Thursday, 26 May 2016

Advertising and Sales. And the nonsense that's talked about them.

There's a lot of talk by well, 'experts', about directly relating TV advertising to Sales and therefore, suggesting some form of ROI (Return on Investment). In other words, adding Science to Advertising in an attempt to prove that one medium works better than another. 

They tend to talk about 'models' and 'data' bundled up in theories that appear intelligent, because they sound it, but that's all it is. Mostly, Snake Oil.

Of course, most of these 'studies' by expert companies, aren't done just "off the cuff" to fill in time, but rather, commissioned by Clients who want to make one point or another for their own gain. Without usually, disclosing who those Clients are, who paid for the study. 

So always ask, "Why am I being told this?".

The other problem of course, is that Advertisers are highly unlikely to give actual sales by day to anyone on which these studies are supposedly based. It's hugely competitive information and equates to the Third secret of Fatima in confidentiality. Rightly so.

So do not be fooled by a big brand Consultancy offering "Studies"....there's always a reason. And after all, if you commission a 'study' you expect the result you paid for, don't you?

Fundamentally, Advertising V Sales is flawed. 

Nothing whatsoever to do with the debate around TV Advertising Versus Others (normally it's focused on Digital), but the very notion that you can correlate Advertising directly to Sales, simply cannot be done and never has been. Ever.

If you knew that secret, you'd be extremely wealthy because it's the Holy Grail of Advertising. And remains so.

The argument goes that if you spend one pound on X advertising medium, you get two pounds back - and if that was truly proven, who wouldn't spend it all? 

Think about that. If that was true, you'd spend all you had, because you'd be guaranteed Sales.

But you can't be. 

Nobody will promise that, even after their "studies". Why not ask those experts to give you that Sales guarantee?.....try.

So Does Advertising Sell? Yes, of course it does. 
But how? Well, We just don't know.

Simply, because there's such a myriad of factors that affects Sales - and Advertising is only one.

It all revolves (if you want the Science) in how the Demand and Supply curves interact and shift around the equilibrium. There's a bit of Economics for you....and if you can understand the Supply/Demand Graphic above (thanks you understand everything. 

Advertising is only ONE factor.

What that means, is you have to determine all the factors affecting Demand (Sales)? And, what therefore, are the factors affecting Supply? And, how do they relate to each other? 

When one changes, the other does too - so it's fluid or dynamic.

The first and primary objective of Advertising is to inform. To show consumers what you have "for sale". 

Succinctly referred to as, "I see it, I like it, I buy it". General awareness if you like, because if people don't know it's there, they won't look for it.

The right Ad, to the right people, in the right place, at the right time.

You're looking for a Car. Up pops an Ad telling you about a great Car, ideal for what you're looking for and you'll probably buy it because now, you know about it. Or you will the next time you're looking.

Or, an Ad for a magical new TV because yours is falling apart.
Or, a drink because you're thirsty.

Information at the right time to the right person.

Advertising works in part, because the more you inform people (and presuming your product is something they want anyway), they'll buy it, because they now know it's there. Awareness.

You can of course, make a good stab at measuring awareness through pre and post unprompted recall of an Ad, but awareness uplifts in themselves, are one component of Sales only. 

Certainly, the more you create awareness/inform, means that the Advertiser with the bigger marketing pockets should nearly always, win on the awareness battle. 

Look at the past success of the big brand builders, the deep-pocketed multinationals, as an example of that. 

But the problem is, that other issues impact those Sales, hamper the Demand for those products despite your Advertising. 

Here's some of those issues;

Price impacts on Sales. Reduce your price and normally, you'll sell more, (Or, Higher prices means Demand falls). Lower price means higher volumes (not always, but most of the time) and look at Ryanair as an example of that. Using their profits to reduce fares to generate more Sales. They know lower fares means more Sales.

(An aside - You can't go lower than 'free', which eventually, Ryanair will. I think that's a brilliant ambition of theirs to fly for free and take margin from other stuff like airport fees, baggage fees etc).

Income impacts on Sales. Recent recessions show that. Notwithstanding your excellent product, superb Advertising skills and your terrific price, if people can't afford it, they won't buy it. Incomes affect Demand and that fall in Incomes can be unforeseen because it may simply be a consumers lack of future economic confidence that quickly enters the market. (Poor Expectations). 

Experience impacts on Repeat Sales. Consumers only buy once. If they like it, they'll buy it does the product live up to the promise? And in these days if it doesn't, watch out on Social Media because other consumers will know quickly. So Product Quality is a part of this. There's no amount of Advertising that will sell a poor product, twice.

Taste/Fashion impacts on Sales. Tastes change quickly and so does Fashion. So, if there are concerns about say Health (obesity or diabetes) in the general public awareness and you're selling high sugar drinks, you've got a problem all of a sudden. Demand will drop. 

Or if, somebody very fashionable (Ms. Kardashian for example) likes your product/brand, you could be on a winner, today. PR has a function here obviously in creating that new 'trend'. 

Competitors impact on Sales. Their activity might impact yours. Say they reduce their prices lower than yours quickly in the middle of your Advertising campaign? And keep doing it? Same product (ish) at a lower price, then most consumers will probably, switch away from yours. Or say a competitor copies your product at a lower price? Apple V Samsung.

Weather impacts on Sales. Sunny days sell Ice Cream, but holiday sales drop off. Sunny days kill retail footfall traffic generally. Actually ironically, a good sunny agricultural 'harvest' will mean a glut and that will mean prices will fall. Over supply. So your best laid Advertising plans can be affected by the weather. 

I know of one large DVD Rental Retailer who based their Advertising on Weather. A bad rainy day = more DVD rentals as people stayed home.

Supply impacts on Sales. The more accessible your product is (the easier it is to buy), the more you'll sell. Look at the example of online shopping Versus Bricks and Mortar stores. It's easier to buy online. So 8 of the top 10 UK retailers last year were online shops. Grocery Sales are driven by convenience for example.

In some cases a lack of supply (shortage) may also create pent-up demand, an old Apple trick, but generally good Supply impacts good Sales.

Creative impacts everything. Some Ads just work better than others. We don't know why but we know from experience, what tends to work better than others. It's that experience that brings you to hire experienced Ad Agencies.

Better Creative, means more demand, means more Sales. 

Look at Levi Jeans "Launderette" at the time, from John Hegarty at BBH. Denim was a poor, overpriced, under selling product but that commercial had it walking off the shelves. Famous brands have been built on famous creative for that reason (Audi, Guinness, Coke....).

Media impacts on Sales. Analysis of what spots went where at what time. If the Media buying isn't up scratch in other words or indeed, the Media Planning, then your Advertising will not be as effective.

And when all of these factors combine, they impact on each other. 

So it changes. 

Sales change because price changes, incomes fall and rise, weather changes, competitors respond, supply changes (high demand means out of stock) and on and on we go. The Demand and Supply Curves shift to keep trying to find the equilibrium which in reality, they never do. 

To suggest therefore, that Advertising alone, let alone TV Advertising, can be directly linked to Sales is a nonsense. 

Yes it works, but because of awareness....but awareness alone is never enough.  
You cannot isolate Advertising and relate it to Sales because there's too much at work here. Too many factors.

You can of course, surely argue about TV advertising Versus Digital Video as to which is better at reaching an audience at an optimum cost (reach and frequency) and that's legitimate. They're all Advertising mediums and arguable.

But trying to make Advertising a Science, is not legit.
Because actually, it's an Art.

Nobody knows why it works and why it works best.
Never has, never will.