The Advertising Indsutry’s Dirty Little Secret

dirty advertising secret

When is the last time you saw an advert promoting an advertising agency?

First, a brief pop-quiz: How many of these logos do you recognize?

I can reveal that they are all advertising agencies. If you are like most people, you couldn’t recognize any of them. BBDO and McCann might ring a bell because you watched Madmen. But I bet that is it.

Do you remember the last time you saw an advertisement promoting an advertising agency? Probably not, because advertising agencies doesn't spend a lot of resources when it comes to promoting themselves. 

That seems odd, doesn't it? Shouldn’t the agencies be eating their own medicine?

When you ask an advertising agency executive why they are not running ads for their own company, you will most likely get one of the following answers:

We are a business-to-business (B2B) company, so advertising doesn’t make sense to us

But keep in mind, the same agencies will not advice a big B2B company like e.g. Mærsk Shipping to skip the advertising budget. On the contrary, they will more likely advice Mærsk to increase their spending for branding.

It is an industry standard not to advertise

A classic consultant answer. Well, even it is an industry standard not to advertise, shouldn’t a creative agency not be able to get around that with the very work they offer their clients?

We do advertise!

But only in very niche publications. Then they will point to one famous ad in the New York Times by the legendary advertising grandmaster Ogilvy.

We rely on word-of-mouth

That is mostly their own mouth, which consist of cold-calling, direct mail, network groups, events and public relations. Or they flaunt whatever trophy they just won at Cannes Lion.

So advertising doesn't work? Oh, it works ... just not the way you think.

I have to be careful, because my point is not that advertising doesn’t work - it most certainly does work ... just not for all companies, as many agencies will have you believe.

Coca-Cola is one of the biggest advertisers today, and most likely wouldn’t be here today if it weren’t for the effect on advertising. But that doesn't mean that IBM can take Coca-Cola's advertising tactic and apply it to business computing. IBM closes B2B sales in million-dollar range, and for that kind of decision it is hard for an ad to stand alone.

Advertising works really well when it comes to fast moving consumer goods (FMCG) and standard consumer goods. In buying decisions that requires very little mental activity to reach a conclusion, advertising can help differentiate your product subconsciously and nudge the buyer in your direction. If you sell cookies, speakers and even cars, advertising can be a very effective tactic (not the only one mind you).

For B2B enterprise product however, advertising is highly overrated. That is why advertising agencies doesn’t advertise for themselves - it is ineffective in those kind of sales processes. It is fundamentally a bad investment for those kind of companies. They just forget to tell their B2B clients that, and manage to sell advertising as the end-all-be-all to all product distribution strategies.

Peter Thiel, one of the co-founders of PayPal and the author of Zero to One very accurately described the most effective distribution strategies for different kinds of companies:

distribution model

 


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