Investment or Expense?

How many of us have checked our 401K performance lately? I did this morning, and it wasn’t pretty. It’s down 4%. Just a month or two ago, it was up 13%, so calling it disappointing is an understatement. So, what did I do, or what did you do? Did you call your fund manager and cancel your investments? Did you switch to some new investment that you’ve heard about, like Bitcoin or gold? The shiny new toys? (Pun intended). You probably didn’t do any of those things and told yourself, “It’s just cyclical, it will come back. Stay the course. That’s what Dave Ramsey would advise.”

Any investment advisor would tell you that long-term investing is much more profitable than day trading. While day traders can see huge gains if they time it right, smart investors like Warren Buffett adopt a long-term approach, understanding that market fluctuations happen, but its consistency that leads to profit. Who do you think made more money in the last ten years, day traders or Warren Buffett? This isn’t even a fair fight. Buffett’s 10-year return has doubled and nearly tripled his money. On the other hand, only 1-5% of day traders turn a profit, while 80-95% lose money.

There’s a parallel between investing in the market and advertising from a business perspective. The problem is… too many advertisers want investment returns with day-trader patience.

• “This campaign didn’t work in 30 days. Pull it.”
• “Let’s try something new.”
• “What’s the quick win?”

They’re chasing quick wins instead of building momentum. But advertising doesn’t work that way. Advertising is a compounding asset, not an expense. At RAB, we teach that the purpose of advertising is to be “known before you're needed.” Why is this important? Here’s the part most advertisers miss: At any given moment, about 95% of the market is not buying. So, if you only advertise when you want immediate results, you're invisible to the people who will matter later. Only a tiny percentage of the population is “in the market” for what your clients are selling. (See the graphic at the top of this tip):

• 1-3% buy today
• 3-4% will buy next week
• 3-4% will buy next month
• 90% won’t buy till next year

That applies to any product, any client or any market. Trying to predict when customers are “in the market” isn’t strategy… it’s day trading. Let me say something that might surprise/shock you:

People do not respond to ads.

Ouch, right?

The truth is that people respond to needs. They identify a need, and that’s when they take action. We call this a triggering event. Something happens in their lives that makes them realize they have a need. That moment is when all the long-term advertising pays off. Because when someone recognizes a need, they think first and feel most comfortable with the companies they already know.

Awareness, trust and preference don’t happen in a campaign… they compound over time. And just like your 401K, some months are up, some are down, but the trend rewards those who stay consistent.

I often suggest in our training sessions that much of our job as professionals is simply to “reframe” the issue or the conversation. That’s appropriate thinking in this case.

When a client begins to question results, avoid defending the campaign. Shift the mindset. Try this:

“Can I ask you something? When your investments dip, do you pull your money out or do you stay the course?”

Then connect it:

Advertising works the same way. The businesses that succeed aren’t the ones that jump in and out… they’re the ones who stay visible, stay consistent and let it build over time.

That shift in positioning changes everything. When you sell advertising as a cost, clients tend to look for reasons to cut it. When you position it as an investment, clients look for ways to grow it. That’s the difference between:

• A short-term buy
• And a long-term partnership

The stock market rewards patience and so does advertising. The question isn’t: “Is this campaign working right now?” The real question is: “Are we building something that will pay off over time?”

Just like investing, the biggest returns don’t come from timing the market; they come from time in the market. The same is true for your clients’ advertising. The brands that win aren’t the loudest today; they’re the ones that are still there tomorrow.

On Monday, we will share how we might be contributing to this problem.

Happy Friday!
Think Big, Make Big Things Happen!

Jeff Schmidt is the SVP of Professional Development. You can reach him at Jeff.Schmidt@RAB.com. You can also connect with him on X, YouTube, and LinkedIn.