Feb 24, 2021 Advertising Agencies that First Offer Advanced Marketing Analytics Have the Highest ROR
In my last post I described what advanced marketing analytics is and how it improves marketing effectiveness – getting the most bang for the advertising buck. In this post, I am going to explain why Advertising Agencies who ramp up their marketing analytics offerings will have the highest rate of return on their investment.
If you will permit me, I shall put on my economist’s hat and describe what I have observed in terms of speed to market for new products and services and the correlation to rate of return on the investment needed to bring that new product to market.
Let us divide the market into four quartiles based on the entry of the new product to the marketplace. The first quartile represents the first 25% of companies who introduce a comparable new product. The second quartile represents the next 25% of companies and so on. The first quartile are the innovators. They develop the new product or service first, they charge the highest prices. They develop their own expertise with their experience. They invest some of the profits to continue to improve their product and introduce new variants. They develop economies of scale and develop efficiencies in the provision of the service driving down the cost of offering the product or service. They create long term competitive advantage over their competitors. As time goes on, more competitors create competing products and the market fragments. As this occurs, the prices companies can charge start to fall. Due to the efficiencies that the early innovators have created, they continue to make solid profits, even when prices fall.
As it turns out, the second quartile of companies makes a good return also but considerably less than the first quartile innovators. The third quartile of companies only make a very modest return. And finally, the last quartile has to spend more money to offer the product than they will ever make in return. They must create a competitive product just to keep themselves in the game. They have a negative rate of return.
This classic story is currently playing out in advertising as advertising agencies begin to get serious about offering advanced marketing analytics to their customers. While it can be costly and time consuming to improve their marketing analytics offerings, there is gold in doing so first.
So, if your advertising agency needs some help in improving their marketing analytics offerings, Apollo can help. Be an innovator!
Bryan B Mason
Apollo Consulting Group, Providence, RI