Exercise your brand or it will die

Eric Blais is vice-president, director of client services at Harrod & Mirlin, a Toronto ad agency.When ad agency executives warn that short-term thinking and an obsession with quarterly results can be dangerous to the long-term health of brands, it is often...

Eric Blais is vice-president, director of client services at Harrod & Mirlin, a Toronto ad agency.

When ad agency executives warn that short-term thinking and an obsession with quarterly results can be dangerous to the long-term health of brands, it is often seen as a desperate bid to repatriate the advertising dollars that have shifted to promotions and other forms of marketing.

The shift is real, and there is no doubt that reversing the trend would help ad agencies.

According to an article in the Feb. 1, 1992 edition of The Economist, a survey of 300 u.s. firms by Myers Marketing Research found that companies devote more than two-thirds of their marketing budgets to promotions; the rest is used for advertising.

In 1980, the proportions were the reverse.

But the message is more than self-serving. It serves to remind marketers that, in the end, the best defence against price brands, eroding loyalties, private labels and heavy discounting is equity building advertising.

The ‘advertising vs. promotion’ debate is not new, and is probably the wrong debate anyway. A lot of valid marketing efforts get bundled under the ‘promotion’ label. Consumer promotion, event marketing, couponing and merchandising work quite well in conjunction with brand building advertising.

Right perspective

Bob James, McCann-Erickson’s chairman and chief executive officer, in a speech to the American Association of Advertising Agencies, put the debate in the right perspective.

‘Promotion isn’t the right word for it, since it has nothing to do with marketing communications of any kind,’ James said in his speech.

‘It reduces the price of products to the retailer, while taking money away from communicating to consumers,’ he said.

James also said ‘enlisting the support and co-operation of the retail trade is indisputably of paramount importance in marketing.

‘But what many of our clients have come to know in recent years as trade promotion is really something else,’ he said. ‘It’s not retail sales support. It’s not tactical communications. It’s not a local execution of a national strategy.

‘What is it? It’s off-invoice deductions. It’s cash discount incentives for stores to buy, stock and display more cases of products.’

The long-term impact of this shifting of funds from advertising to trade promotions can be devastating to the viability of brands.

Weaken

James said ‘if you don’t spend money to advertise brands, over time you are going to weaken those brands.

‘If you let those brands decline, you are not going to be able to demonstrate your brand’s power in pulling consumers into the store. If you can’t demonstrate that power, then you are going to have less leverage with retailers.’

Edwin Artzt, chairman and chief executive officer of Procter & Gamble, goes further:

‘Think of advertising and promotion as exercise and recreation,’ Artzt says.

‘Advertising is exercise,’ he says. ‘It’s something you need, and it provides long-term benefits, but it’s awfully easy to either cut or postpone because there’s not immediate penalty for not exercising.’

The unfortunate reality is that many advertisers have stopped exercising.

Some agencies have responded by offering their clients ‘integrated marketing services’ as a means to keep their share of the marketing communications dollars.

A fancy name for getting a client to co-ordinate all its marketing efforts through one agency, integrated marketing works well on paper.

Unfortunately, few clients have truly adopted the concept. Most are reluctant to entrust everything to one agency. They prefer to orchestrate their own co-ordinated efforts.

In a survey conducted in 1991 by the American Association of Advertising Agencies, advertisers felt strongly that ad agencies cannot co-ordinate integrated programs any better than they can.

Associations

Industry associations have also tried to show the value of advertising to the marketing community. To many advertisers, advertising has become something vague, an indulgence that has nothing to do with the bottom line. Yet, advertising is very much about dollars, sales and profits.

Over the years, the agency community has done amazingly little to prove the effectiveness of advertising. We are now seeing many initiatives in this area, one of which is ‘The Underspending Study,’ conducted by 4As in the u.s.

The study takes a hard, long-term view of what impact ad spending cutbacks have on market share. The findings are shocking.

They show that the conventional wisdom that advertisers are spending more and more on advertising and getting less and less for it is wrong. In fact, many advertisers are spending less in real dollar terms and when they spend less, they get a lot less in terms of market share.

The pilot study showed that when ad spending for a major dry soup declined 20.3% in real dollars, it was accompanied by a market share decline of 54.7%. A salad dressing brand that is spending 26.6% less in constant dollars has suffered a 44.9% decline in market share. The average results for all 12 brands showed that an ad spending decline of 12.4% in real dollars was accompanied by a 19.9% decline in market share.

This is a small pilot study, and many other factors affect market share, but the trend is there. What is changed is not the effectiveness of advertising, but the media and business environment in which advertising operates.

Lately, agencies have tried to better serve their clients’ needs in order to get them to reaffirm their commitment to advertising.

This has resulted in the creation of new agency structures and buzzwords such as ‘unbundling,’ ’boutiquing,’ and, my favorite, ‘customized clusters.’

These are all valid efforts.

In the end, however, brand managers choose to make the investment, take the risks and are ultimately responsible to shareholders.

They can ignore the call from agencies to invest in brand building efforts, but they must be prepared to face the long-term effects of what David Aaker calls ‘brand neglect’ in his book on brand equity.

The Sept. 7, 1991 issue of The Economist described it this way:

‘Under pressure to make big short-run gains in sales, many brand managers are cavalier about the long-term commercial health of their products.

‘Increasingly, they are abandoning brand building activities, such as advertising, in favor of tactics, especially price promotions, which aim to increase market share quickly. Managers are not sufficiently aware of the damage that short-term thinking can do to good brands.’

Serious questions

Brand neglect, and the tremendous growth of private labels, raise some serious questions about the future of brands.

The following quote from Dave Nichol is a frightening reminder to protect and build brand equities:

‘Unlike ourselves, marketers of national brands have to factor in pricey marketing and advertising budgets when they set the price for their products. This premium price is euphemistically called `brand equity.’ We call it a brand tax.’

Reducing the brand tax might bring temporary relief. But, in the long run, building brand equity through advertising will create that incremental difference consumers will pay more for.

Marketers and agencies will only profit if marketers are prepared to invest, and agencies find more cost-effective, more creative ways to create and reinforce brand equities.