The Tax You Pay For A Bad Idea

If you work for a company that loves to tell the world—through its ads, marketing materials, email blasts and the like—how innovative it is, while all the while it’s losing market share, your organization is paying what can only be called “an innovation deficit tax.”

Marketing and advertising are the tax—the financial penalty—you pay for a bad idea.


More accurately, marketing and advertising costs have become the tax you pay for not being able to create a better idea than your competitors.

And if you are pushing “BLAH” products and services while your competitors are launching “BAM!” you may (unwittingly) be taxing yourself with both your R&D and marketing budgets. Both are failing to justify the cost of their existence.

The ability to consistently launch meaningful new products and services eliminates this tax—boosting your margins significantly.

Not only will people pay higher margins for innovative products, but they will also seek them out and tell their friends about them. Academics have shown that 54 percent of a company’s stock’s price is based on ideas that you haven’t even thought about yet.

That’s why innovation is so important, and it also explains why the tax for pushing “BLAH” is going up.

For example, even with the advent of less expensive social media tools, the last U.S. Presidential election resulted in roughly $2 billion of spending by both parties, making it the most expensive presidential cycle in U.S. history.

Quick: Name one great marketing message—after spending $2 billion—that came from either Mitt Romney or President Obama.

The defense rests.

L’Oreal spent a reported $1.8+ billion on advertising last year. How much do you think they would have to spend if they invented a product that reversed aging? My guess: $0.00. I have a very strong feeling my bride would find out about it almost immediately from every single one of her friends.

Pfizer spent a reported $2+ billion on advertising last year. How much do you think they would have to spend if they invented a product that reversed balding? Not much. I’d be one of the hundreds who would write a column about it to let the world in on the good news.

So the next time you are looking to create a budget to promote innovation, I suggest you start by looking at your marketing and advertising budgets. Take some (and probably a lot) from those columns and move it over to the column labeled “innovation.”

Refining your ability to create noteworthy new products and services will increase sales even while your costs of marketing plummet.

Author’s note for those of you in large companies: You can invest what amounts to a rounding error of your media budget to create the results I am talking about.

The good news for advertising agencies is that once your clients have a robust innovation portfolio, your suggestion of doubling down on social media will actually produce the results you’ve been promising for years.


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