Why Advertising Does Not Work

Flicking through the TV channels last night, I heard a rather interesting theory which went on to explain that advertising may not actually work.


I forget exactly how the explanation of that theory goes (think it's called Game Theory, created by John von Neumann and Oskar Morgenstern in 1944), but I do know how it was applied to advertising. The theory goes; if two companies were advertising at the same time (which a lot of windows companies are), spending roughly the same amount of money (which will be relevant as most go on ITV from our sector), any advantage gained from that advertising will cancel each other's out. If that company had never advertised in the first place, the market would remain unchanged - no worse off, and that company would have saved all that extra cash, and their business would be in roughly the same place anyway.


Most businesses probably haven't considered this theory. The thinking of business has always been that advertising has been beneficial. During the recession businesses were urged to increase advertising to boost revenues and exposure. But very few would have considered that if other businesses in their sector advertised at the same time, the effect of their advertising campaign would have been nullified - therefore a waste of time and money.


From previous experience, advertising hasn't always been beneficial. Yes it increases exposure, but if the economic conditions aren't right and people are not in the mood to spend, it's doesn't matter how many times you tell them these deals will end at the end of the week, people just won't spend. No matter how effective you think your ad campaign is. 


Perhaps it's a theory worth considering now. Times are hard and set to get harder. Maybe it's high time we took a long, hard, critical look at advertising and work out whether it really is one of the necessary tools that businesses need to use to boost revenues.