Advertising, as per one of its many definitions
, is the action of calling public attention to something [Hawks]. Historically, the "action" element of the definition has evolved with changing times and technologies but the second element of the definition, the motive for advertising, hasn't changed since the early days of advertising- to attract people's attention to a product, service or a brand in general. It has been one of the most effective tools to get the word out about a product and brands have used multiple avenues to exploit it and get a message across to the consumer.
But today, consumers have more choices than ever before and more channels to hear about them than ever before. In that context, what does it even mean to "advertise" something. Advertising is only one of the tools that a brand can use for it's marketing efforts. This paper explores how brands have proven that traditional methods of advertising such as billboards, newspaper and TV ads and so on are dispensable and how alternate tactics of marketing might prove more beneficial than advertising.
At the turn of the millennium, marketing Guru Seth Godin made a compelling case for a paradigm shift in the approach that companies used to attract consumers. The cycle of buying ad time on TV to interrupt people and inform them of a brand and use that distribution of ideas to (hopefully) sell more products and make profits to make more ads- what he called the "TV Industrial Complex", he argued, was over. It simply doesn't work anymore. The average consumer had too much choice and too little time to pay attention to these advertisements and had stopped paying attention to them. Godin, was talking about TV ads at a time when the internet as an advertising tool was only begin to make its mark. And what was true then, is still true today. Traditional advertising methods simply do not catch the attention of the target audience as effectively as it used to in yesteryears. Especially in the age of the millennials, whose attention span is a mere 8 seconds (lower than that of a goldfish), it is no surprise that about half of all advertisements are ineffective and, more importantly, the average effectiveness of advertising is only half as much as previously believed [T
In fact, in a survey conducted for the purpose of this paper, of the 90 respondent, 47% ranked "attractive advertisements" as the second least influencing factor in their purchasing decisions (celebrity endorsements were ranked lowest with 73% saying that it had no effect on their purchasing decision). When asked specifically if advertisements influenced their purchasing decision at all, an incredible 90% of respondents rated it 3 or lower (on a scale of 5 where 1 indicated absolutely no influence and 5 indicated a heavy influence). As of 2014, the advertising industry spent close to $600 billion [forbes
] and that figure is growing at nearly 5% per annum. The problem, of course, is that there are no clear metrics to determine if a billboard on Times Square directly influences a consumer's behavior. By some estimates, a consumer needs to hear or see a brand 3-5 times before it effects his/her purchasing decision which is the premise on which brands blast ads from every space they can find- on billboards, on the sides of buses, in trains, on empty walls, on TV, mobile and accessories. But the message from the market space seems to be clear- This isn't working as well as it should. As Nineteenth-century retailer John Wanamaker famously said
, "Half the money I spend on advertising is wasted, the trouble is I don't know which half." The Atlantic recently did an article which explored if internet advertising works at all and as it turns out, it doesn't
So if advertisements aren't the solution, what is?
As mentioned earlier, advertising is only one of the tools that a brand can use for its marketing efforts. This is an important distinction to draw. Advertising is simply the process of communicating something to the market space. If it works, it sells a product. Marketing has to do with everything related to the product starting from its look and feel to the colors associated with the brand, deciding the target audience and, setting the price point and finally selling it. Advertising is simply the process of communicating the last part of that process. But time and again, companies have proved that the most important selling point of a product, is the product and not the advertisements. In the same survey that ranked advertisements and celebrity endorsements as the least influential factors in purchasing decisions, 46% ranked quality of the product as the most influential factor (75% put it in their top 3 influential factors. The other two being cost and quality of post-purchase service). A good marketing campaign can involve zero advertising and still create brand awareness, customer loyalty and drive sales at the same time.
In the United States, one example of a popular brand that does no advertising, is Huy Fong Foods' Sriracha sauce. Based in California and created in 1980 by Vietnamese-American David Tran, Huy Fong Foods' Sriracha sauce is the most popular hot sauce brand in the US and can be found in nearly every Vietnamese Pho restaurant in the US. In spite of not advertising it as an essential vietnamese sauce (or advertising it at all), it is very closely associated with Vietnamese cuisine in America. The most interesting aspect of that association? Sriracha isn't vietnamese at all. It's Thai.
David Tran is an outlier in today's age. What separates Huy Fong Foods' Sriracha from the hundreds of competitors and knock-offs is the obsession with quality. The chillies they used need to be processed with a day of being picked and unlike other popular brands like McIlhenny, the maker of Tabasco, who buys chillies from all over the world, Huy Fong insists on freshness of the produce. It is because of this obsession with quality that Huy Fong can barely keep up with the demand. Advertising would merely widen the gap between demand and supply even further. “I don’t advertise, because I can’t advertise,” says Tran.
But then how did the brand become so popular if there were no advertisements? How did people hear about it? How did the demand grow to the extent that Huy Fong Foods had to purchase a new 650,000-square-foot (60,000 sq m) factory in Irwindale, capable of producing 7500 bottles every hour, 24 hours a day and six days a week?
Billion dollar business have proved that advertising is not necessary for marketing. Spanx- the underwear, valued at above $1 billion by four wall street investment firms, does no advertising despite their ability to afford every billboard in Times Square. Spanx was founded in 2000 by Sara Blakely using her life savings of $5000 to create pantyhose that didn't roll up the leg after she cut them
. She sent Oprah Winfrey a basket with her first prototypes with a handwritten note that read
"You've been inspiring to me and here, check out my invention". Oprah happened to love the product and even put it on her list of favorite things. Today, Spanx makes nearly $250 million in revenue and doesn't spend a single penny on advertising.
Sara's reasoning was simple- there was no way to measure the returns she'd get from advertising so she didn't do it. But how did a company that was founded in an apartment by one person become so popular without any advertisements?
Crystal Pepsi was a clear, caffeine-free version of Pepsi which was sold briefly in the 90s by PepsiCo. It was advertised using every available avenue at the time including TV, newspapers, billboards and even during the Super Bowl XXVII (at a price of nearly $850,000 for the 30 second ad
slot). Even with the established brand name and recognition of PepsiCo combined with the enormous ad spending, the product failed and was pulled from the shelves shortly after launch. The reason was clear- people simply didn't want a clear, caffeine-free version of Pepsi. (Note: Coca Cola released a competing soft drink called Tab Clear which also failed). While this one example does not dis-credit all the iconic ad campaigns that both these giants have released in the past, it highlights the fact that product is king. And that seems to be where it went wrong for them in this particular instance.
The takeaway from these examples is that advertisements can be very expensive. Investing that money on improving products or services could prove to be more useful. But more importantly, moving away from traditional advertising shouldn't happen simply as a method of cutting costs- It needs to be a conscious decision that is made with a specific alternative plan to improve the effectiveness of communicating with the consumer.
Advertisements in the Internet age
Over the past decade, online advertising has increased manifold. The internet advertising market seems to have saturated with companies having to pay more for the same results. According to one report, while google's revenues from ads have increased, the average cost-per-click has reduced forcing companies to serve more ads to make the same amount of money as before. The approach to online advertising seems to be similar to the one that companies have traditionally used albeit its now being served on Facebook walls instead of real walls and on google search results instead of on billboards. This replication of a real world model into the cyber world has many flaws which are becoming more and more apparent to advertisers.
Like Godin said about TV ads in 2000, so is true now for internet advertisements. When this was still a novel approach, seeing an ad for a travel agency when you were searching for flights on google attracted people. But internet users today loathe advertisements. "Banner Blindness" is the phrase used to describe users simply ignoring ad banners on websites that they visit
. There is a very real distrust of online advertisements. One study revealed that searchers clicked on sponsored links less than 16% of the time citing "negative bias" and "distrust
". Users are not just uninterested in online ads, they actively try to avoid them using ad-blockers. In the survey conducted for this survey, 67% of respondents said that they use ad-blockers.
Bombarding users with advertisements is not only less attractive, it also drives users away from the ads (and directly from content). Major website like the Financial Times block content if they detect a user using ad-blockers. Ads are the primary source of income for some of these websites and it makes sense for them to aggressively hold on to it to keep the website running. But, readership (or viewership) tends to reduce as a result of "blocking ad-blockers" as seen in this analysis.
Traditional advertising, as seen in previous sections, is arguably ineffective. But using the same principles on the internet is not only ineffective, it could also potentially negatively impact the brand. A recent study showed that 69% of users considered pop-ads annoying and 23% said that they would not return to that website as a result of the ads.
Marketing without advertising
The success of brands that do no advertising provides many lessons to solve the problems identified above. A closer look at the marketing aspect of these brands reveal how effective marketing is possible without advertising.
Innovation in products (and the forgotten stakeholder in that process): Often, the product itself gets forgotten in the process of advertising. But if the product isn't attractive, it isn't going to sell. Niche products have a clear edge since they can offer something that the competitors don't and that makes them stand out. But often, this is difficult. When the first iPhone came out in 2007, a touch-screen phone that can connect to the internet was a niche device. That is no longer true today. Companies need to constantly improve devices and come up with innovative solutions.
In the process of innovating, companies seem to have left behind a important stakeholder- The user. Eric Von Hippel's seminal paper in the 80's about user innovation
is one of the most effective ways of including the user in not just innovation but also marketing.
User Innovation is based on the premise that users are the greatest innovators. Von Hippel cites
the example of skateboards to illustrate his point- “The reason it is called a skateboard,” says Von Hippel, “is that the old product, the metal skates you and I used as kids are where it began. These skates came in two halves so you could shorten or lengthen them. Kids took the skates apart and hammered the parts onto a board – hence skateboard. It became a phenomenon long before manufacturers got involved. The basic functions were all developed by consumers". From a customer's point of view, it may only be customization for their own use. But on a broader level, it leads to value creation for the brand at large as well
. Take for instance, Lay's whose "Do us a flavor
" campaign received some 3.8 million submissions in 2013. Giving users a stake in the process of creation is an incentive by itself for users to engage with the brand.
Takeaway: The advent of the internet allows for a producer-consumer relationship that is unprecedented and one that was nearly impossible many years ago. Collaborative approaches to product innovation will not only improve the product and the brand but also improve consumer engagement.
Target your lead users: Too often, companies tend to focus on their largest market base rather than the most influential. History is filled with examples to prove that targeting products at lead users not only results in a better product but also a more successful one. As Godin put it in his famous TED talk, lead users believe in the product and the message the company is trying to convey and they tend to spread the word to those who come later in the curve like the early and late majority. An interesting example of this is one involving LEGO. LEGO brought in Martin Lindstorm to rebrand their business in 2004. Every big data based research they had in their possession suggested that LEGO blocks need to be made bigger and simpler (and dumber) since the new generation of users were in search of "instant gratification". But Lindstorm, in his book called "Small Data", narrates how he advised the company to do the exact opposite- to make the LEGO blocks smaller and more challenging. On the basis of numerous user interviews and his own observations, he found that "children attain social currency among their peers by playing and achieving a high level of mastery at their chosen skill. If that skill is valuable, they will stick with until they get it right no matter how long it takes" and these kids were the primary target audience of LEGO. This pivot in focus was one of the reasons for LEGO's sales rising 11% to exceed $2 billion in 2014 to become the world's largest toy-maker ahead of Mattel.
Huy Fong Foods is another great example of this phenomenon. David Tran had received many requests to make his iconic hot sauce less spicy. But his response to those requests show why Sriracha is loved by millions of people
- "Hot sauce must be hot. If you don’t like it hot, use less. We don’t make mayonnaise here."
Takeaway: Incredibly, one of the three finalists
of the Lay's "Do us a flavor" contest, was a Sriracha flavor. These lead users are passionate about the products they believe in and it only goes on to show that if you can convince your lead users, they will market your product for you- for free.
Word-of-Mouth advertising: In 1141, Louis VII gave town-criers exclusive privileges of town crying in the province
. In the pre-printing era, this is believed to be one of the earliest examples of advertising. Since then, advertising has taken many forms. But the most effective of these has to be word-of-mouth advertising. Almost nothing beats an endorsement of a product from someone you know who has used the same product. According to report by McKinsey, "word of mouth is the primary factor behind 20 to 50 percent of all purchasing decisions
. The survey conducted for the purpose of this paper too reaffirms this number (38% of respondents put reviews from other users as one of the top 3 influential factors in all purchasing decisions).Experiential word of mouth marketing is one of the most effective techniques of influencing purchasing decisions. As Sara Blakely explained when asked why Spanx relied on word-of-mouth, "The power of women discovering the brand from other women was actually a better strategy. The aunt telling her niece; one woman to a college friend. There's something about saying, 'look, feel my back, no lines' that's powerful. Look at how big social media has become now. People trust advice."
Takeaway: Word-of-mouth advertising is very effective but also very difficult to actually do. But this dovetails well with the previous recommendation to create a product that convinces lead users and then leave it to them to do the marketing. Especially with the power of the internet, this approach works- and how! According to Nielsen, 92% of consumers believe recommendations from friends and family over all forms of advertising
Content based Marketing: Platforms like YouTube churn out content that is watched by millions everyday. Traditional advertising methods involved having ads at the start of these videos and forcing viewers to watch the ad. While this has turned out to be a successful model in term of cost-per-click, according to YouTube, 70% of users skip the ads that play before a video. People even use ad-blockers as mentioned earlier to watch videos uninterrupted. But new trend among young brands is to sponsor famous YouTubers to plug their products in their videos. But while some of these are almost like advertisements (native advertisements), some of the more interesting ones focus on the content and subtly place the product in their videos. Like this one by India automobile company, Bajaj, is a full documentary on INS Vikrant, an aircraft carrier that served the Indian Navy for many years before being decommissioned. Only at the end of the documentary does the viewer realize that it is an advertisement for Bajaj's new bike. The video has been shared almost a million times on YouTube and generated a lot of conversation on Social Media.
Takeaway: Content marketing costs 62% less than outbound marketing, boosts brand recall and tends to have a greater ROI than native advertising
. It's also an ingenious way to get around ad-blockers and increase engagement
This paper argues that traditional methods of advertising are ineffective in today's world and that brands must adapt to the changing ecosystem. Millennials not only pay less attention to advertisements but also actively try to avoid them. In that context, the money spent on advertising is better used on other methods to boost engagement and sales. In a survey of 90 respondents conducted for the purpose of this paper, users ranked attractive advertisements as the second least influential factor in their decision making. Using Seth Godin's argument that "safe is risky", this paper suggests a few alternative, well-established that marketing ideas that can be used instead of advertising. While Godin was speaking in the context of TV ads, his declaration that the "TV Industrial Complex has been cancelled" is still true today, only now in the context of Internet ads. Godin's "purple cow" analogy is perfectly suited to make this point- if you were driving down a highway and you saw a lot of healthy cows, you don't pay attention to them. But all of a sudden if you saw a purple cow, that would catch your attention. But if all cows were purple, again, it stops being special and something else needs to catch your attention. Brands need to create a new "purple cow" to market more effectively to the millennial generation and this paper suggests a few "purple cows".