I am the marketing director at a professional service firm. We started advertising on radio and tv about 7 years ago. The first campaign we did generated clients at a cost of about $10,000 each. That was very expensive and we were disappointed. We kept going and we’ve seen the cost per acquisition go lower every year. After 7 years we are around 750$. Brand advertising is like a flywheel: you keep fueling it and it takes a while before it’s actually spinning. I really don’t think you can measure ROI. Especially since it helps your business in other ways too. Since we have been advertising it’s actually been easier for us to attract talent. Having a known brand is immensely powerful.
TV Advertising Effectiveness and Profitability
131–140 of 197 posts
Re: TV Advertising Effectiveness and Profitability
#132Earlier quoted context omitted.
What is your point? No one is claiming that advertising is the only way to increase demand. It is simply one option to increase demand, an option that Tesla has no use for at the moment.
If the hottest company in auto is spending 0 on ads are ads really that valuable to auto industry ?
If Elon Musk is one of the richest men in the world and draws roughly a minimum wage salary, is salary really that valuable to building personal wealth?
That is the equivalent of what you are asking. Musk has other forms of income and wealth accumulation that other people don't have. Therefore his salary shouldn't be used to compare to people who don't have those other methods of income. Similarly Tesla has other advantages that help increase demand (or limit the upside of further increasing demand). Other companies that don't have those same advantages can still benefit from increasing demand through advertising.
The only conclusion we can draw from Tesla's lack of advertising is that the company leadership feels that it is not the best use of company money. Any attempt to extrapolate that out to the auto industry or advertising in general is making a lot of assumptions.
Re: TV Advertising Effectiveness and Profitability
#133Advertising is at its core a prisoner's dilemma. If every competitor in a certain space puts in $100 in advertising, they can all expect $0 in returns. However if a single company put in nothing they would be in a worse place because their competitors' returns would automatically become higher.
That might be true for products or services that people need and know. But what about new or less known ones? For example, I will buy a car and one car only. All the advertising is not going to make me buy two. However, for electronics, I might buy an additional TV or another tablet, or gaming console.
Re: TV Advertising Effectiveness and Profitability
#134Earlier quoted context omitted.
If the hottest company in auto is spending 0 on ads are ads really that valuable to auto industry ?
If Elon Musk is one of the richest men in the world and draws roughly a minimum wage salary, is salary really that valuable to building personal wealth? That is the equivalent of what you are asking. Musk has other forms of income and wealth accumulation that other people don't have. Therefore his salary shouldn't be used to compare to people who don't have those other methods of income. Similarly Tesla has other adv…
"Lack of advertisement" should be "Lack of conventional advertisement"
Musk is strongly associated with Tesla in many people's minds and he's very capable of keeping himself in the public's focus. Then there's SpaceX which literally launched a Tesla into space. Umm, that launch was advertising. Even if it didn't come out of an "Advertising" budget line. Every manned SpaceX launch uses a Tesla vehicle to get the astronauts to the craft and, in the US at least, SpaceX is hot the past few years.
If Toyota or Ford had a space launch company you could be confident they'd tie their trucks into it, drag the Ford Shuttle S150 out with a fleet of F150s. Who needs conventional advertisement when that's your public image?
Then there's the fact that Tesla's vehicles are still unique in the market place with few direct competitors (though that's changing). There's no need to spend money advertising when you're the only company making status symbol electric vehicles that are (somewhat) affordable. A Honda Fit, not a status symbol even if it is more practical financially. Honda and Toyota's midsize sedans aren't differentiable, not really. They rely on branding and conventional advertising to make people prefer one to the other. All the other auto makers are in that same situation with most of their vehicles.
Re: TV Advertising Effectiveness and Profitability
#135Earlier quoted context omitted.
>Brand advertising, in contrast, works on a spread-out scale of years or decades...The actual effect that a brand advertisement has, is to add PENNIES (not dollars) to their sales every day, for the next 100 YEARS. It's a long-term investment. And for these reasons hard if not impossible to measure or control for confounders - but that doesn't mean it doesn't work!! Car brands are the obvious example of brand adverti…
And yet the most valuable car company in the world (for whatever that's worth) spends 0 on advertising and sells everything they can produce.
Toyota doesn't advertise?
Re: TV Advertising Effectiveness and Profitability
#136Earlier quoted context omitted.
If they can't get 80% back, that's pretty bad. I was wondering how these marginal net negative numbers worked. If they're saying it's 95% back, then that's still higher than 80%.
Think of this way: You have $2 profit. You can take it paying 0.4 in taxes, leaving 1.6 after taxes. OR You have $2, reinvest an extra $1 on marketing with 80% return. You now have 1.8 total profit. You pay 0.36 in taxes, leaving 1.46 You will always loose money if the marketing ROI is less than 100%
Can you elaborate your calculation more? Are you using $1 from the $2 profit to reinvest in advertising? Also are you getting an 80% return on that $1 meaning getting back $1.8? ($1 investment in advertising + $0.8 profit)
Re: TV Advertising Effectiveness and Profitability
#137Earlier quoted context omitted.
>Brand advertising, in contrast, works on a spread-out scale of years or decades...The actual effect that a brand advertisement has, is to add PENNIES (not dollars) to their sales every day, for the next 100 YEARS. It's a long-term investment. And for these reasons hard if not impossible to measure or control for confounders - but that doesn't mean it doesn't work!! Car brands are the obvious example of brand adverti…
And yet the most valuable car company in the world (for whatever that's worth) spends 0 on advertising and sells everything they can produce.
Based off the comments I guess this is tesla. Isn't this just based off of their inflated stock price. If someone was seriously considering buying the company they wouldn't make an offer based off the stock price?
Re: TV Advertising Effectiveness and Profitability
#138Earlier quoted context omitted.
And yet the most valuable car company in the world (for whatever that's worth) spends 0 on advertising and sells everything they can produce.
Toyota doesn't advertise?
I think you saw the "brand value" list rather then the valuation of the company list:
https://www.visualcapitalist.com/worlds-top-car-manufacturer...
Re: TV Advertising Effectiveness and Profitability
#139There is a fundamental misunderstanding (intentional or not) with these types of studies and claims. Limited-time promotions, e.g. a 10% off sale, work on short timescales that are easily measured. You can easily say what the ROI is of an advertised promotion, and it is often positive. (Side note, these promotions have a more-difficult-to-measure detrimental effect on your long-term profitability, closely related to…
> Source: Been on the leading edge of marketing and advertising for over 12 years Would you say that might be a source of bias? Look at SpaceX and Tesla. They barely advertise and have huge brand recognition. I'd buy Sennheiser over Beats. Krispy Kreme over Dunkin. Costco. My partner loves Zara. I don't have a high opinion of brands that advertise.
SpaceX and Tesla do viral marketing, and they are really good at it.
In a narrow sense, Tesla doesn't advertise: they don't buy ad spots on TV, but they certainly do it in other ways. I mean, SpaceX started because Elon Musk wanted to buy a Russian ICBM to put a small greenhouse on Mars as a publicity stunt, Russians said "WTF lol no", Elon Musk said "Ok, I will make my own rockets". I don't know if it is true but it certainly shows the lengths Elon Musk is ready to go when it comes to marketing.
And you say you'd buy Sennheiser over Beats, but you certainly know about Beats. Everyone knows about Beats. To give an idea of the power of Beats relentless advertising, audiophiles (Beats supposed enemies) make articles like "list of bass heavy headphones that are better and cheaper than Beats" (that are not that much cheaper). It may seem like they are attacking Beats, but instead, they have just set them as a reference. Bass heavy headphones = Beats. They talk smugly about how Beats prioritize form over function (Headphones that look cool = Beats). Guess what someone who wants bass heavy headphones that look cool will buy, even though they Beats is far from the only one offering such products?
You won't buy Beats, they don't care, you are not their target. If they want to capture your market, they will create or buy another brand, and use a different marketing strategy.
Re: TV Advertising Effectiveness and Profitability
#140Advertising is at its core a prisoner's dilemma. If every competitor in a certain space puts in $100 in advertising, they can all expect $0 in returns. However if a single company put in nothing they would be in a worse place because their competitors' returns would automatically become higher.
This only holds if advertising can't grow the market, which it absolutely can and does.
Well, if you broaden the scope, you're effectively fighting again other (completely unrelated) purchases and a person's wallet.