I feel your article by Alan Mitchell “P&G admits Cott’s right on brand tax” (MW March 1) was a little simplistic.
Regarding your textbook definition of brand equity – I believe a better definition is the “net increase/decrease in marketing efficiency delivered by a brand”.
Given that markets are systems which are seldom in balance (witness the car industry, or petrol retailing) – the marketer’s role is to maximise the period for which demand exceeds supply for their organisation’s output.
All the resources (both internal and external) available to the marketer should be leveraged to that end – within, of course, the various constraints imposed by the stakeholders in the market.
Investment in brand creation/promotion, whether corporate or product/service, is but one of the levers available. However, it can be a valuable one.
The creation and support of a brand can simplify and clarify an offer in the mind of the target market, and increase communication efficiency/effectiveness.
This increase reduces the cost to market of supply – thereby increasing demand, and moving the market in the direction desired.
What is clear from the P&G scenario is a recognition that any area of investment has an “S”-shaped utility curve, and that the marginal utility of increased investment, at some point, becomes zero, or even negative.
P&G has determined that it has reached this point in the area of investment known as brand support, aka advertising.
I believe P&G should be congratulated on the application of investment analysis criteria to brand support, and I would encourage other companies to do the same.
There has been for too long an unwillingness to address brand support as an area open to analysis – indeed the blackness of the art of advertising has resulted in too little attention being paid to a proper assessment of the contribution of brand support versus other levers available to marketers.
The P&G action does not signify a battle for the future of marketing – just belated recognition that there is more to the marketer’s armoury than some would (for their own ends) have us believe.
Automotive Industry consultant