Market View: Spend Your Marketing Budget Only Where it Works

Nov. 28, 2016
With every expenditure, ask yourself: Did this strengthen our brand?

I love TV commercials. While many people speed past commercials, I watch them. However, I do not understand how any company can justify the amount of money spent on advertising during the Super Bowl. I know all the justifications about the audience size, post-advertising spill-over and PR, etc. But advertising should be a precious opportunity to communicate with consumers about how our brands are perfect for them.

In many cases, the real justification for buying ad space on high visibility shows such as the Super Bowl, the Masters or the World Series is not really marketing objectives but the desire of top executives to be personally involved with these events. When you sponsor these types of events, all the top brass go to the event and parade around like grand poobahs. The marketing budget is tagged with the expenses while the top management enjoys the benefits. That is until the end of the year, when marketing productivity is called into question. At that point top management seems to get amnesia about their fantastic visit to the Super Bowl, etc.

I am not a stick in the mud! I enjoy a good time as much as anyone else, but I think advertising dollars are too difficult to come by to pretend we are spending them effectively on some of these super events. Everyone likes to quote the adage attributed to John Wanamaker: “I know I’m wasting 50 percent of my advertising but I don’t know which 50 percent.” Well the wasted 50 percent just might be the wining and dining of executives! Advertising should be reserved for communicating with consumers about great products.

Today’s world of advertising is even more complicated as social media, online advertising and other high-tech methods of communication are all the rage. I have no doubt that before long they will capture the majority of advertising dollars. For the most part, I believe these platforms can be even more effective than the methods we used in the past. But the newness of these methods creates an even greater burden to be vigilant on how the money is spent. While marketing dollars are less likely to be wasted, a company is a more likely to invest these marketing dollars in the new methods of communication without real due diligence.

It is not just the top executives that take advantage of the advertising budgets. I have seen marketing brand managers wined and dined by their advertising agencies, who then just bill these expenses back to the company, or new on-line advertisers that are led astray by technocrats that are testing and trying new methods.

A college roommate of mine became a VP of marketing at a well-known company. He noticed how his New York advertising agency was all too willing to arrange to have a limo pick him up when he was in town and how a half dozen agency staff would take him to lunch and dinner and always pick up the check. When he started checking their bills he realized he was ultimately paying for everything -- plus the agency tacked on overhead.

And of course, all the attendees at the meetings and dinners were charging their time to his account -- you know, billable hours! He decided to stop this practice. He took Uber like most people and he made the agency justify the presence of each person at meals and meetings. He was able to free up more money than anyone could have imagined for real marketing activities and not marketing department aggrandizement.

Another colleague was convinced to spend thousands of advertising dollars on social media. It wasn’t clear to him exactly how it would work, but it was the “in” thing to do, so he did it. He still is not certain what his ROI is and no one seems able to give any good decision-making information other than how many views he gets, how long people stay on various pages, etc.

I have often railed about the nerve of accounting and finance people acting like they are protecting the company from marketing people wasting their company’s money. However, I think marketing executives should be sure to closely examine their own house and make sure the marketing budget is spent on marketing and demand-building activities and not on perks that come through the back door. I know it is not easy.

I believe in the “Wal-Mart policy.” Wal-Mart buyers could not accept anything from suppliers but they asked the suppliers to just reduce the costs of products instead of taking them to baseball games or buying them pens or magnets.

With every expenditure, ask yourself: Did this strengthen our brand? We should spend our marketing dollars where it works not where everyone else is spending it.

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