By Kevin Meyer
When Bill makes a point it usually makes the rest of us a bit hypersensitive to similar situations. And so it was with his two posts on the silliness of advertising. Ford spending $3.9 billion on advertising, more than they spent on direct labor? And since ROI on advertising is difficult to quantify it gets a pass while every penny of direct labor or direct manufacturing "cost" is scrutinized. Crazy.
So now we're all on the lookout for analogous examples of value justification screwiness, and this morning's Wall Street Journal smacked us in the face with one.
The big-name rock concert is an annual rite at otherwise geeky tech conferences. Oracle has featured Elton John and Billy Joel in past years. SAP has booked Bon Jovi and Eric Clapton. Microsoft Corp. hired Dave Matthews last year.
Seriously? And guess how much these gigs cost.
Producers and planners say a top band costs a company $500,000 to $1.5 million, before production costs. "It's like a barometer of their health," says Steve Einzig, CEO of BookingEntertainment.com, which brokers private shows by famous acts. "If they don't bring in acts as big as the year before it might hint that they're having trouble."
Now sure, these aren't manufacturing companies, but that doesn't really matter. They are still in the business of creating value for their customers. Supposedly.
It gets even better… sometimes they can't even get those bands to mention their brand.
Rockers help fire up customers, but tech companies would really like their hired musicians to lavish a little praise on their brand names, too. Sometimes it works: On one blurry YouTube clip making the rounds, pop star Christina Aguilera bellows "Mi-cro-soft!" at an event for the company's top salespeople.
But most stars decline to plug their tech benefactors and bands usually insist on control over how visible a corporate logo can be—the smaller the better—and how the event is described on a company's website, planners say.
Fire up customers? Oh you mean the relative handful of folks that actually go to these customer conferences? Let's not pretend that the money spent on these bands actually benefits more than a fraction of the customer base… unlesss the company is really in it deep.
Paying the piper for bands, over-the-top trade show booths, glitzy advertising – it's really the same thing. A rebate or discount from the price to the true value of the product. If the value is there, customers will pay. If it's not, and you insist on pricing the product higher, then you need to throw money at customers to make up the difference. Informing customers of the value of your product is real selling. Bribing them isn't.