Business without advertising.  Is that a thing?

no-ad

The grandaddy of not advertising

Ok.  Quick exercise.  Take a second to think about a brand that you think delivers a truly exceptional product or service.  Got it?  Now – when was the last time you saw an advertisement for that company?

Although a dated statistic, according to Gartner, U.S. companies spent an average of 10.4% of their 2012 revenues on advertising.  Some companies are defined more by their advertising than by their actual product.  Try to think about Geico and not picture a gecko or caveman.  Or Dos Equis and the most interesting man in the world.  And there are certainly some industries that tend to spend more on advertising that others.  AdAge’s 25 top advertisers from 2015 are dominated by cellular service providers, automobile companies, and retailers.

Still, while advertising is big business (nearing $200 billion total in the U.S.), some brands thrive in the complete absence of advertising.  What kind of patterns do we see in these companies, and what can we learn from them?

Lesson #1: Offer a unique product

One way to avoid having to convince people to buy your product?  Offer something they just can’t get anywhere else.  Elon Musk’s Tesla is a prime example of this.  While this is likely to change in the near future, if you want the experience of an electric car without making any sacrifices (except for ones related to your wallet), you have to purchase a Tesla.  Sure, having a charismatic founder certainly helps, but by defining a new type of product, Tesla garnered enormous amounts of free media coverage.  And by offering a product that was not only new but also high quality, the customers came to Tesla – there was no need to go out and find them.

Finding other products that fit into this category is challenging.  Spanx could certainly qualify.  I’d also nominate Donald Trump, someone that understands the importance of defying expectations and benefitting from free media.  Regardless, it’s probably safe to say that providing something unique reduces the need to advertise.

Lesson #2: Do it better than anyone else

But creating a completely new product or service is hard work!  Sometimes, it’s enough offer something more traditional, but deliver it better than anyone else.  Costco exemplifies this. While consumers have any number of discount retail options, Costco strives to be the absolute best, by providing a consistent customer experience, friendly customer service (no doubt aided by Costco’s emphasis on providing living wages to employees), and, of course, low prices.  Put together, Costco can rely upon customer word-of-mouth to recruit new business.  Because of the low switching costs associated with choosing a retailer (although Costco increases these costs through membership fees), developing a devoted customer base is particularly important for companies like Costco.   Thus, the practices that obviate their need for marketing also serve to promote loyalty.  Smart, Costco.  Zara is another company that fits this model.

Lesson #3: Be a cult classic

sriracha-costume

Note: if your product has turned into a non-ironic costume, you’re probably doing it right

The last group of ad-free success stories is a little harder to explain.  What defines these companies seems to be their development of cult-like devotees, even if it’s not clear that their product or service is demonstrably superior to competitors.  Take Sriracha.  Is it a tasty hot sauce?  Yes.  Do I personally put it on my eggs almost every morning?  Yes.  Is it really that much better than other spicy condiments?  I’m not so sure.  For Sriracha, while it’s certainly a quality product, it’s success really seems to be best attributed to a certain je ne sais quoi.  Maybe the hipster authenticity associated with a product branded with foreign characters and the simple graphic design of the iconic rooster logo just clicked with the cultural milieu.  Or, they just got lucky!

Other examples might include Lululemon, Krispy Kreme and Kiehls’.  Some of these products certainly display the traits discussed above – no, I don’t know another chain that has glazed, jelly-filled donuts and yes, Kiehls’ manages to deliver a great in-store experience, partially through the liberal use of samples.  Still, the message here is that while you need to start with a product or service that could stand on its own, happening into a cult following likely depends on some luck.

What this means for other companies

The trends pointed out above are not ground-breaking.  In essence, these cases reiterate the importance of differentiation in seeking competitive advantage.  Not advertising should not be the goal – instead, looking at companies that can thrive without a need to advertise may be a shortcut to finding companies that have figured out how to differentiate themselves and provide unique value to their customers.  It’s an indicator of a company that’s doing something right – a hint to others to perk up and take notice.

dosequis

Great commercial. Not sure about the beer.

Let’s finish with another exercise.  This time, think of a company that advertises really heavily.  Got it?  Now, do you think of that company of offering a truly exceptional product?  If Geico was so much cheaper or if Dos Equis was that much better a beer, would these companies need to invest so heavily in advertising?   Maybe not!  So, while advertising is obviously a critical way to reach new customers and introduce new products, if advertising defines your company, it might be time to think about how you can make the product speak for itself.

Sources

http://www.gartner.com/technology/research/digital-marketing/digital-marketing-spend-report.jsp

http://adage.com/article/news/meet-america-s-25-biggest-advertisers/242969/

http://www.huffingtonpost.com/2013/08/26/companies-dont-use-advertising_n_3768504.html

http://abcnews.go.com/Business/story?id=87805&page=1

Advertisements
This entry was posted in Uncategorized. Bookmark the permalink.

Leave a Comment/Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s