Are marketers underutilizing the power of advertising?

Written by :
Manoj Tadepalli

There seem to be many large brands that are spending too little on advertising, eventually leading to a weakening of the brand and its ability sell and command a premium. Take for instance Tanishq, a leader in the fine jewellery space with over 20 k cr in turnover, it is all but invisible on mass media. Sure, it is a fast growing brand, but is it actually taking full advantage of its strengths and the headroom in the industry? Probably not. There are also large FMCG companies, who have cut advertising spends as a percentage over time, especially in years when the going gets a little tough. Are they doing the right thing? Or are they leaving money on the table?

Let us look at the reasons why they are doing this? The main reason is that advertising has a short term impact and a longer term impact. When companies are looking at quarterly profits, they are essentially focussing on the short term, as they see the immediate benefit. As the money is coming from the same budget for advertising and promotions, they spend even lesser on branding as promotions typically have a higher immediate lift, and brand campaigns may not deliver as much. So CEOs find it convenient to spend less on brand related activities.

Studies show that the longer term impact of advertising is 3 or more times that of short term campaigns as brand advertising gets the consumer to buy into the brand promise and stay with it, sometimes over a lifetime.

Once one takes the long term into consideration, the entire ROI issue is tilted in favour of brand advertising as opposed to promotions. 

The issue with long term is that it is more difficult to measure, as even regression based methods, tend to identify only the shorter term effects. So even a relatively advanced technique like marketing mix modelling (MMM) will still tend to show that brand advertising does not perform as well as promotions. So what then is the solution? Do marketers go with the broad studies and take a leap of faith and invest more than what they have been till now?

Luckily for us it is now possible to measure the longer term effect through both a specialised modelling technique as well as by using brand health measures into the equation. By doing this, brands can truly optimize how much to spend, and maximise profits, not at  a quarter level alone but at a longer 3 to 5 year period. Why leave so much money on the table, simply because the impact is not immediately obvious and one does not have the skill set to identify the opportunity?