Friday, December 05, 2014

Manufacturing and Distribution

At lunch a few years ago, a client of mine explained advertising to me this way.

“Advertising is simply manufacturing and distribution.  What I want to know is what is my manufacturing ROI and what is my distribution ROI.”

That stopped me. 

Most clients want to know what their “marketing ROI” is.  A client’s marketing ROI is usually based on sales.  Spend this much, sell that much. 

This client was breaking advertising down into two very distinct and different categories. 

Which got me wondering as to how one determines a “manufacturing ROI”.

Certainly, there is a manufacturing budget as most advertising budgets are made up of production dollars and media dollars.

What this guy was asking for was an ROI for production dollars spent.

My immediate answer was persuasion.  You spend production dollars to help persuade the viewer that your product is better and worth purchasing.

But my client wasn’t satisfied.  “Too amorphous, “ he said.  “What first has to happen for persuasion to occur?”

I looked at him blankly.

“The spot needs to be watched,” he said.

Well, duh.

"And by watched, I don't mean an impression.  I mean, interest or involvement."  

His thinking was this:  If he spent $300,000 to have a :30 spot produced, he was paying $10,000 per second of production.  If all thirty seconds were consumed by the viewer, his ROI would be 100%.  If only 15 seconds were consumed by the viewer, his ROI would be 50%.

Whether the spot actually persuaded anyone or not wasn’t what he was after.   That would be indicated by sales.   What he was after was seconds consumed.  Because only if the spot involved the viewer, would persuasion have any chance in hell of occurring.

And then he threw in the kicker.  “What if we paid you based on that type of ROI?  The greater the viewer's return on involvement, interest, whatever you want to call it, the more money you will make for creating it.”

As this was a few years back, measuring view duration wasn’t something that was possible. 

Today, it is.

My client wasn’t wrong then.

He’s not wrong now.

Manufacturing and distribution have two very different and immediate (and measurable) objectives.  Two very different ROI’s.

And yet, the advertising geniuses continues to ignore this fact.

Perhaps they should have lunch with my client.

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