The Technology of Advertising

“What do we get from our advertising”

A fair and intelligent question.

In fact, if you are in top management, it may be one of the most pertinent and helpful questions you could ask about the annual investment in advertising and other communications programs.

Why?

Because the whole purpose of marketing communications is to effect noticeable improvements in your business development, and unless that question is seriously addressed, neither you, your ad manager, nor your agency will ever know whether any such improvements are actually occurring, or to what degree.

Today, the only numbers provided for management’s focus are the program’s cost. Small wonder then that that’s where they do focus – on the cost side, not the performance side.

Historically, funds to measure performance have been denied for so long, they’re no longer requested, thereby depriving top management of seeing what is actually achieved.

Remove everyone’s goalposts?

To appreciate the problems this causes, consider it this way: Suppose, in every department, you took away everyone’s ability to measure their progress. Hide the gauges in production, remove all instruments in R & D and in the labs, fix the programs in accounting so they won’t tally columns of numbers, and advise that sales figures will no longer be compiled.

Inform all departments that, if anything, they’ll be rated entirely on costs – not on meeting performance objectives.

Tell everyone, “You must guess at performance – and next year’s budget will depend on how well we guess your department performed.

Sounds ludicrous, yet this is the predicament in which ad managers and agencies find themselves. Means of measurement are available – at some cost of time and budget – yet even within surprisingly large companies, regular measurement is rare. And where it is done with good effect, it’s never published.

As a substitute, advertising people are forced to rely on sales lead tallies or anecdotal evidence from field sales: “Those sales leads sent to our territory were super”; “I sold two carloads of Haufenmist to that company who inquired”; “Our distributors say the new campaign is really swell.”

That sort of feedback hardly reassures your ad manager, much less any CEO who may be asked to explain expenditures to his board of directors: “…and we’re investing $350,000 in communications this year, but I’ve no way of setting any measurable objectives. And if we get meaningful results, we won’t know it…yet I am hopeful.”

Another harmful effect is that people in other departments where performance is routinely quantified or qualified, via documentation or statistics, may sometimes regard the ad manager as an elitist who operates on his force of personality and experience, curiously exempted from “showing results.”

How many of us would invest in a mutual fund or a stock company that never tracked past performance?

And so, the original question strikes at the core of the enigma, i.e., What real value does it have? Does it provide an acceptable return?

If it does not, it ought to be scrapped in its entirely – the ads – the direct mail – photography – shows and publicity. Why spend money on medicine that’s not proven to cure anything?

But if technology advertising does work and does lead to the creation of profitable business, how can we find out? And how can such findings be used to improve performance?

Technology programs (low-tech, high-tech, no-tech) have been studied by so many reputable companies, no one need feel, “We don’t know how to measure results.” GE, Cahners and others have been there and have done it.

The Brucker Method He’s developed a formula for identifying new business creation and extrapolating the value of new business into sales, based on average first sale, followed by repeat business for the four -year period that constitutes new business.

The Obermayer Method Starts with the finding – from studying the outcomes of 10,000 sales leads - that, out of 100 sales leads, 45% purchase that technology within the year.

Of those, the advertiser, assuming he initiates reasonable follow-up, should convert at the rate equal to his present share of market.

The PIMS Study Extensive documentation showing that firms that advertise (at certain advertising weight) tend to gain share of market and share of profit at rather impressive rates. The basis is a study of about 10,000 technology firms’ programs.

The Morrill Study Shows attitude changes among prospects that occur at various levels of exposure to advertising; charts the change in opinion caused by 6 pages of ads compared to 3 and 4 pages, and then plots changes in the advertisers’ market shares.

Meldrum & Fewsmith, Inc. and American Business Press Singled out by Arthur D. Little as one of the best, it tracks performance – during and after recessions – of companies with differing promotional budgets.

One puzzle to be dealt with is, what do you expect your programs to do? If sales is the function of the sales force and/or distribution, what’s left?

What’s left is preparation of the selling environment, i.e., preparation of the battlefield, which, logically, is begun prior to action. The usual job of communications is to change that environment – attract – initiate access – educate – increase familiarity – change beliefs.

Those jobs could be done extremely well by sales people with the time, budget and access. But in many situations, they can be done on a wider scale, more economically, by programs that meet recognized criteria of quality and weight.

The front end of selling is to establish contact, create awareness and then to shape opinion and trust. Accomplish those things and you’ve partially prepared the battlefield in your favor. The development of all those can be measured.

Where to start?

Measuring the performance of your advertising investment must have the continuing interest of management. Without it, programs will perennially be malnourished due to honest doubts about basic value, doubts that stem from lack of systematic study.

Sadly, product managers are rarely in a mood to devote any portion of budget to studies: “I may not know what the programs really contribute, but I won’t divert ad funds that may help to move product this year into studies that won’t help me for a year or more…and I won’t do it next year either.”

That pressure to “spend on it, but never measure it” has gone on far too long, and the on-again, off-again support for today’s ad budgets is the sorry result. In our view, it is a top management problem.

Fixing the problem

One company conducts a major study ever several years. It takes time and budget, but they know what is or is not happening, and the CEO now sees quantified connections between programs and performance. Others make yearly measurements organic to the marketing budget.

Another uses incentives. They reward feedback about sales lead follow-up and results by any distributor who cares to participate. Their reward is certainty versus guesswork.

If, no matter how credible, no study devised by outsiders will be acceptable to your managers, why not devise your own systems of analyzing “effects?” Consider a continuing series of small-scale studies that measure very specific bits and pieces, e.g., “Today, 22% of the engineers in industry who specify Farkle Inverters know that we manufacture an improved Farkle Inverter – Before the programs started XX months ago, only 8% knew it.”

The environment inherited by CEOs usually provides them no statistical measures of awareness and attitudes, even within major served markets. No charts to indicate if awareness and preference ratios have been trending up or down. Too many of us rely on “feel”.

That makes for a confusing battlefield. You see what’s happening, but you don’t know why. Share-of-market only tells us where things are and doesn’t explain the forces that moved them into those locations. That’s left to speculation.

Even with no communications program, the value of annually tracking the forces at work – awareness, preference and other attitudes within served markets – should be apparent.

Professional advertising people know what can be measured. Let them assemble a small, ad-hoc crew – give them clout, as for any significant endeavor – and follow the rules of the road that are readily available. Accept that this is technology – often with a spectrum of buying influencers – not a retail store where we’ll all know by Sunday whether the ad worked.

Studies will not necessarily increase ad budgets, but they should at least help to stamp out some lip service programs and permit concentration on fewer targets, with more realistic expectations.

Professional doubters of studies as self-serving may be asked who checks the quality of the medicines their family uses or the safety of bridges they drive across each day. And who checks your own finished products? When you employ people of integrity, that’s not a problem.

Frequent studies can be as helpful to your communications as is the routine use a computer in engineering, or the “total” key in accounting. One alone hardly scratches the surface, but the accumulation will, like a jigsaw puzzle, let the pictures emerge and show what your programs are doing – and what they have yet to do.

This enables planning to be more focused and eliminates the demoralization of asking for funds for programs that ad managers feel their own management suspects are not worth the cost.

Such strengthening of confidence will enable the devotion of more time to strategy, solving real problems and closing gaps identified by the studies, with less reliance on instincts and training to do the right things.

Instead of being simply regarded as providers of services, that staff will become recognized as a group whose main reason for being is to be an engine of accountable, profitable business development.

And apart from any effects on the programs, profit center managers will have an additional gauge to see whether awareness and acceptance of both company and products is changing for better or worse, independent of short-term P & L performance.