Offline Advertising - Familiarity

29 Sep 2018 Tweet advertising · old-school

I read a few excellent (albeit old) articles on advertising recently. A few of them were on The Doc Searls Weblog. My main take away from these articles was that offline advertising is not ineffective because an ad run on TV is seen by all sorts of people and is targeted at a cross section of the population; In fact, it is very effective because of that very property.

I recently made a cross-country move (more on this in a later post). I wanted to select a phone contract in the new country. There were several companies and it was all very confusing. I had two references: a contract that my company’s HR people recommended and companies that I had heard of before (particularly, SoftBank and Docomo). I had heard of these companies not because I had used them before. I had heard of them through old-school advertising!

We all know the names of a lot of companies whose products we have never used. That doesn’t mean that the money the companies spent on getting us to know their names was wasted, OH NO! It only means that the return is more long term than that.

In terms of signaling theory in economics (for which Michael Spence won a Nobel prize), “the firm signals the quality of its product to consumers by its willingness to spend money on advertising.” (N. Gregory Mankiw: Principles of Economics, p. 401.)

– from Rethinking John Wanamaker (I highly recommend this article)

Now, when I walk into the huge super market aisle of moisturizers in a foreign country, I will see a lot of brands on the shelf. But the moment I see Pantene or Nivea, my brain will make a quick connection and this familiarity will make it very likely that I buy their products. All this pretty unscientific and anecdotal; but I am fairly confident that this is how all of us work.

I have never used Pantene’s soaps or Nivea’s creams before, but I have seen their ads on TV, I have seen big celebrities appear in their ads, so I know that Pantene spends a whole lot of money on their ads. They probably believe that their product is genuinely good, or why else would they do that? They could just get a Google AdWords account and try targetting people whose last search on Amazon was “moisturizer”.