Better Decisions Through Data.
Back in 2015, we (Acculation, Inc.) collaborated with the IBM NuStory Project to mentor University of Southern California (USC) Marshall Business School students in data-driven social media. Their task: use data to promote a wearables fashion brand on social media for the project (Wearitude(TM), which is incorrectly referred to as a company in the video — it is a brand.) As their final project for their course, they created this short video primer on wearables, originally titled “20 Second Lessons: Wearables.”
The importance of fashion and artistic creativity to business and the economy is often a surprise to engineers, and we talk about some scientific reasons of why fashion might be economically important. The two worlds (tech and fashion) are increasingly colliding in this era of wearables like smartwatches and sensor-laden-devices.
Why high marketing spend if marketing is “efficient” in wearables/fashion industry?
Fashion (and by extension, high-tech fashion like smartphone computers) is one of the industry verticals where marketing ROI is highest. Ironically, as the students discovered (although not mentioned in this video), that very high ROI means, counter-intuitively, that a successful, new fashion brand would need to spend more, not less, on marketing than a comparable company in another industry. In the caption to the video on YouTube, we ask why is this, and promised an answer in this accompanying blog article.
Both the fashion industry and the marketing industry (broadly defined as including public relations and other “communication” industries) exist in a competitive economy. Consequently, if marketing spend is “extremely” efficient an industry vertical such as fashion (or wearables), it means marketing is also “very” efficient for competitors in that industry. (We put “extremely” and “very” in quotes because these relative terms. In general, market spend doesn’t give as much as new entrepreneurs would expect. Marketing doesn’t do a whole lot in general, but it works (slightly) much better in fashion than in most other industries. Companies need to market to survive, so a great deal of money gets spend on marketing even when it is not as efficient as a new entrepreneur might expect.)
So, if marketing is, relatively speaking “very” efficient for one’s competitors in fashion, you can bet they will be spending a great deal on marketing! Business is something of a Darwinian enterprise. If a fashion house is not putting money or effort into marketing (again, loosely defined to include activists such as public relations), they will be quickly be going out of business.
Worse, wearable consumers are used to fashion houses spending a great deal on marketing, and have come to expect it in the industry. Under some economic theories, marketing is a “signaling mechanism” whereby brands can demonstrate their quality by their ability to lavish large marketing budgets without going bankrupt. (By a similar measure, although marketing channel efficiency varies widely, and marketing channels are often selected for valid business reasons other than their strict dollar-for-dollar efficiency for reasons beyond the scope of this article. Nevertheless, within a touchpoint class, marketing firms & channels must remain competitive and efficient. This means that, within a specific touchpoint class or type of marketing, firms can expect similar revenue lifts given competent campaign execution due to the competitive nature of advertising and the market economy.)
This means, counter-intuitively, because marketing is (relatively) very effective in the fashion industry, a new fashion or wearable house will face entrenched competitors with large, equally entrenched ad budgets. The competitive nature of the market will thus mean a new fashion house will need to spend a great deal to become established in the face of existing labels!
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