If we never advertised, we’d never sell anything. Right?
Perhaps right, but there are three major types of advertising, some requiring large outlays of cash, some not.
First, you can advertise your brand so that people recognize it when they see it in later materials. Second, you can make a call to action, using an ad to bring people to your place of offer, buy your services or product, or take advantage of a special incentive. And third,
you can invest in direct response advertising. Here you make a pitch with a price attached and ask the target to respond immediately to take advantage of the offer.
There is a vast difference in the way we can measure the results of our advertising. For example, direct response ads yield precise statistics, and the pay–off is easily measurable. Yes, you might have made a more attractive offer with better results; but you can test direct response ads with various offers and price points to determine that optimum level.
[Email readers, continue here…] With a call to action ad, you have a more complex measurement problem, since people can come to an event or buy the merchandise by finding out through any of several sources other than the specific ad.
And with brand (or lifestyle) advertising, there is no way to directly measure success. It is this kind of ad which must have prompted John Wanamaker to state, “Half the money I spend on advertising is wasted; the trouble is I don’t know which half.”
We angel and venture investors look to build brand and enterprise value, sometimes at the direct expense of profitability or even revenue. A good manager of a business should work to create value the old fashioned way, by working IN the business, not ON the business (as investors are prone to do.)
You should not succumb to the investor’s prodding unless there is plenty of money in the bank and an agreed upon time to seek a sale. Advertise to build the business’s revenue and profits whenever possible.