Things cost 25% more than they should
April 14, 2003 - 11:06am — trevorj
This from a Booze, Allen & Hamilton report...
Advertising and media, trade promotion, and consumer promotion spending now account for as much as 20 to 25 percent of sales among consumer packaged-goods companies in the United States, up from 15 percent in 1978. Trade spending today is the second-largest item on the profit and loss statement for most of these companies (following cost of goods sold).
I loathe advertising, and try very hard to ignore it. Find it frustrating that nonetheless, it is inflating the costs of the products I buy...by up to 25%. Yowch!
Postings and comments are owned by their authors. What Boris says here doesn't necessarily apply anywhere else. You can subscribe by email if RSS isn't your bag, baby.
Comments
Unfortunately...
Having done some marketing and PR activities (including adverts, promos & trade-shows): they are quite effective in generating awareness, interest and sales for your offerings.
Some products like couture, fashion, cosmetics, tobacco, spirits, pharmaceuticals, beverages and a/v-cables have traditionally had high marketing cost components.
The largest advertisers in the world by far, however, are the auto manufacturers.
Also, recently I sold my house in Ottawa. The agent understood the market and target-marketed it intelligently, he got my price for me in ten days.
Result of commoditization and globalization
I would say that commoditization and "globalization" (in quotations marks to represent the part of that word that I consider bad -- pollution and lax labour laws being taken advantage of across the globe) have lots to do with this -- companies are all gravitating to cheap labour and cheap resources, so marketing is the only thing that sets them apart.
I would love to see more focus on the ethical and environmental practices of these companies used as a "marketing tool". I spent some time this weekend talking with someone who specializes in a three-tiered bottom line -- here's the blurb direct from Real Living Solutions:
Some industries: $10K for 1 customer
That's a statistic I heard once too - $10,000 per customer to win them over. Look at Coke & Pepsi - a combined advertising budget of $1 billion per year, or more, for the sugar water industry, knowing that they rarely change, they're just marketing to young kids to bring them into the market.
Not only do I glaze over in miliseconds once my brain recognizes advortising, but generally I tend away from brand-name items, opting for no-name or house-brand, particularly with grocery stores, clothes, and more. I remember laughing when I started seeing the newest trend my friends were into - Tommy Hilfiger. To me they looked like they were walking around with the cotton equivalent of those dudes that get paid to hang out at a street corner and advertise some local Italian restaurant with a board on the front and a board on the back.