Does Advertising Really Work?

With the recession forcing companies to rejigger their marketing budgets, mainstream media advertising must begin to support an ROI.The NY Times’ media blogger Virginia Heffernan weighs in on the industries that spend the biggest proportion of their revenue on advertising:

Spending the Greatest Percentage of Total Revenues on Advertising Over the Last 12 Months

Industries Advertising
4483 – Jewelry, Luggage, and Leather Goods Stores 3.75%
4531 – Florists 3.63%
4421 – Furniture Stores 3.55%
5312 – Offices of Real Estate Agents and Brokers 3.36%
6115 – Technical and Trade Schools 2.91%
7222 – Limited-Service Eating Places 2.88%
4481 – Clothing Stores 2.70%
6116 – Other Schools and Instruction 2.64%
5223 – Activities Related to Credit Intermediation 2.58%
4511 – Sporting Goods, Hobby and Musical Instrument Stores 2.47%
4422 – Home Furnishings Stores 2.36%
8122 – Death Care Services 2.35%
7139 – Other Amusement and Recreation Industries 2.34%

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Two types of products/services seem to stand out:

  • Big ticket retail – real estate (if you can call it retail), leather goods, furniture (I’m surprised cars aren’t on the list) – isn’t moving as much so it seems ad budgets remained fixed but revenues dropped.
  • Business opportunities due to recession – credit services, trade schools, fast food – increased their ad budgets

Conclusions:

  • Big ticket retail advertising was a defensive marketing expenditure – companies didn’t cut their ad budgets in anticipation of slow sales, and the ROI from the marginal cost of the ads were likely negligible.
  • Recession based businesses were offensive marketing opportunities which benefit from advertising because their message – “save your credit”, “get a better job” – hit on consumer fears.

Advertising does work well when the one-way message is to the consumer is emotional and urgent. With the recession next year, we’ll monitor the trend towards leveraging the social media as a cost-saving marketing strategy.

About Pat Kitano

Patrick Kitano works with brands in developing hyperlocal engagement solutions and is administrator of the Breaking News Network, a national hyperlocal network devoted to community service. He is the author of The Local Network on Street Fight, and is reachable via Twitter @pkitano and email pkitano@gmail.com.

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