Eli5 How does a huge sum of a company’s money used for marketing really help in the long run?
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There are lots of reasons to advertise on the expensive side. Introducing excitement about a new product from a trusted company for example would be something that would show direct returns on marketing. If the ad is good and the product is good, you can get 1,000% returns on an ad.
Another reason is just branding. This done for the pure purpose of telling people/reminding people that you exist. This does not show direct returns but will be to your benefit later when someone sees a targeted ad. They’ll remember who you are or, at least, remember your name.
Sometimes, it’s just adds for investors. Like an ad for Bio-Techne in the back of a Science magazine. Do consumers really need to buy the best animal free e-coli protein derivations? Do you really need a bucket of IGF-3 made from the finest e-coli? They also have plenty of stuff produced using goat blood if you need it. There’s also human tissue lines. That is targeting like 50 people across the entire world that might care to invest in the company or form a partnership. Maybe the ads just there to let people know that they changed the corporate name that the operate under back to the old name. Again, no proof of ROI, but necessary.
Then there’s stupid advertising that wastes huge amounts of money. Example, participating in a tradeshow focused on washers and dryers and you own a cosmetics company. I’m sure you’ve seen that at tradeshows if you attend them.. That’s a $30,000 booth fee +staffing for a weekend that you’ll never get back. $30,000 may seem like a tiny amount, but do that 30 times a year you start to get into walking around money. Plus your direct mail campaign for a service that costs, on average $1,000 targeted to a poor area of town. Anything coupons are also terrible. Ads for things that everyone already buys. Are you really going to switch toilet paper brands by the time you’re in your 40’s? Pretty sure if you like Scott, you’re sticking with Scott at this point. All the stupid ads add up way quicker than you think. Yes, you have advertising saturation but that’s a two edge sword. Yes, everyone knows who you are. Yes, they know hate you because they can’t stand your terrible ads.
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