The Advertising Saturation Point

For every automobile, and maybe every product, there’s a threshold beyond which your ad budget is wasted.
That’s the premise of this startlingly clear analysis from Evan Hirsh and Mark Schweizer from Booz Allen Hamilton’s Cleveland office. They ask:
“…What if there was an optimal level of advertising spend for any given product — beyond which the money was completely wasted?”
And explain:
“Economists often speak of “price elasticity”: When prices rise or fall, consumers respond by changing their purchase strategies. That is why price increases do not automatically lead to equivalent rises in revenues. The same kind of elasticity exists with advertising. For any given brand in any given market, there is a saturation point for advertising spend. Up to that point, increases in the ad budget will generate results; but once the market for a product or service is saturated, no matter how much a company spends on advertising, it will not produce enough added sales to justify the cost. The best possible budget places just enough ads to reach the saturation point, and not a dollar’s worth of advertising more. Companies that follow this principle will optimize their overall profitability because they will spend on advertising only what they can recoup in revenues.”
An important wake up call for marketing and advertising strategists everywhere. Download here >>

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