Recently, I accompanied a client, the CEO of a start-up company, to a trade show where he was considering purchasing booth space the next year. This was a very large trade show held in a convention center in Chicago, with tens of thousands of attendees and exhibitors from around the U.S. As we entered the building, you could see company names and logos displayed virtually everywhere possible: banners hanging from the second floor balconies, A-frame signs in the hallways, pictures on the hand railing of the escalators, and even on risers of the stairways (the vertical parts). My client, whose forte lies in financial analysis, pointed to a banner and stated, “That banner costs $8,000 to display in that spot. Do you think that’s worth $8,000? Will we get $8,000 worth of business if we display our banner there next year?”
Unfortunately he was looking for a yes or no answer and the answer is not that simple. My client wanted to know the return on investment (ROI) for this one, particular advertising piece. In his realm, business activities can be analyzed and broken down into small components, with distinct numerical values for each one. In finance and accounting, two plus two always equals four. Formulas determine cost of equity and present value of investment opportunities; it’s a matter of plugging and chugging. Marketing, on the other hand, is an applied, qualitative discipline. While marketers do work with numbers, creativity and experience play a much larger role in creating a total promotional mix. This is the combination of advertising (i.e., print, social media, radio, banner, and television) that is part of the overall marketing mix, traditionally referred to as the 4 Ps of product, price, promotion, and packaging. The value, or return on investment, for the total promotional mix is ascertainable, however, it is virtually impossible to determine the exact return on investment for individual pieces. But how can one explain this to a numbers person?
Think about baking a cake. A cake is made by combining flour, sugar, eggs, butter, baking powder, milk, flavoring, and icing. When combined in the appropriate quantities and baked at the right temperature, the end result is delicious when compared to eating the individual parts by themselves. The end product is a combination of all the parts working together, creating an enticing and desirable confectionary delight, or in the case of marketing, a successful promotional mix. Using only some of the ingredients would not have resulted in a successful cake. Additionally, using high quality flavorings and icing can make a substantially positive impact on the end product as opposed to using lesser ingredients. (In other words, don’t just go with cheap options if more expensive ones will get the job done better. Tiny print ads just don’t get noticed. If you’re using print, purchase ad space that will be seen.) Finally, while some ingredients may cost pennies and others cost dollars, one cannot definitely determine that the dollar ingredient contributed more to the success of the cake when compared to the penny ingredient. Please note that the key word here is success, not allocated cost.
While marketers must define their company’s targeted audiences and cater to their needs, hot buttons, and desires, the point is that repetition in the message is key to getting your target’s attention and eventual purchasing action. For example, your potential customer hears about your product on a radio commercial during this morning’s drive, then sees a Facebook ad while surfing at lunch. A few days later your customer receives a postcard and a few more days later buys your product…so what spurred the purchase decision? While the postcard may seem like the right answer, would the customer have purchased with ONLY receiving the postcard? Most likely, no. Many studies have been done that document the cumulative effects of persistent marketing to spur sales.
So, returning to our cake example, can I tell you if that butter was worth $8000 (was that banner worth the $8000)? I can’t tell you now, in our isolated-vacuum circumstance, but I CAN make an educated, experienced, and sound decision when the cake is done baking and the icing has set.