Except that direct mail is measured by the response rate, and the response is tied to each individual mailing. Direct mail can be measured down to the point where the advertiser can tell whether a long introductory letter works better than a single line with a price point on it, and which street in which zip code responds better to which approach.
The more you can narrow your target audience, the more you can spend on reaching them and still get a satisfactory return on your investment.
That only applies if it is direct mail associated with a specific campaign that tracks responses. The pile of junkmail I got today went immediately into the recycle bin. There is a strong chance that in the next week I will visit one of the stores in that pile of junkmail. It had absolutely nothing to do with the flyer they sent me I didn’t even look at. The store may know my address, and that I get their flyers, but any causal relationship is spurious.
Of course, that is the kind of junk mail that isn’t tracking responses. Some of the flyers I threw out might have coupons for tracking responses, but many of them are just a list of the week’s specials, no coupon necessary.
Direct mail and flyers may mean different things to people in advertising, but to the rest of us, it’s all just junk mail.
So it’s not a waste of the company’s time and money.
I did this for the first time today. I got a letter from a cremation service addressed to my late wife. The return form has her name and our current address.
Wrote on it “You’re over 4 1/2 years late. Update your fucking mailing list.
P.S. As you requested, I will mention your company to my friends and on social media.”
I doubt it will work but WTH.
It’s a waste, as far as I am concerned, but it makes perfect sense for the company.
I suppose I’d add another factor to the calculus. Which may have been addressed in the podcasts I did not listen to.
I see an arms race. If Coke didn’t advertise, Pepsi would not need to either. Once it’s a given that Coke is advertising, Pepsi will be more profitable with countervailing advertising than without. Despite having to pay the expense of that advertising.
But might both contenders be more profitable individually and therefore also collectively if the entire cost of both their advertising was removed, perhaps at some reduction in sales? That is a very different question. With perhaps a very different answer.
As well there is one case with products like e.g. Coke and Pepsi with long-standing name recognition, not all of it bought via simple advertising. Ditto major car manufacturers, airlines, cereal companies, laundry detergents, ad nauseum.
A very different situation obtains with new companies and even with totally new products by existing well-known companies. I can’t / won’t buy a gizmo if I don’t know gizmos exist, much less that Acme makes a darn fine one sold for a great price.
Maybe, maybe not. I think those podcasts did mention it: If you see an ad for Coke, think “a soda sounds good,” then you go get a Pepsi from the fridge, does it matter if Pepsi advertises? I know that happens to me occasionally with beer ads. Coors ad? no, but an Avery sounds good!
That type of switch is going to work for some products, but not others. It makes lots of sense that you see an ad for Papa Johns, and then order your regular from Dominoes. It makes much less sense that you see an ad for Audi, and then run out and buy a Toyota because you realized a new car sounds good.
All of these, and other things, are why measuring the effectiveness of ads is so difficult.
I do like the simplicity of getting one of those big glossy postcards in the mail, and then taking it to the store for the $10 off $50 (or whatever) deal. I saved $10, and the store knows their direct mailer got me in to spend money. What they don’t know, is if I was going to come in anyway, and they could have saved the cost of the mailer + $10 and had me anyway.
There’s a chapter in Thinking Strategically, a non-technical introduction to game theory by Avinash Dixit and Barry Nalebuff, which looks at the competition between Coke and Pepsi through that lense. They argue that the two companies are trapped in a prisoner’s dilemma: Both of them would be better off if neither of them advertised compared to where both of them advertise - relative market shares would not be greatly different, but they’d both save the cost of advertising. But either company has an incentive to advertise if the other does, and either company has an incentive to advertise if the other doesn’t. So they end up in their suboptimal scenario of both of them advertising.
The solution, from the game theoretical point of view, would be to set up a cartel, i.e. a mutual agreement to not advertise, together with an enforcement mechanism (let’s leave aside for a moment whether that would be legal from an antitrust law perspective). Dixit and Nalebuff also argue that there is statistical evidence (from the timing at which the two companies run special promotions) that Coke and Pepsi might have found an arrangement along these lines.
I suppose that if advertising agencies can make companies believe that advertising works, then the agencies can also make the companies’ customers buy the companies’ products.
I’ve often heard people say “advertising doesn’t work on me, I simply ignore it”. I find that attitude naive. Advertising in the modern sense has been done systematically for about a century now, and enormous amounts of money have been spent on it, as well as on research to study its effects. If it didn’t at work at least sufficiently well, we’d have found out by now. In particular, successful advertising doesn’t depend on the target audience going out to buy the advertised product immediately; it’s perfectly sufficient to simply maintain the customer’s background awareness of the product so that, some time further down the road when a purchasing decision is made, the customer thinks, “Oh yes, I know that brand, I guess it’s good”.
Existing restaurants that we like sometimes send coupons. We save those, as well as any Bed, Bath, and Beyond coupons. Pretty much everything else goes into the recycle can before it even enters the house.
That is the same argument as “if some advertising works, then all advertising works,” which is clearly not true.
Lots of things are done systematically for long periods of time, and don’t work.The history of medicine is a good place to find examples of this.
It’s my understanding, from the above linked podcasts, and other places, that much of the research on advertising has been done by ad firms, and the ad division of companies. Those groups are motivated to find that advertising works, because if it doesn’t work, then they are out of jobs.
Independent academic research into advertising has been less common, but generally shows smaller effects than the industry research into advertising. The industry people argue that the academics don’t understand the field, and have made bad conclusions. The academics argue that the industry people are biased because they’re highly motivated to find positive results.
For me I’m not arguing whether advertising works or not, just that companies will continue to advertise because they believe advertising works, not because it actually does work. They may believe it works, and be right, or they might be wrong.
A company that did not believe advertising works would not advertise. They, too, could be wrong. Companies often make mistakes. Sometimes they continue to make mistakes for long periods of time. Like for all of us, we might not know a decision was a mistake for a long time.
Is there anyone who seriously believes that advertising doesn’t work at all? Like, zero effect on behavior? That seems pretty far-fetched to me.
It’s difficult to precisely measure how effective advertising is, and to compare different methods of advertising.
But it obviously works to some extent.
Is there even anyone in this thread who has never, in their entire life, heard about some product or event through paid promotion and thought “That sounds tasty/fun/like the solution to this problem I’ve been having?”
The difficult task that the advertising industry has is not convincing companies that it works. Everyone knows advertising works. Their task is to convince companies that it is cost effective. Which is the actual open question and is often hard to answer.
Some advertising is completely worthless. As in my earlier example. All of the mail flyers that go straight from my mailbox to my recycle bin do not work at all on me. Despite the companies having spent some money to reach me, they have failed completely.
I would be much more circumspect on those statements: Everyone knows that some advertising works, but nobody knows how much, or which advertising.
“Half my advertising spend is wasted; the trouble is, I don’t know which half”
Academic research on advertising suggests that the “half” is optimistic. Probably much more than half of advertising money is wasted.
That is definitely not a sensible way to think about or measure the effectiveness of direct mailing.
It’s like saying that the commercials your television isn’t displaying when it’s off don’t work, or the billboards in a language you don’t speak don’t work. You have to measure aggregate effectiveness over a targeted group.
This is a well-known aphorism, but, again, it’s the wrong way to think about advertising, and no serious person who is involved in marketing thinks about things this way. The right way is to think statistically.
Obviously, you are correct that many direct mailings go directly into the trash. But the question is whether the return on them in total is positive. If it is, then the ones that go to the trash are just the cost of that return.
It’s like a casino, which has a house edge, complaining that “half the spins of the roulette wheel are a waste of money” because (slightly less than) half the time the casino loses money on a bet. But of course they are not, because those are a necessary part of the statistical universe that results in profit.
From the fairly regular cycle of news articles “this charity is ripping people off” my understanding is that - a lot of charity advertising/fund raising is contracted out. The fund raiser gets a significant cut of the proceeds. By the time you add in the overhead of the organization itself, it’s no surprise that for some, it could be 80% or more of the funds don’t go to the organization’s purpose.
(I had a boss of my boss once who was very cynical about bureaucracy. At a meeting once, he gave an example of what I would later see in Pournelle’s Iron Law of Bureaucracy. He said “March of Dimes was created to fight polio. Polio was effectively eliminated (this was late 1980’s) but there’s still a huge March of Dimes organization.” And, they’re still fund-raising.
I would say the same problem likely exists with any advertising campaign that sends stuff out and looks for responses. Odds are it’s not done by the corporation, they contract the whole business out. So Mastercard or Walmart don’t know if you send back a reply envelope with or without a nasty message - and the advertising agency is unlikely to tell them “guess how many possible customers we pissed off?” unless it’s the lead story on Channel 5. (or nowadays, a viral video).
Worse than that, maybe being in Canada insulates me from the full torrent of trash. However, most junk mail addressed to me is actually addressed to “occupant”. We’ve had an unlisted number at this address up until the phone company stopped publishing phone books, which I assume was a major free source of names. However, the greater part of the mail is flyers from local businesses. (It’s amazing how many real estate agents have a long list of buyers waiting to buy my home…) The flyer printers contract with the post office, because it’s cheaper than hiring people to go door to door handing out the trash. Apparently it’s one of the major money-makers for the post office. (Although there is a service that also does a weekly delivery of a moderately hefty pile of flyers.)
I suppose the main purpose of junk mail is to put their name front and center in your mind. When you need to replace your air conditioner, or go auto shopping, or sell your house - ok, for a pizza or groceries you may have a local store you frequent, but for these other services you only choose once every year or 10.
Exactly this. Yes, some advertising is specifically created to get the consumer to take a particular action now, but a lot of it is about building name recognition, and being top-of-mind for the consumer.
One of my clients is a major brand in the home improvement category – they sell products which most homeowners will only ever buy once in their lifetimes, and which, in most cases, has a “path to purchase” which can be a year or longer. The work we do for them is structured to both (a) maintain brand awareness, and build a positive impression of the brand for when the homeowner is finally ready to start actively shopping, and (b) provide offers and specific “how to buy” information for the homeowner who is now ready to buy.
This is the argument, but I’m suspicious that it is true. I’m perfectly willing to be swayed by evidence from independent studies.
It all depends what you’re measuring. If the TV station is selling ads based on 1,000 TV sets being turned on, but it turns out that only 750 TVs were on, then the commercials aren’t working they way they were claimed to work. Even if the commercial is effective at increasing sales, the advertiser still has likely wasted money.
This gets much worse in online advertising, where fraud and lying are rampant. Lots of click-fraud, and places like Facebook lying about their engagement levels.
Of course, I just don’t feel like doing the research to pull up some valid independent statistics, so I’m falling back on anecdotes (where n=1).
All that’s bothering me are when people say “advertising must work, because companies spend money on it” and “advertising works” when neither thing are remotely true.
Rather, “some companies believe advertising to work, because they spend money on it” and “some advertising may increase sales some of the time, but whether spending money on advertising is an efficient way to increase profits is an open question, and the answer will depend on the details of each case.”
Advertising is a direct route to sales, but it often has a low rate of return. At the same time it can be a marketing vehicle which increases name recognition of the product or company effectively. Compared to advertising on television or major publications direct mail is still inexpensive for both purposes. I haven’t been associated with the direct mail business for many moons but I have to assume it is still rather effective at targeting an older audience that had responded to direct mail in the past, and that group is rapidly diminishing.
I actually think those arguments are pretty good. They don’t prove that advertising always works (I think it would be silly for anyone to make that claim, and I don’t think anyone is?). But I think they are a very solid argument for the claim that “on average, advertising works”. Business is quite competitive and if advertising were on average a waste of money, there would be more successful companies coming along eschewing it.
Like, none of that is a rock-solid philosophical proof, but if your prior is “advertising is on average a waste of money”, the fact that basically every person in the world with a significant financial incentive to answer that question correctly has decided otherwise should update you a bit.
But anyway, that’s not my argument. My argument is that we all know that advertising works because we’ve all experienced it working on us at least once.
Again: have you never been swayed by some kind of advertising? Never learned about a new product through a that you later purchased? Never tried a new restaurant because you got a flyer in the mail? Never had any kind of positive or negative brand association other than through direct experience with their products? Not once?
I think there probably are such people, but they’re very rare outliers.
ETA: If you are in fact such an outlier, maybe the next time you get a flyer for a new restaurant that sounds like the kind of restaurant you like, go there and try it? New restaurants open all the time and some of them are good!
OP here. Here’s a different but related question:
Do commercials done during the Superbowl) lead to better sales? I mean, companies pay through the roof for them. Have there been studies done? And where does the humor/memorability factor come into play?