Top brands justify big budgets

Research seen exclusively by Marketing Week reveals how brands that dominate in the FMCG sector can cement their leading positions by increasing their advertising presence beyond challenger rivals.

Understanding whether your campaign is having an impact on your bottom line is probably the primary concern of any marketing director. But new research from Nielsen Analytic Consulting along with the Institute of Practitioners in Advertising, exclusive to Marketing Week, aims to help companies prove the worth of their spending.

The data looks at the relationship between share of market (SoM) and “share of voice” (SoV) – best described as a company’s advertising or marketing presence. It claims to demonstrate how businesses in the FMCG sector that carefully manage both SoM and SoV can boost their commercial success.

By increasing their advertising presence beyond the norm for their market, brands can achieve better growth. The research suggests this could be as much as 0.5% for an “average” FMCG brand, rising to 1.4% for a leading brand in a category for every 10% of excess share of voice (ESoV).

The report follows on from a project last year where the IPA analysed cases from its Effectiveness Awards to set out a clear equation for companies to see how upping their marketing might lead to financial success. But because these award-winning case studies, ranging over 30 years, are not typical of the average campaign, the new wave of data uses Nielsen figures about a wider range of FMCG marketing initiatives to broaden the results.

Hamish Pringle, director general at the IPA, explains: “Having awards and collecting case studies is great for companies but it’s useless if no-one learns from them.” With the IPA’s Bellwether report earlier this month indicating that marketing budgets are still in “severe decline” due to the recession – with 38% revised downwards in the last quarter – it is more relevant than ever to show the financial benefit of investing in any kind of promotion.

The IPA/Nielsen research also shows that larger brands benefit most from a larger proportion of marketing presence in their sector. The leading brands in any category as defined by Nielsen see a 1.4% growth, compared with just 0.4% for those defined as “challengers”.

For example, the research cites the example of two anonymous brands. The market leader and challenger invest in more marketing than the category average, boosting their excess SoV to 10% and increasing the market share of both. The market leader, with sales of £142m in 2008, makes £144m in 2009 and is set to reach £146m by 2010. It achieved growth of 1.5% in 2008, with another 1.2% in 2009 and a projected 1.4% in 2010. But the challenger brand, with flat sales across 2008/09 and into 2010, grew by just 0.2% in 2008, 0.3% in 2009 and will only achieve 0.4% growth in 2010.

“Being a challenger brand in the FMCG sector is pretty tough,” says Pringle. “If you look at the returns compared with those of the brand leader, it’s a big ask to close that gap.”

He says this advantage for larger, dominant companies means that challenger brands must invest more heavily in “quality” to break the 0.4% growth ceiling.

Pringle cites the evidence that when comparing the case studies from the IPA’s Effectiveness Awards with the broad spectrum of campaigns by Nielsen, there is a 60% uplift in growth. The winning campaigns – as opposed to those that were shortlisted – enjoy an even greater improvement of 37% above the non-winners.

Pringle suggests that challenger brands in the FMCG category need to make sure that if they are investing heavily in marketing to ensure growth, it needs to be innovative and well thought out. The only chance of challengers achieving as much growth as the market leaders is to raise the quality of their communications above the norm as well as the quantity.

They also need to push what the research calls the “buzzability” of their marketing to make sure that promotions are enhanced by word of mouth. The Nielsen data shows that campaigns can be much more effective if they are designed with their “buzz” potential in mind, considering how they will be passed along and discussed among consumers.

For example, the Cadbury Gorilla advert and the PG Tips ad that uses the Monkey character from the ITV Digital ads were seen by Nielsen to enhance the business results of both companies. The two companies effectively leveraged the content of their TV ads online and also posted excellent financial results.

It’s not all good news for big brands, however. The research suggests that as market sectors become more mature, the ROI from ESoV declines. Pringle says this is something that organisations can plan for if they know it is likely to occur. “If you are a brand leader in a mature or declining sector, you might be able to manipulate your media budgets accordingly,” he says.

It is not just clients who should be looking at this research and working out how to transform their media and marketing planning to ensure growth, he adds. An increasing number of agencies are being asked by clients to sign contracts that offer payment by results or partially based on the effectiveness of the resulting campaign.

“This research shows a metric that gives a sound basis for setting these payment by results agreements,” he suggests. “Rather than telling a client that it’s not possible to achieve such a target with a certain budget, you can demonstrate exactly why. Or you can say to a client, ‘we beat the metric on this occasion, so we deserve that performance to be recognised’.”

Despite all the positive areas covered in this research with opportunities for brands to convert creative work into commercial rigour, the data still leaves questions as to whether these results are true for brands outside the FMCG sector. The original IPA research from last year looked at services and durables, which suggested that the relationship between SoV and SoM was even more marked than in the competitive FMCG area.

Pringle admits the Nielsen research is limited by its focus on FMCG but feels that it provides an “interesting” start for brands to begin campaign planning. In the end, he suggests the most important thing is making sure that case histories, models and examples help push marketing directors into taking the lead and approaching the rest of 2009 and 2010 with a positive attitude, despite declining budgets.

He concludes: “It’s about getting learnings from cases into the market and putting them in a proactive place.”

From the frontline

Hugh Burkitt

Chief executive, The Marketing Society

For any marketer wishing to take a more aggressive stance in these times of economic difficulty, these are interesting figures. You could take these figures to the finance department and all pretty quickly do the arithmetic. It’s based on enough data to be credible thanks to the Nielsen involvement.

For the moment, however, this data is only based on FMCG brands and there are a lot of markets where the equations might not apply, so the use of the research does have its limits. It also only calculates what growth you can “expect” so it doesn’t take into account what happens if your competitor responds, for example.

I think that advising people to spend more money is all very well and good but you have to make sure that whatever budget you have, you’re spending it in an interesting way. It isn’t just how much you spend but what you do with it.

Will Harris
Marketing director, Nokia

When talking about campaigns as in this [IPA/Nielsen] research, I think it’s outdated as a concept to talk about “advertising”. Advertising in its traditional sense is now, for many companies, not a massive part of their budgets. We need to be talking about “marketing” rather than advertising in future.

In terms of large brands having the advantage, I think it much depends on the category you’re in and what you are selling. These days, we are definitely seeing that consumers are less willing to experiment with high-risk, high-cost items. People are happy to experiment for free or if you’re not asking them to pay anything. But if you’re asking them to part with their money, that’s different.

I’m a big fan of Payment By Results, both for employees and agency partners. If this report does offer any future methods for benchmarking the progress of this, that would certainly be interesting.

In general at the moment, I see money moving away from advertising to other media. There has certainly been a leaking of my budget away from advertising towards digital and so on. The recession has only accelerated that. But it’s a massively positive change in my view.


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