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July 13, 2015
How Can We Quantify Prevention?
 

Our business environment, generally speaking, is reactionary. A player makes a move in the environment, and another player or group of players reacts. Based on the reaction, there are a number of observations we are able to make. Speculation could be defined as the predetermined reaction of a player or group of players. For example, if market analysts think that oil production will decrease (future player move), then the reaction would be to charge higher prices per barrel in the futures market.

Or, in the advertising industry, if we think that a new product is about to come in to shake things up, we may institute incentives for a loyalty program or host something a little before the announcement date of the new product.

The nice thing about reactionary strategies is that they are easily quantifiable.

We saw something.

We reacted.

We can look at results.

But what about prevention?

Let's tell a story. Imagine Brand A has been with Agency A for years. Recently the sales have been going down, so Agency A proposes a new marketing campaign to freshen it up and reawaken their target market. Brand A likes it and gives the go-ahead. The campaign happens, and sales go up — let's say 2% — but reach a plateau. 

Brand A fires Agency A. Shortly after, Brand A hires Agency B to do a new marketing campaign that focuses on their target audience.

Brand A's sales plummet. Brand A fires Agency B and brings marketing activities in-house, claiming that agencies aren't sure how to implement their strategies.

Unfortunately, this scenario has happened in real form many times. Should Agency A have been fired in the first place? Couldn't there have been a time period of prevention — in this case, the prevention of lost sales — in which Agency A could have made an argument?

We are hoping that you, as smart marketing professionals, would at least hear Agency A speak its piece.

The business environment moves quickly and it demands results when it feels like it’s time for them. Advertising and consumer perception, however, are having trouble adjusting to the speed.

Can advertising professionals show what brands could have lost if they didn't employ a particular strategy? Or is AdLand doomed to be reactionary like the rest of Corporate America?

The answer is murky at best. AdLand could use customer lifetime value (CLV) and the theory of reasoned action (TRA) to determine if, given the right stimuli, the customer would continue to buy the product after they are "officially" done with buying that type of product. If the advertising prolongs the CLV, then it prevented a loss in sales.

There are more tricky economic formulas with which we could predict prevention (or losses due to lower switching costs), and we could go into that if our reading public demands.

But for now, it is just a question to think about.


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Dwayne W. Waite Jr. is partner and principal at JDW: The Charlotte Agency, a marketing and advertising shop in Charlotte, NC. He enjoys consumer behavior, economics, and football.
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