Marketing Creates Value

Near the end of the classic movie “It’s a Wonderful Life,” George Bailey saw reality in a whole new light. He glimpsed a world in which he was never born and realized just how important he was to those around him. This experience instantly and dramatically changed George’s outlook on life. In a matter of minutes, he transitioned from attempted suicide to pure joy at the fact of his own existence. No material facts changed. George Bailey was still stuck in Bedford Falls. He was still hard of hearing. He was still in deep legal and financial trouble. The angelic Clarence did nothing to improve the external condition of Mr. Bailey’s life, but he saved it nonetheless. He saved it with marketing.

Marketing is often criticized as being deceptive, slimy or at least economically wasteful. How could anyone justify a $2 million dollar Super Bowl ad about a bottle of Coke? Skepticism of marketing springs from an overly narrow and simplistic view of value. In the real world, the line between the real and perceived characteristics of an economic good is all but nonexistent. Our knowledge of and beliefs about goods are just as much a part of their value as anything that can be weighed or measured.

Economists have long understood that value (in the economic sense) is subjective. There is no universal formula to determine how much a good or service or experience is worth, because each person has different tastes, preferences and needs, and each will value things differently with changing circumstances. This means that how we feel about a good and what the good is made of are equally important in determining its value to us—i.e. how much satisfaction it brings. If making a better mousetrap can make lives better, so too can making people feel more confident in their mousetrap. This is not trickery; it’s value creation. Confidence in my mouse trap might help me sleep better at night and enhance my quality of life in a very real way.

We’ve all seen news stories about blind taste tests. They are meant to reveal consumer stupidity and branding smoke and mirrors. I recall reading about customers given a cheap beer and told it was a more expensive brand. They reported that it tasted much better than what they were told was the cheap beer, but was in reality the more costly. When they were told the opposite, the results reversed.

The report was framed as some kind of “gotcha” moment, as if a great hoax had been revealed. Why should these results be surprising? If you’ve ever picked up a glass of milk, thinking it was water, and taken a swig, you’ll understand. Even if you like milk you are likely to spit it out. Your beliefs about what you are consuming prepare your brain and your taste buds for a certain experience. The knowledge you have about what you ingest literally changes the experience of consumption. Try smoking a good cigar while stressed or in a hurry and see if it tastes even remotely similar to the same cigar when you have an hour to kill with nothing on the mind.

They say marketing is all about the sizzle, not so much about the steak. Why shouldn’t it be? Steak without sizzle is little more than raw meat; carrion fit for vultures and wild dogs. Steak beautifully plated and garnished creates more value for the person consuming it. Sight, sound, smell and taste are all part of the experience, and the brain is the crucial interface. Even if you have a purely utilitarian approach to eating and care only for the sustenance, you can’t ignore the mind. What you believe about your food actually affects how much it satisfies you.

My father suffered a closed head injury many years ago which affected, among other things, the communication channel between his brain and his digestive system. His brain always tells him he is hungry, no matter how much he eats. It is a near full-time job to convince him that he is full and doesn’t need any more food—that’s some serious marketing. In fact a great many people without head injuries resort to all kinds of tricks and techniques to convince themselves of the same thing in order to stay trim.

I recall talking to a friend who had no taste for coffee. I convinced her to try a sip only after closing her eyes and letting me describe step-by-step the growth, cultivation, harvesting and roasting process. She admitted that, while she still didn’t love it, she began to enjoy the taste a good bit more and understood why I love it so much. I know of people who can no longer stand the taste of meat because they observed the operations of a meat-packing factory. The meat did not change, yet its taste changed with their knowledge and feelings about it. The value of the product radically shifted with a change in perception.

If marketing makes us love a product more, and therefore makes us happier, it has indeed created value. Love for a new car comes not only because it is red, weighs 2,500 pounds and has four doors—all things that can be measured objectively—but also because it is safe, one-of-a kind, and edgy, all subjective to the person experiencing it. The purely informational role of an advertisement is no more valuable than its ability to make us proud of what we purchase. But how valuable is it?

We can get a rough idea of the minimum value created by marketing in dollars and cents. This does not, of course, measure the subjective value to each consumer, but it reveals how much value consumers placed on the marketing in money terms. If a marketing campaign costs $10 million and it results in an additional $11 million of revenue, we know that it has created more than $1 million in value, as judged by those who willingly spent money on the product. If the campaign made the product more valuable to more people and induced them to buy more or buy at a higher price, that is a reflection of the fact that the consumers felt the product and associated satisfaction created by marketing was worth more than the money they gave up to get it. Real value was created. If it was not, people would not have willingly parted with their money in exchange for the good. Better marketing can often be a cheaper and more effective way of improving a good and making people happier than altering the product itself.

Goods and the knowledge and feelings that come with them cannot be separated. New tile floors and soft lighting may be just as important as variety and good service at a clothing store. An inspiring ad campaign may bring just as much happiness as new features on a smartphone. This is no scandal, but a fact of the human experience of reality.

Rather than denigrate it as some kind of fraud or waste, we should applaud good marketing. Not only does it enhance the value of the products we buy, it enhances our quality of life even when we don’t buy the products being marketed. TV ads are often funny and entertaining. Billboards and magazine ads are sometimes works of art. Good marketing is a free gift to all, and it makes all our lives better. A world without marketing would be dull and far less fulfilling.

Altering our perceptions of reality is one of the best ways of improving our quality of life. It’s powerful stuff. Clarence saved George Bailey’s life with a recasting of the facts, and set him out with a full heart ready to take on the world. The creative efforts of marketers everywhere have the same power to make our lives richer and better.

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