Tomicide Solutions December 2007: The Dirty Little Secrets Branding / Advertising Agencies Don't Want You to Know
By Tom "Bald Dog" Varjan
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In a recent article, entitled "ROI? Not With Those Ads You Won't...", in Fast Company (18 December 2007) there is a statistic from the London School of Economics, according to which only 2% of advertising have something bankable to show for, while the other 98% are waste of time, money and advertising space.
However, it all depends on what perspective we look at this result from...
When you look at most advertising/branding agencies, you see that their success lies in their impressive portfolios and how many awards their creative creations have won. If you've worked with one of these agencies in the past, maybe you too selected the firm based on the number of awards or how much you liked the firm's portfolio.
But there are some problems here: 1) Awards won has no relation to how profitable the award-winning campaigns are to the clients that pay for those awards. 2) You're not an advertising professional, so you have no basis (and no expertise) to assess an advertising agency's portfolio. The reason why 98% of ads miserably flop is because their designs are based on what the clients liked not what the marketplace liked.
A typical example is the famous Nissan commercial which was a great winner for the advertising agency and won bushels of awards, yet, from Nissan's perspective, it was a financial disaster, sending car sales on a decline.
At the same time, lonely direct response copywriters create seemingly simplistic marketing pieces and sales letters for their clients that produce incredible response rates and sales.
Advertising is an interesting thing. Done correctly, it can be pretty lucrative for the advertising company. Done incorrectly, it can be a perpetual goldmine for the advertising agency and an ongoing financial disaster for the advertising companies that finance their ad agencies' success at their own expense and detriment.
Why perpetual goldmine and ongoing financial disaster? Because advertising agencies' salespeople will convince the advertising companies that they have to carry on advertising forever and ever if they want to see results. And of course, they also have to continue paying their advertising agencies for ongoing "help and support" to create more "buzz" and better "brand awareness".
In this article we take a closer look at how the famous (notorious) "Madison Avenue image marketing machine" collects billions of dollars from thousands of unsuspecting companies based on pseudo science and pop psychology. And at the end of the day the advertising agencies make a pile of money while most of the advertising companies are not one inch closer to their goals than before engaging their agencies.
But here is something that's important. This is not happening because these agencies are bad people per se. They do it because this is the conventional wisdom. It's like the companies that want to sell online, hire web designers and believe that by having a website they are actually doing business online.
As we've discussed in other articles, there are two types of marketing.
One is the flash, glitz, glamour-filled image advertising practised by most large advertising agencies, following the "creative guidelines" of famous Madison Avenue agencies. The idea behind this form of marketing is that you just have to repeat it forever in good faith because you can't measure its impact.
I believe it's image marketing that's created these two widely used quotations...
"I know that half the money I spend on advertising is wasted. I just don't know which half." ~ Department store magnate John Wanamaker in the 1920s
"More money is wasted in marketing than in any other human activity." ~ Al Ries and Jack Trout in The 22 Immutable Laws of Marketing in 2000
The other approach is the direct response marketing approach. As the name suggests, this kind of marketing requires a response to every piece of marketing that is put out to the market. And, yes, no response is also a response. What that means is that direct response marketing is measurable and therefore can be put on a path of perpetual improvement.
In the 21st century I truly believe technology companies ought to live by this mantra...
"Every one of our marketing dollars must come back to us with many of its siblings, and we'd better be able to prove it."
Basically this is the essence of direct response marketing. That is, the response brings in more money, both short and long-term, than it cost the marketing company to create the trigger (cause = marketing campaign) that caused the response (effect).
Now don't get me wrong. Madison Avenue image marketing can work - provided you have a spare few ten millions you can gamble with, and even if you lose, which you almost certainly will, your business can carry on as if nothing had happened. Just think of Nissan from the above example. The Nissan leaders noticed the nosedive in sales and took corrective action to eliminate the cause of the problem to restore the previous situation.
Over the years I've seen hundreds of high-tech companies have fallen into the marketing and advertising traps of ultra-large multinational corporations and started doing institutional advertising. And sadly, they are slowly but surely losing their shirts [options: trousers, bras, socks and knickers] in the process.
But now we know that smaller agile, frugal technology companies never should follow what large conglomerates and multinational behemoths are doing.
So, let's take a closer look at those fiendish image marketing traps and what we can do about avoiding paying the high price of those image tricks.
1. Image Marketing Is The Creation Of Artists To Impress Not To Create Revenue
There is nothing wrong with artists per se. The problem lies in the fact that their ads are exposed to scientists and engineers, and while artists are predominantly right-brained creative people, the target market is predominantly left-brained analytical people.
Image marketing often uses high dosage of emotional hot button pounding, hoping to address emotions that lead to purchases. And while this is a pretty good practice to sell beer, chocolate bars to the general public, the same ads would never work on professional beer brewers and master chocolatiers. They simply don't view ads from the same perspective as the general public.
And when you're selling premium technology solutions, you're selling to experts, and instead of emotional manipulation, they must be "educated into" a buying decision. In the B2C market people often say that customers don't read long sales letters. Well, they do and there is preponderance of evidence to prove that.
Before making million dollar buying decisions, savvy buyers are willing to invest time and effort to read incredible amount of information about the stuff they're about to buy. They are serious buyers.
Or look at cancer patients. I know this for a fact from my years in biomedical engineering. Many cancer patients have libraries of books and magazines on cancer and cancer research. They don't rely single-handedly on their doctors' help. They invest time, money and effort to educate themselves about their conditions, so they can go to their doctors quite educated, and it's not the doctor but the collaboration between the doctor (consultant per se) and the educated patient (savvy buyer per se) that puts the patient on the path of healing. The patient is an active participant in the healing process. And healing is not something that is done TO, FOR or AT the patient but WITH the patient.
Providing technology solutions is pretty much the same. You do it with your clients in a collaborative manner.
2. Institutional or Image Marketing Can Slowly Kill Your Marketing Budget
Image marketing is cost-prohibitive for most technology companies. In 1901, Coca Cola's advertising budget was $100,000. In 1910, American big businesses spent $600 million on advertising. In 2005 a 30-second advertising spot on the Super Bowl broadcast costs $2.5 million. But the sad truth is that most of those companies that advertise there never see a return on their investments. But those players have tens of millions of dollars to gamble with, and if they lose it all, that's not a problem either. There is another pile of money at the ready. It's just a matter of laying off a few thousand people and the next cash injection is ready to burn.
This may sound like a rather cynical comment, but in many cases this is how many technology companies finance their next big campaigns. And of course the perpetual search for investors. After over a decade of working with them, it still puzzles me why so many technology companies need ongoing cash injections, while bragging in their annual reports and on their websites about what sort of global market leaders and how profitable they are. But the question is where the profit is coming from. Something just doesn't add up for me here.
3. Institutional Advertising Is About Creating Brand Awareness And Awards Not Revenue
There is one big problem with "look at us how cute we are" type image marketing. The problem is that you can't tell your mortgage lender that "I don't have money, but the world is aware of my brand". For institutional marketing you need and endless supply of money to be poured into a black hole.
It may be because of my engineering background, but I love getting pretty quick feedback on my marketing stuff to see what works great, what can be improved and what should be dumped altogether.
Many high-tech start-ups can rely on idiotic investors who pour their money into anything where there is leading-edge technology is involved. I've recently come across and Internet company that doesn't want to waste money on marketing. They want to hire lots of cheap telemarketers and commission-only pavement-pounding peddlers, while the executives are constantly seeking investors. "Hey, we love the lifestyle but since we can't make our own, let's burn other people's money." I know branding is important. But in your advertising focus on creating clients and then based on their experience they will spread your brand.
Using cattle farming language, what's the point in having the fanciest branding iron in the vicinity if I don't have one single head of cattle? There is nothing to brand.
I believe good marketing is all about results, that is, subsequent sales. Marketing and advertising are merely the precursors to sales. And that's what direct response marketing can achieve. It's a means to the end. Image marketing is an end itself.
And while direct response marketing can take a bit of money at the beginning, at the testing stage, the investment keeps going down, while the results keep improving.
In contrast image marketing requires a steady, ongoing and pretty high investment. It's like pouring money into a big black hole and not knowing where the money goes after it gets out of sight.
4. Image Marketing Is Intelligent Guesswork The At The Best And - Usually - Stabbing In The Dark
Image marketing hardly ever uses testing for there is nothing to test.
Yes, there are considerations with colours, based on scientifically established colour psychology and some other factors like the preferences of the executives, but testing the concept and changing it as needed go against the whole concept of creating awareness. You can't create awareness for something that's constantly changing.
Imagine that you run an ad in a magazine. In one month it works and you get lots of enquiries, but the next month it flops. What is the problem here?
Yes, the ad can be improved, that's certain. But what else could have made the difference? Maybe the ad's position in the magazine? Maybe a major industry conference during the publication of the magazine, so there was more awareness for the industry in general causing more attention to a company in that industry. But nothing is certain.
And after the flop, blaming the ad itself, the ad folks start revamping the ad. Some more money down the drain. My local telephone company, Telus, has already used all sorts of animals to do various re-branding activities and create awareness for the new services. But when you call the company and acquire about those services, you will put instantly on hold and then your never-ending frustration starts.
The Telus ads are cute, although meaningless. The Telus experience is a certifiable nightmare. The quality of service went up a bit when the unionised workers went on strike and Telus hired temporary people. But then the strike ended and the unionised folks were back to work, providing a service at their usual, shabby standards.
5. Image Marketing Is Ambiguous
Since the whole image marketing process is based on flashing an image and a fancy slogan in front of the target market, the message is less than 100% obvious. And now don't think of images associated with Coke or McDonald's. Don't even think of IBM. These companies have been building their brands for many many years and have poured hundreds of millions of dollars into this brand building process.
So, when you recognise the McDonald's golden arches or the IBM blue, it's the result of those hundreds of millions of dollars. And it would be pretty silly to try competing with them on this brand awareness stuff.
That's why technology companies today need clear marketing messages beyond the obfuscation of catchy slogans and fancy images. Slogans and images may be enough to sell junk food at low prices but it's hardly the way to promote million dollar technology solutions.
This is where the power of words comes into the equation. But not just the power of a few catchy words but the power of the right amount of words. There is plenty of evidence that buyers of premium technology solutions want to read the full story on the stuff they're about to buy. Just think about it… Would you buy even a $70 DVD player based on the couple of bullet points on the price tag? Probably not.
6. Image Marketing Is Often An Oddball Concoction Of... What?
Referring to the animal world, people often jokingly say about the Platypus that it's an animal created by a committee. More often than not, image marketing is the same.
Graphics artists create an image or logo, the marketing folks create a catchy slogan and then the executives argue day and night about how to modify the image and the slogan in such a way that they like it. This is a great example of the nastiest turf war and power struggle.
What the market would want to see and hear is irrelevant since image marketing is all about self-aggrandisement and pompous pontification, so benefits are not required.
Image marketing is self-centred and this is the reason why it needs so many exposures to the target market. The more exposures you allow to this type of marketing, the more results you get. It's like the more spaghetti you chuck at the wall, the more will stick to it.
And of course, all these endless tinkering cost lots of time and money.
With direct response marketing there is one person in charge, although several people work on it, and the marketing pieces are created based on empirical market research data on demographics, geographics, psychographics and technographics. And smart executives don't argue with the results and the copy because the whole marketing stuff is meant to be buyer-centred not seller-centred.
Summary
Now I know that by now you may think to yourself that image marketing for Coke or General Motors must be successful because these companies are still in business. Yes, they are. But they've been marketing this way almost ever since the Universe began. So, they have momentum. But not as a result of high effectiveness, but sheer time and piles of dough.
And another huge difference: Coke and GM sell commodities, while most technology companies sell highly customised solutions. The other difference is in the buyers. People who buy Coke are not chemistry experts. And people who buy GM cars are not engineers. But people who buy complex technical solutions are either technical experts themselves or enlist the help of technology experts.
And while economic buyers themselves may not be technology experts, scientists and engineers are always involved in the process of buying technology. So, let's say, if you're selling PID industrial control systems for $100,000 a pop, it's not enough to take out a 20-second Super Bowl ad and brandish your logo at the audience. First, it's not a qualified audience; second, who cares about a logo anyway?
Done correctly, direct response marketing and copywriting can be your goose that lays the golden eggs for your company day in day out. Done incorrectly, nothing happens. Or even worse, your goose shits all over in your backyard and you end up trampling on it... day in day out.
Attribution: "This article was written by Tom "Bald Dog" Varjan who helps privately held information technology companies to develop high leverage client acquisition systems and business development teams in order to sell their products and services to premium clients at premium fees and prices. Visit Tom's website at http://www.varjan.com.
