Why waste works: the power of brand extravagance

Late at night, on 23 August 1994, Bill Drummond and Jim Cauty set fire to ￡1 million pounds of their own cash.

This was no accident. The pair, who founded the KLF, one of Britain's most successful 90s bands, had become disillusioned with the music business and decided to incinerate the last of their earnings.

Nor was it a hoax. Witnesses videoed them lugging a holdall, bulging with 24 kg of cash, to a disused boathouse on the Isle of Jura and then chucking fat bundles of notes onto the fire.

An hour later they had nothing left beyond a few burnt embers.

Their reasons are unclear - they never provided a satisfactory explanation - but the impact is indisputable. The public were flabbergasted; aghast at the waste. To get a sense of the outrage watch their interview on an Irish chat show, below. The audience are on the cusp of violence.

https://www.youtube.com/watch?v=Zk-A93GAdAI

As this example shows, an act of extravagant waste has the power to move people deeply. In this case it led to anger, but when harnessed in advertising it can move people in positive ways.

The brand benefits of waste

John Kay, an economist at Oxford University, suggests that advertising works not because of the explicit messages, but because of the waste. By waste he means spending more on adverts than is necessary to functionally communicate the explicit message. That could be a 90" ad, acres of white space on a double page spread or extravagant production values.

Advertising known to be expensive signals the volume of the resources available to the advertiser. As Kay says in his landmark paper:

"The advertiser has either persuaded lots or people to buy his product already, a good sign, or has persuaded someone to lend him lots of money to finance the campaign"

Advertising works, not despite its perceived wastage, but because of it.

Kay further states that since advertising tends to recoup its costs in the long term, only a company with substantial commitment to their brand would invest significant sums of money in advertising. A poor quality brand can advertise to generate trial, but no amount of spend can deliver repeat purchase to disgruntled customers.

In his words, extravagant advertising, therefore, acts as a screening mechanism that:

"convincingly signals the quality of a product by displaying the producer's sincere faith in his own output, reflected by the money spent promoting it."

This theory neatly explains why famous sponsorships are effective. They demonstrate a costly and, therefore, honest belief in the strength of the advertised product.

Of course, this theory assumes consumer awareness of the price of sponsorships. Is this the case? Our research suggests consumers are well aware how costly sports sponsorship can be. We surveyed 333 nationally representative consumers about the cost of the Real Madrid shirt sponsorship. Of those who gave a figure, 89% thought it cost more than ￡30 million per year - which is indeed the rough cost.

Brands must recognise that much of advertising's impact comes from perceived waste. There is a role, for bold brand statements, even in an era obsessed with efficiency.

The occasional extravagance displays a confidence that mere ad claims cannot emulate.

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First published on Mediatel https://mediatel.co.uk/newsline/2016/10/17/a-wasted-opportunity/