The greatest trick the advertisers ever pulled

Friday, November 3rd, 2017

We were just discussing whether advertising works, and now Steve Sailer wonders aloud, could advertising in general be over-advertised?

To paraphrase a Kevin Spacey movie:

The greatest trick the advertising platforms ever pulled was convincing the world that advertising works.

One unsettling possibility is that most everybody wants to be tricked into believing in the power of advertising. After all, we get shown all sorts of interesting things for free or low cost that we’d have to pay for if it weren’t a truism among hardheaded businesspeople that Advertising Pays.

I worked in marketing research for eighteen years in the late 20th century and helped write a couple of white papers on whether our internal data showed that paying for more television commercials would sell more supermarket products.

The firm I worked at had constructed the finest test-marketing laboratory in history.

(Even after a third of a century, I want to maintain a certain level of obscurity, so I’ll call the service BehaviorCheck.)

In the first half of the 1980s, BehaviorCheck was wildly successful at being hired by blue-chip makers of consumer packaged goods, such as, I’ll call it, G&Z.

When launched in 1980, BehaviorCheck was a science-fiction wish-fulfillment fantasy for marketers.

Brand managers had always dreamed of proving to their CEOs that if only they’d be given a bigger budget, their brilliant ads would move more product. And now BehaviorCheck was here to provide scientific proof about just how persuasive their ads were if only they were given a larger budget.

A BehaviorCheck test market was run in one or more of the eight small cities where our firm had bought newfangled laser checkout scanners for all eight to twelve supermarkets in town. In return, the grocers had their checkers scan the barcode ID cards of a couple thousand families we had recruited to share with us scanner records of all items they purchased. We then manipulated which commercials they saw on cable television.

In a typical test, G&Z would hire us for a year to show double the normal national level of ads for, say, Crust toothpaste to a test group of 2,500 households, and the regular level of ads to a control group matched for exactly equal toothpaste buying over the previous year.

But in the second half of the 1980s, clients started to complain that very few of our tests showed that increasing TV advertising by 50 or 100 percent would move the needle on sales at all.

In response, we did a couple of meta-studies summarizing hundreds of test markets we’d run.

Occasionally, we found, higher advertising did pay off, especially if you had news to share, such as that your chemists had actually invented a better ingredient. Dave Barry joked in 1988 about one new version of a product that really did benefit from higher ad spending:

The Toothpaste Manufacturers Association, which each year holds a contest to come up with a new repulsive dental substance for Americans to worry about (previous winners: “tartar” and “plaque”) announce that this year’s winner is: “scuzz.”

If you really had invented a scuzz-fighting toothpaste, it could definitely be worth your while to invest in alerting consumers about the menace of scuzz.

On the other hand, if you didn’t have any news to tell consumers, we didn’t find much evidence that you could cajole them into buying more just through the awesomeness of your advertising.

This is not to say that good advertising couldn’t help a new brand, but there tended to be diminishing returns once an identity was established.

For example, we did a long-running test for one famous product that had used the same slogan for so many years that the character who said the catchphrase was as identifiable to the public as Jimmy Carter.

While the control cell saw the standard level of advertising, one cell saw more and another cell saw less. There were no differences in sales among the three cells.

As the evidence piled up, I recommended to G&Z that they pay us to test cutting their advertising budgets. They could start perpetual tests with us to see if reducing ad spending hurt their products’ sales. If it hadn’t after two years, they could cut their commercials nationally. If in later years our forerunner tests picked up a long-term downturn, they could boost advertising nationally back to the original levels before any harm was done.

For $5 million in testing, they might be able to save $50 million (or even $500 million) in advertising. (G&Z currently spends about $7 billion per year on advertising in total.)

This logic seemed unassailable to me. But my contacts at G&Z explained that no brand manager had ever gotten promoted by cutting his ad budget. G&Z believed in advertising. To consider reducing commercials was heresy.

In short, Americans like to advertise.

Our assumption that somebody must have proved that advertising works is reassuring even if nobody can remember the exact details.


  1. Faze says:

    Steve is probably right about advertising not initiating new sales. But ads have other functions that are worth paying for. They keep your current customers in the fold by reinforcing their buy decision. That is, they remind the current customers who they are and what tribe they belong to by virtue of buying your product. This is information that needs continual updating.

    There is also the theory that the audience for much advertising is the employees of the company being advertised. Seeing your own company advertised on, say, the Super Bowl give a super boost to employee pride and engagement. Advertising can serve as a form of compensation, since it enhances the employees’ status in the community.

  2. Crosbie says:

    Taking a cue from the OCIAA, perhaps advertising spend is an elaborate way of laundering money paid by the capital owning classes in return for control of the media.

  3. David Foster says:

    “But my contacts at G&Z explained that no brand manager had ever gotten promoted by cutting his ad budget.”

    This would suggest that G&Z brand managers aren’t paid or promoted based on the *profit* generated by their brands.

    Makes me glad I’ve sold most of my G&Z stock.

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