DIRECT MEDIA United Solutions
By: Marija Ilić, Account Director/Brand Lead at DIRECT MEDIA United Solutions
Let’s get one thing straight right away. This article is not a quick read — no bullet points, just pure theory — but practice indeed proves it. And yes, you should read it. In it, you will recognize parts of campaigns and strategies of world-class brands, coming from across the advertising spectrum. The ones whose results are beyond doubt, but whose strategies are quite often confusing because their investments far exceed their market shares. They grow their brand power, while category prices slide down. They are the ones that we call smart and brave at the same time — the ones that prove the assertions below.
But let’s start at the beginning.
Brand awareness is surely one of the critical factors influencing consumer decisions on buying. The higher the level of brand awareness, the higher the level of consumer preference — which involves a direct connection with the market share. Keller defined the main reasons why brand recognition is key for sales — it is important for the consumer to first consider the brand when making purchasing decisions within the product category and to think about the brand when thinking about the product category. Furthermore, brand awareness affects brand image through forming associations and how strong they are.
Technology is changing consumers. Consequently, marketing practices are following suit. Today’s consumers are connecting with brands in new ways and using new media; they are well informed, proactive, and willing to share their opinions in public forums… However, media fragmentation is reducing brands’ ability to stand out from the competition, all thanks to droves of information that reach consumers on a daily basis. The complex media market makes it difficult for consumers to identify brands that match their needs and expectations, which raises the question of the effectiveness of advertising.
These facts are well-known but vital. Let’s move on.
Advertising and marketing represent an important connection between brands and customers, as well as society as a whole. Brands that maintain continuity in the media during recession are much more likely to grow their market share and earn consumer trust through increased visibility among the competition and within their community and audiences in general. On the other hand, brands that decide to downsize investments or even completely stop them are highly likely to be more dependent on price lowering, and this will surely have a negative impact on brand perception in the long run.
That leads us to the question of the effectiveness of advertising.
Not many studies focus on this issue, but one is most certainly relevant to the profession, and perhaps even to today’s moment when companies are deciding about what would be an investment and what would be an expense. Marketing in the Era of Accountability and Marketing effectiveness in the digital era are reports examining marketing effectiveness that have been produced by Les Binet and Peter Field for a decade now and that draw from the IPA database.
Below are the study’s key findings:
1. 60/40 RULE
Communication can home in on brand building or sales activations. Brand building involves creating mental structures (associations, memories, beliefs…) that will potentially influence customers to choose one brand over another. Brand building is a lengthy process that requires a widest possible audience reach, while communication is rooted in emotions.
Sales activations, on the other hand, involve short-term focusing with relatively little exposure on people who are likely to buy the brand in the near future.
The challenge comes in striking a balance between one form of communication and the other, particularly because they work in different ways and at different time intervals. The study revealed that effectiveness is optimized when around 60% of the communication budget is designated for brand building, and around 40% for sales activation. This compounds the impact of advertising on short-term and long-term results.
2. THE SIGNIFICANCE OF eSoV
Brands that invest more in relation to their market share have a bigger tendency to grow compared with those with a low SoV. Analysis suggests that the advertising budget (and especially SoV) is one of the most important factors in campaign effectiveness.
eSOV (excess SoV = SoV–SoM) has a critical impact on advertising effectiveness as a vital component in the brand’s success, especially in a downturn (Mark Ritson). If SoV is larger than SoM, your market share is more likely to grow in the future. That’s what we call a positive eSoV.
Brands that maintain (or even increase) their advertising budgets while their competitors are reducing theirs present with higher eSoV, resulting in increased market share.
Despite media fragmentation, SoV continues to play a key role in campaign effectiveness, even for brands with low recognition levels, in highly competitive categories. A positive eSoV increases the interest in your brand, which you can monitor through Google searches, which — in turn — ultimately lead to higher sales of products and services.
3. THE SIGNIFICANCE OF REACH
The study also revealed a strong connection between campaign effectiveness and campaign reach. Analysis also included the time that the audience spends on certain media (dwell time), but reach had a much bigger impact on the result. Most brands depend on reaching as high a percentage of the audience as possible.
Brands are constantly losing customers, which is why they need an ongoing influx of new ones to survive, let alone grow. And that requires media that can ensure high reach and adequate budgets.
Digital media have enabled entirely new levels of loyalty marketing, precise targeting, and reducing budgets, but is it enough for brands to just use narrowly targeted communications and strengthen their connection with existing customers?
The IPA’s latest data show that the most effective campaigns are the ones targeting and communicating with both new and existing customers — those that have a broad reach and that focus on the entire market. In other words, long-term growth largely comes from expanding the customer base.
However, there is one area where focusing on existing customers provides good results. Those are campaigns that involve some sales activation. Existing customers are more likely to respond to offers.
Digital media is effective for activating sales — especially paid search and email marketing. Offline advertising, on the other hand, triggers Google searches. As digital becomes increasingly used, the synergy between online and offline communications grows and boost marketing effectiveness.
In order to use the full potential of advertising, brands must invest at levels that ensure positive eSoV, and it is especially important for them to balance short-term and long-term objectives and use the full potential of the media mix.
At the end of the day, despite the major shifts in the media ecosystem over the recent years, some key marketing principles seem to remain the same.
We just need to remember them from time to time, at least in terms of theory.
If they work — and they do — then this article does, too.