Saturation Point

A recent article from Strategy-Business really caught my eye. The article, entitled The Advertising Saturation Point, discusses the fact that advertisers waste their money without knowing what is working and what isn’t. As John Wanamaker once said ‘Half the money I spend on advertising is wasted. The trouble is, I do not know which half.’

Each product on the market must have a point at which its advertising spend saturates and money becomes wasted. This happens when additional advertising spend no longer produces enough sales to justify the cost. Therefore the best ad budgets place just enough ads to reach saturation point and then stop.

The trouble is knowing when you’ve reached saturation point and then halting spending.

Evan Hirsh and Mark Schweizer argue that it is possible to calculate advertising saturation points for most consumer products. They believe that to make the calculations questions like these need to be answered: How risky is it for the consumer to try the product? How much margin does the manufacturer make for each incremental unit sold? How easy is it to lure customers from a competitor? How much influence does advertising have for this category compared with others? If modeled against the sales and advertising spend data the saturation point can be calculated.

A pretty dry subject, but think of the kudos you’ll receive if you can prove that you haven’t yet met the saturation point and that your advertising really does work?