Monday, April 27, 2015

Our Debate About 'Risky' Versus 'Safe' Advertising Is Embarrassingly Amateur



The attitude that we have towards risk in our industry is embarrassingly amateur.

And I'm pointing the finger at both Agencies and Clients here, who tend to fall into opposite but equally naive traps.

The Agency view, most commonly (but not exclusively) heard from Creatives, is that "safe advertising is actually more risky than risky advertising." The theory here is that if advertising is 'vanilla' it "won't cut through" and is therefore likely to be useless. They rail against Clients' "conservatism", and wish their Clients would have 'more vision' or, moving further down the body, 'more balls.'

Many Clients, on the other hand, make huge efforts to minimise risk. The principal method is via research. If a campaign has 'passed' research, they feel it has a higher chance of being successful, i.e. should give them a higher than average return on investment. If a campaign is similar to things that have worked before, they again feel it has a higher chance of working. If an agency has done similar work before, a photographer or director has done similar work before, they will be more comfortable, because they will be 'reducing the risk' and therefore maximising their chance of a high return.

Both attitudes are so, so wrong.

For a more informed view, we need to learn something from the risk professionals - financial investors.

First of all, they are smart enough to realise that every investment carries risk. Indeed, they classify it. Low-risk investments include short-dated US Treasury Bonds - the chance of the United States going bankrupt within the next 30 or 60 days is tiny. A medium risk investment might be shares in a company like General Electric or Boeing. A high-risk investment could be loans to countries considered at risk of default, such as Greece and Argentina.

The difference with advertising is that financial investors understand that risk and reward are highly correlated. The low-risk 30-day US Treasury Bond delivers only a small return - just 0.03% annually, as of last Friday. Boeing's dividend yield is currently 2.45%, GE's is 3.7%. Whereas a higher-risk Greek government 10-year bond is currently yielding 12.7%, and Argentina 7.2%.

The more risk you are willing to take, the higher your potential reward. It's that simple.

And it's the same for every area of life. Asking a hottie out? High risk, high reward. Working for the civil service? Low risk, low reward.

If only we in advertising could understand this simple correlation. The Creatives arguing for high-risk as a 'form of safety' are idiots. High-risk work is high-risk. It's also potentially higher reward, of course. And the Clients demanding that their work be de-risked should not expect that it will also generate high returns. It won't.

Cadbury's drumming gorilla was high-risk (because very weird and unusual - it could have bombed) but when it worked, the rewards were high. A beer ad that just shows hops being farmed and droplets of water glistening on the bottle is low risk (it's not going to offend anybody) but will be low reward.

TLDR: an ad campaign that has a chance of earning a high return will also involve high risk. A low risk campaign can never earn a high return.


8 comments:

Ben said...

Interesting.

But do low-risk things like Cillit Bang and Oxy really not succeed?

And I guess there are many other definitions of risk in this situation: a marketing director who just wants to stay in the post for a few years until he gets promoted would be taking a big risk to jeopardise that with anything 'risky' when he could keep his head down with unrisky projects and be much more likely to get his promotion, especially as it's difficult to isolate the effectiveness of an ad campaign when the other factors (pricing, distribution etc.) have so much effect.

I should shorten that sentence, but I can't be arsed.

TB said...


"A low risk campaign can never earn a high return."

Sadly, you CAN do low-risk, client friendly, intellectually dull work and still gain a return.

The more truthful interpretation of the risk you refer to is, will the client risk doing work that WE think is cool but MAY have absolutely nothing to do with the lives of people who enjoy watching gogglebox?

Down, down, prices are down, anyone?

Gawen said...

A useful adjunct to the discussion might be to dig out a copy of 'Risk & Responsibility' that grainy old 16mm film featuring Jeremy Bullmore et al illustrating the risks of being responsible with David Ogilvy's 'The Man in the Hathaway Shirt,'

A similar discussion on DDB's classic 'Think Small' print ad is archived somewhere I'd guess Simon.

down down said...


Coles only works because they out shout their competitors.

Most "low-risk" ideas don't have that luxury

Jim said...

If you need to rely completely on "high risk, high reward" advertising for your business to succeed then I think you'll be in trouble long-term and if you're an agency only selling high risk ideas you can expect to have a pretty frustrated client (or no client after the first couple tank, even if the 3rd was going to be "the one").

Surely a mixed portfolio is the way to go. Some safe activity to ensure you won't go bust from one bad decision, medium risk activity to bring the required sales in and to hedge against Risky campaigns that hold the potential for big wins without your immediate future riding on it.

The Cadbury example good to show how risk can pay off, but I doubt the success or failure of the company was riding on the back of that one campaign and I bet Cadbury knew this when they signed off on it.

As you say the most important thing is to be realistic about what results a campaign will deliver. Do this and I think you'll find clients are happy with the moderate results of lower risk activity and agencies will find there is more of an appetite to take the bigger gambles because they are an acknowledged risk to improve return. Not just asking bet the farm with every brief.

mark teece said...

If a high risk ad works, you can create a campaign from it that's low risk.

Scamp said...

Jim, I agree with you. For an owner of a portfolio of brands, it probably makes sense to treat some of your brands to high-risk/high-return advertising, and some to low-risk/low-return advertising. Same with financial investors - the ideal portfolio contains a mixture of low risk and high risk assets.

Anonymous said...

I think clients like research not because they think it will guarantee them a good ad. I think they like it because they use it as a way of removing responsibility for the ad. If it bombs they say "the research said it would succeed. Not my fault." If it succeeds they say "It was all my doing."