An idea persists in fashion, automobiles, and advertising that the more you spend, the better the result. We can’t speak for Rodeo Drive or Mercedes, but there are plenty of examples where companies have spent themselves into bankruptcy advertising their product. Add fledgling digital streaming service Quibi to the list.
In case you missed it, founders Jeffrey Katzenberg and Meg Whitman announced Quibi’s demise on October 21, 2020, after just a six-month run. (By the way, these founders are not novices: Katzenberg is a former Chairman of Disney and DreamWorks, while Whitman is a former President and CEO of eBay and HP, among others.) During Quibi’s brief six months, the start-up streamer spent more than $63 million across TV, digital, and print advertising, according to advertising sales analysts at MediaRadar. This level of ad buy made Quibi the fifth-largest advertiser in the video streaming category year-to-date, behind streaming heavyweights Amazon Prime Video, Disney+, Hulu and Peacock (in alphabetical order). Quibi was particularly active in February, even running a Super Bowl ad, and was a major purchaser of advertising between March and September.
Yet Quibi failed, and it isn’t alone. National e-commerce advertiser Casper Mattress recently disclosed that while it continues to generate strong sales revenues, it remains unprofitable. Why, with that kind of advertising budget, were Quibi and Casper Mattress unable to connect with their intended consumers and become profitable? Obviously, a successful marketing campaign requires more than throwing dollars at advertising media. A skilled marketing and advertising consultant can focus scarce advertising resources on achieving Return on Investment (“ROI”).
Huge initial advertising spends used to be a staple of marketing products sold only in retail. These campaigns required a massive cash outlay upfront, with the hope that customers would seek out the product and, eventually, lead the seller to profitability--at some point months or years later. With the tools now available to savvy marketing professionals, effective direct to consumer advertising (sometimes called “Direct Response Marketing” or “DRTV”) can and should bring a return on the initial spend very quickly. Indeed, Direct Response Marketing typically leads to ads paying for themselves. Companies entering a market or seeking to grow their market share can still allocate large advertising budgets but should only do so where every dollar spent on media results in multiple dollars in returning revenue. ROI is not only nice; it can make the difference between a company’s long, profitable life or quick, Quibi-like death.
At Harvest Growth, we are experts at generating ROI for our clients’ advertising budgets. We have been connecting products with consumers since 2006. Give us a call, and we’ll help your company avoid Quibi’s fate.