Tuesday, March 18, 2014

Fools. Greater and Lesser.

I warn you at the outset, this will get a little heady, so fasten your seatbelts.

There's an economic postulate called "The Greater Fool Theory" that does much, I think, to explain the world we live in in marketing and advertising.

The Greater Fool Theory states that the price of an object or of a service is not based on intrinsic value but instead on irrational beliefs and expectations of market participants. A price may be justified by a rational buyer due to the belief that someone else will be willing to pay an even higher price later.

In other words, I will pay X for, say, a signed shoelace from Miley Cyrus because someone else will pay X+5. There's no real worth, but there is a prospect of gain because someone is always willing to bid higher.

A corollary of the Greater Fool Theory, as I see it, is FOMO. Fear Of Missing Out. This is how bubbles get inflated. You know that Miley Cyrus' signed shoelace is crap, but everyone else is cashing in on celebrity ephemera so you have to jump in as well.

Advertising agencies used to create real brand value, and some still do. For instance, Wieden & Kennedy has probably added untold millions to Nike's bottom-line and P&G's through their work on these brands. Old Spice might well have died were it not for Wieden's brilliant work.

Likewise, Ogilvy's contribution to IBM's worth and UPS is notable, as was Chiat's work on Apple, and going far back DDB's on VW, Ammirati's on BMW, Ally's on FedEX and Scali's on Volvo.

What worries me is the massive amount of marketing expenditures that do not produce intrinsic value. Just a couple years ago we chased after Facebook "likes," regarding them as the secret sauce of marketing success. There's a new shiny marketing object seemingly every month. The one I've been hearing lately is that we have to send out paid posts on Facebook and Linked In because "everyone else is doing so."

The very definition of the Greater Fool Theory and FOMO.

I may well be excoriated for this, but as I have stated in this space before, I am a believer in Field Marshall Rommell's notion of concentration of force. Don't spread your marketing thin. Do what brings you the most good from the most people.

In other words, recognize that you can't do everything, you have neither the staff nor the marketing budget. So focus where you can make the biggest difference.

If we don't ignore the greater fool, we risk becoming one.

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