country the
weather sticks around the same for
several days, usually. But what was
fine for school cricket matches across
24 hour periods is very much not so in
the heat of competitive marketing and
the span of a year or more. Only if you
can safely assume that the demand,
the competition, the product range
and the value of the pound are all
going to be the same in eighteen
months time should you use this
method. If you do, let me know, I
want out, quick.
There are sub-sectors of this label-
led the "match-the-enemy" school
and the "find out what they did, and
double it" school. Both inevitably fall
into the same trap of assuming that
tomorrow the sun will shine, without
any evidence – it may not.
(e) The "future percentages" school
This is far better. At least someone
is looking ahead and trying to suggest
what should be spent tomorrow, in
tomorrow's conditions. It has to be
based on sales projections, which
themselves have to have some base in
a tenable forecast. But it still suffers
from the paradox of too rigid adher-
ence to a fixed figure, and smacks of
far too loose a definition of what the
money is to be spent on. As with the
preceding samples it won't stand up to
the new M.D. saying "what was this
money voted to achieve?" (just as an
interesting discipline, try asking your-
self that of your current advertising
budget.)
Which leads, neatly and not before
time,
into the only sane and defens-
ible way of arriving at next year's
expenditure figure...
(f) The "what's it worth" school
Back to square one. It is certainly
incompetent, and probably immoral
to allocate company money without
being able to answer the question
DECEMBER 1980 9
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