Out of alignment
Recent research of more than $1 billion worth of advertising reveals that 47 percent of campaigns fail before a single dime is spent on media. This would suggest that the industry has improved little since the 1890s, when merchant John Wanamaker declared, “I know half of the money I spend on advertising is wasted; I just don't know what half.”
In our book, What Sticks, Rex Briggs and I explain the myriad reasons for advertising's continued ineffectiveness, but the one I believe is most problematic is the misaligned incentive system between agencies and marketers. From what I gather, the main incentive behind the current business relationship is winning awards. Consider: The commission and hourly fee structures of agencies incent volume of revenue. How do you ensure high volume? By winning new business. And awards play a big role in attracting and swaying potential clients. I'll go one step further: awards for “big idea” TV commercials are especially important, as evidenced by today's media allocation. It's a perfect system unless you value advertising effectiveness.