This is the ninth in a series of one-minute videos that address one of the many complex challenges facing marketing, media and advertising today. The Golden Minute series attempts to prove Albert Einstein right when he said, “The definition of genius is taking the complex and making it simple”. But he also said, “Everything should be made as simple as possible, but not simpler”. So we will leave it for you to judge. Please let us know here if there is a topic you would like us to cover in a Golden Minute. Here we look to the recurring, but as you will see, flawed concept of working and non-working advertising spend.
As an industry, we love our terms. Usually, they are TLA (Three-Letter Acronyms) like ATL, BTL, and TTL. Or RFP, RFT and RFIs. Marketing technology and digital buzzwords are making this even crazier.
But there is a concept that has recently made a prominent return to the industry, yet it is totally outdated and no longer relevant. That is Working and Non-Working Spending.
The sudden resurgence is due to a combination of management consultants who are pushing Zero-Based Budgeting, not so much to drive marketing performance and return on investment as as a marketing investment framework to reduce marketing investment and, therefore, budget.
The second source is the increased investment activity in traditional consumer package goods brand companies by private equity and venture capital. They use the term to inform the market that they have magically discovered the investment strategy to turn these entities’ flagging performance around by simply reducing non-working spending and improving the working-to-non-working ratio.
In fact, as I write this, it seems so self-evident that you wonder why the schmucks that owned the business before these clever investors bought it had not done this already.
Why would you not reduce non-working spending? After all, if it is non-working, why are you spending anything on it anyway?
What is Working and Non-Working Spend?
That is until you understand what working and non-working spend actually represents. Working spend is traditionally considered to be a media-related expenditure. It is the cost of the media that places the message in the sight of the potential customer and hopefully persuades them to take action, such as buying the advertiser’s product or service. Clear?
So, what is non-working, you ask? It is all the other costs associated with this process. This includes the agency fees, the production fees, and the costs of producing the content that runs in the media advertising.
The working to non-working ratio for a long time was considered 10%, being that for every dollar you spent on the media, the other costs associated with that spend should be no more than ten cents.
Then came the internet, websites, e-commerce, social media, mobile, and more. To make this easier, let’s think about all of these opportunities in the three areas of paid media (media you pay for and thus would be considered working). Then there is owned media (this is all of the media assets you own, including websites and content that you have created or bought, but this is considered non-working). Then there is earned media (all of the consumer-generated media, which could be consumer-generated content, social sharing and the like, which is also considered non-working).
So you can see that, like Above the Line and Below the Line, Working and Non-Working expenditures have been significantly disrupted in their meaning by the internet and digital marketing.
Working and Non-Working in a Digital World
Take SEO, for instance (Another popular TLA, which means search engine optimization).
With Google and the other search engines generating millions of visits to websites every minute, there are marketing strategies to ensure your non-working owned media, being your website, is optimised to ensure you get an unfair share of those visits because the search engines like Google will rank the link to your site higher for that search leading to a lead and potentially a sale. But because it is not paid media it is non-working.
But Google and other search engines allow you to bid for search terms; this is called paid search. There is no TLA here. It means that if a potential customer searches for the term you have bid for, and if your bid is successful (high enough), then your link will be displayed at the top of the page, increasing the chance of the person searching for it to click on it and visit your non-working website.
Now, because the search was paid, it is. Therefore, paid media and spending are considered to be working. Get it?
So, when a company says it is going to reduce non-working spending, what does it actually mean? Well, it is hard to tell. It could mean they are going to make really cheap and annoying ads for their very expensive media. It could mean they will do less SEO and spend more on paid search.
But the fact is that no matter what they do, the terms working and non-working simply do not work anymore when it comes to considering, analysing, or managing marketing and advertising spend.
So, the next time someone suggests lowering your working-to-non-working ratio, we recommend you ask them if they can improve your P3s—productivity, profit, and market performance – because we can.
Golden Minute Script
I got a call from a client wanting to reduce their non-working spend.
What’s not working? I enquired.
The cost of producing the ads, the content.
So what is working then? I asked.
Media and media cost.
So media is working and the content on that media is non-working.
Well I said, you could reduce your non-working to zero?
They were very excited.
Until I explained that there would be nothing to run in the media.
30 seconds of nothing on television.
30 seconds of silence on radio.
No digital ads to serve.
And of course no non-working cost.
Would that work for you?
I’m not sure working and non-working really works anymore. Do you?
Want to know if your marketing budget is working? Then, read more about our Agency Operational Review and Media Value Operational Reviews.