If "advertising is the tax you pay for a bad idea"....

1. The Innovation Deficit Tax:
Advertising
Want an easy way to know whether By G. Michael Maddock
your product or service qualifies as and Raphael Louis Vitón
sufficiently innovative to get people May 26, 2010
talking about it? Look no further
than your ad budget.
“Advertising is the tax you pay for a bad idea.” The flip side of this argument is that if you don’t have an
— Robert Stephens, founder, Geek Squad idea that really meets a need in a distinctive fashion, you
will need to pay more and more to get it noticed. People
Here’s a startling fact: For what equals a rounding error won’t do you the favor of passing on ideas that have little
in most big-brand ad budgets, companies could create a to no relevance to their lives. You will, in effect, be taxed
meaningful new product that would eliminate much of in media dollars for what you failed to spend in research
the required ad budget, thus saving themselves — while and development. We contend that the price of this tax
also earning — millions and millions of dollars. will increase as your relevancy deficit increases.
In our experience, many leaders nod their heads in
agreement when presented with this concept, then
Innovation Saves Marketing Money
continue feeding a system that advertises too much Why do we care about how much companies spend
and invents too little. on advertising? First, because we see a direct corollary
between true innovation and marketing expenses.
Answer this question: How many apps have you Truly innovative products typically require a smaller
purchased? Since some one billion apps were reportedly investment in marketing and advertising. Why? Because
downloaded worldwide in nine months, we’ll assume true innovation means a company has identified a:
that you’re like us and the number exceeds a few. How
many of those apps did you download because a friend 1. Significant need
told you about them or because you “heard” about
them online? Conversely, how many did you purchase 2. Product, service or business model that meets
because you saw an ad? Come to think of it, how many that need
ads for specific apps have you ever seen?
3. Means of communication that connects the two
Therein lies our point. Great ideas are increasingly
turning viral. We say increasingly because with the When you successfully meld these three variables, you
advent of techno-charged social media, people can tell don’t need to spend as much on marketing. As we said
each other about their favorite innovation in the blink earlier, good news now travels really fast. Case in point:
of an eye, with a click of a mouse. If something qualifies Have you noticed that the world knows about the next
as truly great, you likely will hear about it from your generation of iPads before Apple (AAPL) has made it
network, not from advertisements. available? This is similar to how the stock market reacts
to “word on the street,” rather than actual company
reports. People are sharing news that matters to them
with their powerful, growing networks.

2. The second reason we care is that advertising can A final thought: Around this time for the past six years,
be an unhealthy addiction that can often drive we’ve reported the results of an annual research study
organizations out of business. Rather than address about the impact of Super Bowl ads. Year after year
the true issue — undifferentiated products and we’ve shown that most of the ads have minimal impact,
services — companies spend to get the attention of despite millions in spending. This year we decided the
consumers, rather than invest in reinvention. This study wasn’t worth our time or yours.
results in shrinking margins and less differentiation
while costing more and more to get noticed. Ad We were right. Nobody on Madison Avenue is listening.
agencies often exacerbate this downward spiral by Again this year, the majority of the money went toward
insisting that more media dollars will solve the problem. ads for beer, diet soda and cars. In nearly every case,
Let’s face it: Telling people that they need to buy the ads trumpeted the benefits of products we already
insurance or else something bad will happen to them knew about, products that were imitations of something
is far less desirable than having customers call you already in the market, or the promise of some upcoming
to order your new product. When you find yourself innovation that would eventually, some day, blow us away.
pushing a product instead of responding to requests,
it often means your addiction has taken over. The production values were superb. The gags were great
and the budgets were freely spent. Now who wants to tell
Archimedes said: “Give me a lever long enough and I their friends about the new products? (Insert sound of
shall move the world.” We ask you to think of innovation crickets here.)
as your lever. The bigger the need you are filling, the
G. Michael Maddock is chief executive, and Raphael
more novel the solution you create, and the more
Louis Vitón is president of Maddock Douglas, an
appropriate the communication, the longer your lever innovation consultancy that helps clients invent,
becomes. The longer the lever, the less weight — the brand and launch new products, services and business
less advertising — you need to move the world. models. Maddock is author of the upcoming book
Brand New: Solving the Innovation Paradox —
No Innovation? Save Your Ad Money How Great Brands Invent and Launch New Products,
Services and Business Models (Wiley, April 2011).
We started this article by saying that for a fraction of
their ad budgets, most companies could create innova-
tions that would then cut those budgets dramatically.
It is absolutely true. And the solution is pretty simple:
Don’t advertise until you have invested enough to create
a product, service or business model innovative enough
to go viral. If you don’t have anything innovative and
don’t care to invest to create it, then for God’s sake, stop
advertising. At least your business will last longer. Mike Maddock, CEO
mike@maddockdouglas.com
In the social media age, we encourage you to ask the 630.563.6415
question: “Why do they need to advertise so much?” We
also suggest you reexamine your marketing budget to see
if you’re spending so much money because your product,
service or business model lacks innovative qualities.