The cost of bad advertising

One of the most well-known quotes within the advertising world is:

Half the money I spend on advertising is wasted; the trouble is I don’t know which half.

by John Wanamaker.

The exact share that is wasted is something that has been very hard to estimate for sure but we now have better possibilities to reliably measure the effects of all advertising, thanks to all the digital ad-formats we now have.

The possibilities are also constantly improving. But, I still think that one important aspect to take into consideration in all advertising is not only how many are reacting positively to the ads, but also how many are reacting negatively. There is a cost for bad advertising.

One of the best and most obvious examples of this is spam. The rationale behind spam is that through enormous amounts of e-mails sent out, and extremely low costs to send them, you can still be profitable. Some people will always click and buy. Unserious and extremely short-sighted companies can maybe afford not to think about all the potential customers that are repelled by this, but every serious business has to be more careful than that.

An interesting model to copy to start thinking more seriously about this, and use it in day to day business could be Net Promoter Score (NPS) by Fred Reichheld.

In short, the NPS works like this:

A net promoter score (NPS) is the result of a customer satisfaction survey in which customers are asked only one so-called “Ultimate” question: How likely are you to recommend Company or Product X to a friend or colleague?

Responses to the “ultimate question” above are solicited on a 0 – 10 scale, with 0 meaning the least likely to recommend and 10 meaning the most likely to recommend. The 0 – 10 scale is required for proper NPS calculation. Responses are then coded as follows:

• Customers rating 9-10 are called promoters.
• Customers rating 7-8 are called neutral.
• Customer rating 0-6 are called detractors.

The difference between the percentage of a company’s promoters and detractors is the Net Promoter Score (NPS).

I imagine advertisers creating a score where the same kind of calculation is made, but where the perception of the ads is the starting point. Then you also take the people who perceive your ads in a negative way into account.

Sure, there are probably occasions when advertisers want to create some kind of debate, or some extra buzz, and then it is pretty common to do it by creating something that might upset one or more groups. Something slightly controversial is created. But, there are also many examples of ads and formats that doesn’t intend to do that and where the cost of bad advertising has to be taken into account.

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This is translated from my previous blog in swedish.