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by  Bob Hoffman (@adcontrarian), San Francisco BayOn April 23 of this year, Apple reported…

“We are pleased to report record March quarter revenue thanks to continued strong performance of iPhone and iPad,”

This report was remarkable for two reasons: First, it is generally believed that Apple has not introduced any new products or features of major interest to consumers in about two years. This in an industry whose oxygen is new products and features.

Second, it is also believed that Apple’s advertising has fallen from the lofty standard it had established over previous years, to a point that it is now inferior to its rivals in the tech industry.

So how did they achieve record revenues?

I am not qualified to comment on the product part of the equation, but I do have a strong opinion about the advertising part.

The answer is this: advertising serves two functions. The first function is the one that every marketer focuses on — sales. But the second one is at least as important. Advertising is business insurance. Advertising builds equity so that when you have a fallow period you still can generate income.

This is how Apple was able to report record revenue during a period of widely acknowledged creative foundering.

One of the reasons people continued to spend their money to purchase Apple products was not likely the result of advertising that they ran in that quarter. It was because of the advertising that Apple had run the previous 25 years. It bought them insurance.

Apple products were still believed to be technically superior, even though that is questionable. Apple products were still believed to be of higher quality, even though they may not have been. (Ironically, Apple’s toughest competitor, Samsung, is also one of its primary suppliers.)

The hundreds of millions Apple spent on “insurance” over the years paid off with billions in sales in the first quarter of 2013.

It is the rare marketer that truly understands this aspect of advertising value.

Several months ago I wrote about Coca-Cola’s “senior manager for marketing strategy” who ragged on social media because, “We didn’t see any statistically significant relationship between our buzz and our short-term sales.”

It’s not my habit to be defending social media (much of which I consider misguided and ineffectual) but the prevailing attitude among marketers that everything is immediately measurable completely ignores the insurance value (or in marketing jargon, “brand equity”) that accrues to them through advertising.

One of the frustrating aspects of business is that when marketers engage in advertising most don’t understand what they are buying or appreciate what they are getting.

– The Ad Contrarian is Bob Hoffman, is the author of The Ad Contrarian and 101 Contrarian Ideas About Advertising. Reprinted from his blog The Ad Contrarian.

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Published by Herman Manson

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