How Advertising Works

Advertising

While researching the topic of advertising, I happened upon an infographic on how advertising works. The premise of the infographic was that rich companies had piles of money and to manipulate their audience, they had to make them buy stuff to try to feel rich. It was such a disturbing and ridiculous notion that I commented such on the company’s post and won’t even mention the company or the infographic here.

The first notion that only rich companies advertise is a bizarre idea. Our company is not wealthy and, in fact, had a couple years of losses – yet we still advertised. Advertising, especially via digital channels, is very affordable. You can deposit $100 into virtually any social or search engine pay per click account and push some highly targeted advertisements to drive awareness to your business. The average company isn’t rich, either.

Attitudes on business don’t align well with the actual statistics in a social media world. About a quarter of all businesses fail within the first two years according to multiple studies. While people believe the average company makes a 36% profit margin, the average profit margin for the most recent quarter was 7.5% and the median profit margin was 6.5%.

Angie’s List, for example, continues to operate at a loss while spending $80 million on marketing – with a large portion of that going to the television commercials you repeatedly see on television. While a public company that’s increasing revenue quarter over quarter, they’re hardly rich. Not only are they not rich, but they’re also not advertising to make their customers feel rich. Angie’s List provides a service to protect home services customers from getting ripped off from the plethora of shady providers out there.

Advertising works on different levels; it’s not as simple as trying to get someone to buy something. Over the last decade of content, search, and social marketing, I believe companies are becoming more keen to the fact that advertising needs to be much deeper than manipulating a consumers’ insecurities. Targeted advertising on consumers who are similar to your audience increases profitability by acquiring and keeping great customers.

Why Use Advertising?

The basis for all advertising is simply awareness. Awareness is desirable to companies for a few reasons:

  • Reach – To build demand for your brand, products or service, you must be able to reach new audiences. Those audiences already exist on websites, searches, social media, radio, television, and other mediums. To reach those audiences, the companies that invested and acquired them offer to advertise.
  • Perception – Perhaps people are already aware of your products and services but don’t have a positive perception of your brand. To counter inaccurate brand perceptions, it’s sometimes necessary (or even critical) for brands to invest in advertising.
  • Sales – Driving sales via advertising can be effective, but I’d challenge you to observe traditional and digital advertising for a week and see how much of it is focused on discounting and sales. In my opinion, it’s on the decline. More often than not, we find that while sales can be increased, companies who rely on it for the long-term may devalue their brand.

How Does Advertising Work?

Businesses and consumers alike are looking to improve their quality of life and efficiency of their business. While a small portion of the population may have insecurities that advertising capitalizes on, I believe that’s minimal. In my opinion, the majority of network marketing and multi-level marketing enterprises work in this arena. Have you ever been invited to one of these events? They’re massive celebrations of happy people paraded around the stage with promises of big checks, vacations and even cars to persuade the guests to invest and begin selling for them. Vemma, an energy drink MLM, was recently temporarily shut down as a pyramid scheme.

While that’s extreme, it’s not the norm. Watch a typical Apple advertisement and you won’t see discounting and get rich quick schemes. Instead, you’ll watch stories of people unleashing their inner creativity utilizing Apple devices and software as the tools. Observe Coca-Cola’s advertising and you’ll see a focus on the events and venues they advertise at, trying to build brand awareness where happy memories happen. Of recent, they’ve also had to work on the perception of sweet drinks and the health risks that arise.

Some advertising works on the motivation to save money (discounts), but there are many other reasons why advertising works:

  • Vicinity – Sometimes advertising is simply necessary to provide a regional audience with the fact that you have a location nearby. Perhaps you’re seeking NY style pizza nearby, and so a local pizzeria advertises for location-based terms on search or targets an interest in pizza within a radius around their restaurant.
  • Responsibility – More and more consumers are paying careful attention to businesses that are focusing on sustainability, diversity, and community involvement. Advertising can play a significant role in adjusting the perception of a faceless, massive corporation into one that’s providing grants and scholarships to help local communities. Salesforce recently adopted a local school in Indianapolis, donating $50,000 in equipment to help them.
  • Research – Where do you go when you’re researching your next vacation, your next automobile purchase, your insurance, or other major expense? Advertising informative content to help educate consumers and businesses has exploded in recent years. While the goal is to build trust and authority by providing the necessary research, it’s not always the end goal of a purchase. Many times it’s providing primary or secondary research that is widely shared. I often see advertisements about content that may be of interest to my friends and send it to them.
  • Emotion – Storytelling has jumped to the forefront of many advertising methodologies because it not only connects emotionally with the audience, it’s also produced to lead the viewer or reader through the story. Some may think about this as manipulation, but that’s indistinguishable to an effective advertisement that evokes emotion.
  • Persuasion – Utilizing emotion, advertising is often persuasive. Dr. Robert Cialdini describes six universal principles of persuasion that have been scientifically proven to persuade the advertising audience – reciprocity, scarcity, authority, consistency, liking and consensus.

And Let’s Not Forget

If the evil goal of advertising was to motivate a sale, the vast majority doesn’t work at all. If advertising were that sinister and manipulative, we’d all be running to McDonalds to spend time with family and a box of McNuggets! Advertising is expensive and, more often than not, is a to change perceptions and increase awareness. Advertising, like many other marketing strategies, is a long-term strategy that has quite a bit of risk associated with it.


© 2015 DK New Media.

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