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Flicking through the TV channels last night, I heard a rather interesting theory which went on to explain that advertising may not actually work.
I forget exactly how the explanation of that theory goes (think it’s called Game Theory, created by John von Neumann and Oskar Morgenstern in 1944), but I do know how it was applied to advertising. The theory goes; if two companies were advertising at the same time (which a lot of windows companies are), spending roughly the same amount of money (which will be relevant as most go on ITV from our sector), any advantage gained from that advertising will cancel each other’s out. If that company had never advertised in the first place, the market would remain unchanged – no worse off, and that company would have saved all that extra cash, and their business would be in roughly the same place anyway.
Most businesses probably haven’t considered this theory. The thinking of business has always been that advertising has been beneficial. During the recession businesses were urged to increase advertising to boost revenues and exposure. But very few would have considered that if other businesses in their sector advertised at the same time, the effect of their advertising campaign would have been nullified – therefore a waste of time and money.
From previous experience, advertising hasn’t always been beneficial. Yes it increases exposure, but if the economic conditions aren’t right and people are not in the mood to spend, it’s doesn’t matter how many times you tell them these deals will end at the end of the week, people just won’t spend. No matter how effective you think your ad campaign is.
Perhaps it’s a theory worth considering now. Times are hard and set to get harder. Maybe it’s high time we took a long, hard, critical look at advertising and work out whether it really is one of the necessary tools that businesses need to use to boost revenues.
I forget exactly how the explanation of that theory goes (think it’s called Game Theory, created by John von Neumann and Oskar Morgenstern in 1944), but I do know how it was applied to advertising. The theory goes; if two companies were advertising at the same time (which a lot of windows companies are), spending roughly the same amount of money (which will be relevant as most go on ITV from our sector), any advantage gained from that advertising will cancel each other’s out. If that company had never advertised in the first place, the market would remain unchanged – no worse off, and that company would have saved all that extra cash, and their business would be in roughly the same place anyway.
Most businesses probably haven’t considered this theory. The thinking of business has always been that advertising has been beneficial. During the recession businesses were urged to increase advertising to boost revenues and exposure. But very few would have considered that if other businesses in their sector advertised at the same time, the effect of their advertising campaign would have been nullified – therefore a waste of time and money.
From previous experience, advertising hasn’t always been beneficial. Yes it increases exposure, but if the economic conditions aren’t right and people are not in the mood to spend, it’s doesn’t matter how many times you tell them these deals will end at the end of the week, people just won’t spend. No matter how effective you think your ad campaign is.
Perhaps it’s a theory worth considering now. Times are hard and set to get harder. Maybe it’s high time we took a long, hard, critical look at advertising and work out whether it really is one of the necessary tools that businesses need to use to boost revenues.
>Working from a advertising back ground i couldnt disagree more with this theory, regardless of where or who people advertise with it is a business killer for business small or large to ignore advertising.Their are some very big examples of this ie/m&s and their dip and the Reebok v Nike story but to keep it simple to say if everybody didnt advertise it would keep things the same is not true. The old addage out of sight out of mind is imporant and i can assure you stimulative advertising is hugely important in any economic climate but atm it is… Read more »
>Yo Lee! Luckily this is only a theory and has room for it be be wrong lol. I can see both sides of the argument. I think the importance of advertising is different in different markets. Magazines absolutely survive on advertising, that's a given. It's a complicated theory in general. Game Theory is a calculation based on potential decisions made by the players of a game. But this theory was then applied to other areas of life. Maybe the accuracy of the theory was diluted somewhat when it was applied to other things. It was still an interesting thought to… Read more »
>No Probs it is a very interesting post and i think many companies feel this way but the theory is flawed on so many levels imo. Take out the fact im in this industry and ask these questions. A/in any industry is the number of people making a purchase always constant?B/are those people buyin a set amount of products based on the needs every time they purchaseC/do they only purchase products through neccesityd/is it the same people making the purchase ie/ no new or no existing clients disappearing If you can find me any industry that fit this then i… Read more »
>With all respect, I disagree with this theory mate.
>This is a very interesting theory! Having a lot of advertising is obviously a good thing because you're gaining lots of exposure to get the company name out there, but when you start having to think about the amount of money this is costing you, it's not worth it. Also, you can have too much advertising, especially when there are more than one company that provides a similar service/product. People get annoyed seeing the same adverts over and over again, so while having lots of exposure is a good thing, too much can have a negative effect. Companies should look… Read more »
>Perhaps you should consider the content and communication in adverts…? A well tailored, thought provoking advert/campaign will increase exposure, generating interest in your company. Now it's the companies job to convert the sale. It's quick to point the finger at the advertising but consider this, if the second company didn't advertise, the first would reap the rewards. Yes it's competitive at times but a weak advert will do more harm than good. Consider your message, think about your audience and what makes you different. Get this message across and advertising can be very powerful. Our generation also get the bonus… Read more »
>I've heard of this theory, cant remember where but the example used was the cigarette industry. Once people had chosen their brand it would be hard to make them switch so to be constantly advertising and spending the same as a competitor was deemed useless, as if all cigarette companys spent the same on advertising and were flooding the public with adverts, the consumer still has to make a choice (same as if there were no adverts). Advertising is a tricky one, you can easily alienate some consumers, could put consumers off or make your own look silly. Example is… Read more »
>Quick – someone get on the phone to Coca-Cola and Pepsi to tell them to stop wasting their millions on advertising against each other :)
I once saw a theory demonstrating that pirates prevent global warming. Pirates have been in dramatic decline since the late 18th century, and at exactly the same time pollution (and hence global warming) has grown in parallel.
The difference between a theory and a fact is evidence. I imagine there isn't a lot of evidence supporting the theory you saw on the telly.
>Arrh DGB!! This post has made my day.Hehe.
>Forgive me if this sounds rude, but that really is the most naïve drivel.
Whether you are selling fmcg, consumer durables, capital equipment or a service, people won't buy unless they know about it.
So tell them.
We call it advertising.
If I know about your competitor's widget but you haven't bothered to tell me about yours, guess where my widget budget's going.