Business Tip re Advertising Discounts
Ogilvy and Mather had a unit called the Ogilvy Centre for Research in San Francisco. The director, Alex Biehl, was working on a project called PIMS. PIMS stood - I think - for Profit Impact of Marketing Strategies.
Over 200 firms took part, and the project was run in partnership with Professor Andrew Ehrenberg at the London Business School. (David Ogilvy always said Andrew had the best mind in marketing.)
One thing the project revealed was very simple, very important - yet seemed to be news to almost all marketers: Firms that spend more money on discounting than advertising are far less profitable than those that spend more on advertising than discounting.
The project divided the firms into four quartiles. Those in the top quartile spent the most on advertising and the least on discounting. Those in the bottom quartile did it the other way round.
The firms in the top quartile were on average twice as profitable as those in the bottom one.
Think about it. When you spend more on offering deals than explaining why people should want to buy your stuff, you are perilously close to saying, "Our stuff is not good enough to sell on its merits at full price."
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