Advertising ROI - be careful what you wish for
I enjoyed this from Dave Trott on lateral thinking, but it shows the dangers of getting your sums wrong when you're trying to prove the effectiveness of advertising.
The post tells the story of how Play-Doh went from being a generic wallpaper-cleaning putty to a branded children's toy. It signs off (my emphasis):
In the years since, Play-Doh has sold over 2 BILLION cans. Even now, every year it sells 100 million cans in 75 countries. The original wallpaper-cleaning putty sold for 34 cents a can. Marketed as Play-Doh, the virtually identical product sells for $1.50 a can. That’s an extra $1.16 a can (a 300% increase) that can’t be attributed to anything but marketing and advertising
Yep. Except inflation, of course.
There's a good historical price inflation calculator here. Play-Doh went on sale under that name in 1956 - the latest possible date (and the most generous) to which we can assign the 34 cents price for the wallpaper putty.
If a can of wallpaper putty cost 34 cents in 1956, then we'd expect the equivalent product to cost around $2.70 today. If Play-Doh sells for $1.50 a can (actually a bit less, as three tubs cost $2.99 on Hasbro's website), then it's lost about 44% of its value.
That's not a surprise if you think about it. Wallpaper-cleaning putty was a much-needed household product, and Play-Doh is an inexpensive children's toy. Admittedly, you could be more optimistic about the value of Play-Doh if you added up all the sales of the product in the years since we all stopped needing wallpaper-cleaning putty. In that sense the brand has probably netted its makers millions - but then you'd have to compare that to sales of other children's modelling clay brands, and ideally make sure you were comparing like for like in terms of output, distribution, and other thrilling things like that.
Once you've done that, it's probably still worth a ton of money as a brand. But demonstrating that means proving it to non-believers (finance people, not ad-men), and that means getting your sums right.
# Alex Steer (25/09/2012)