Advertising Transformed

The New Rules for the Digital Age

Fons Van Dyck

• Publisher: Kogan Page
• Year: 2014
• ISBN:
  9780749471491
• Edition: 1
• Topic: Negocios y empresa
• Subtopic: Publicidad

Advertising Transformed is the ultimate guide to advertising in the 21st century. In an advertising world transformed by digital technology it sets out what current and would-be admen and women need to know to create advertising that works. Branding expert and Managing Director of Think BBDO, Fons Van Dyck, synthesizes the latest thinking about advertising into a digestible list of rules to create a best practice guide to succeeding in the industry. It covers some of the key issues affecting advertising professionals today and focuses in particular on how advertisers can engage with increasingly empowered consumers on multiple channels on a global and local scale. Backed by case studies of Effie award winning campaigns from brands such as Evian, Mercedes and IBM, Advertising Transformed provides readers with the insights and expertise to meet the changing requirements of modern advertising and devise exciting campaigns that prove its continuing value.

Part one

The essence of advertising today

01

What is effective advertising?

Everybody has an opinion about advertising. That should come as no surprise, since advertising is omnipresent in our lives. Some embrace advertising as an inextricable part of our popular culture, putting the individual’s freedom of choice first. Others are radically opposed and believe advertising is destroying our world. But what makes advertising effective today?

Companies continue to invest massively in advertising: about US $497 billion (382 billion euros) in 2012, or 3.3 per cent more than in 2011. This represents about the size of the gross domestic product (GDP) of a Western country like Belgium. The biggest investment in advertising per capita is made in Switzerland ($744 per person), followed by Norway ($602 per person), Australia ($580 per person) and the United States ($512 per person). For 2013, global ad spending was expected to rise by 4 per cent.^1,2

Advertising is not new – evidence of its use can be found in Ancient Egyptian, Greek and Roman times. Yet even today, the discussion about how advertising works, what its role and return is for brands and companies continues to be a hot topic in and outside scientific circles:

• What is the current state of play?
• How does advertising really work?
• What is the difference between advertising, sales promotion and word of mouth?
• Does advertising need to focus on loyal customers or on ‘new’ customers?
• What are the short- and long-term effects for brands?

The advertising paradox

New neuroscientific and psychological evidence has brought fresh insights into how our brains work and how advertising works in our brains. Advertising creates memories and recalls them, working on a less conscious and emotional level than was traditionally thought. This is one of the insights presented by marketing authority Byron Sharp in his book³ How Brands Grow: What marketers don’t know (2010), in which he focuses on a number of important advertising topics.

Professor Sharp is the Director of the renowned Ehrenberg-Bass Institute for Marketing Science at the University of South Australia. This centre has been conducting fundamental research on how advertising works for many years, including research commissioned by global brands such as Coca-Cola, Procter & Gamble and Mars. Advertising has one purpose only, says Sharp, and that is to influence consumers’ buying behaviour. More specifically, the billions of dollars that are invested in advertising every year need to stimulate and protect the sale of brands. This is an idea that will make quite a number of marketers shiver, since it conjures up associations of ‘sales’ or ‘super promotions’, whereas they prefer concepts such as ‘brand value’ or ‘customer loyalty’. According to Sharp these notions will make the average CEO or financial director more wary than the hard sales numbers.

Sharp argues that there is sufficient empirical evidence to show that advertising leads to sales. But the effects of advertising are hard to notice in sales trends. He sees two main reasons why sales figures do not jump immediately when advertising starts, or drop immediately when advertising stops. The first reason is that most advertising simply ensures that brands can maintain their market share. First and foremost, advertising is intended to prevent sales from dropping, or else it must hinder competitors from luring customers away. This may seem like turning the world on its head, but it is thanks to advertising that brands can keep up their sales volumes. Advertising is sometimes compared to the engine of a plane that makes sure that the plane – representing sales figures – does not lose altitude. A second reason is that advertising effects on sales are only visible over a longer period of time, unless the campaign in question involves very large and concentrated efforts. For smaller companies, however, it is possible to witness short-term advertising effects. Investments in advertising for these types of companies are relatively larger compared to other marketing efforts. Their sales depend less on word-of-mouth advertising, presence in stores or effects from previous advertising.

So advertising works – but it is hard to tell just by looking at the sales figures. As a result, it is not an easy story to sell. It is made even more difficult, as Sharp suggests, by the fact that even when there is a change in sales figures, it is not certain that this is an indication of a ‘real’ effect. When you see the tip of the iceberg, you don’t know how big the iceberg actually is, he concludes.

The importance of the light buyer

Advertising only works when it reaches the right target group. A target group that is, on the one hand, ‘inclined’ to buy and, on the other hand, large enough to make the difference and to ensure that advertising efforts are cost-efficient.

Every brand has different types of consumers or buyers. The literature often makes the distinction between ‘heavy buyers’, lovers that buy the brand several times a week, and ‘light buyers’, consumers that buy a brand a few times a year at best. At first sight, these heavy buyers seem the most interesting group for marketers. Not only do they buy their brand often and know it better, but frequently they also act as ‘fans’ of the brand on social media and in surveys, performing as true brand ambassadors.

But Sharp puts the theory of the Pareto optimum into perspective. This is a classic theory used by marketers, which assumes that 80 per cent of brand sales are realized by 20 per cent of the customer base. Based on his research, Sharp concludes that, in practice, this 80/20 rule seldom applies for many brands and in many product categories. About half of the brand sales can be attributed to light buyers, consumers that only buy the brand in question sporadically. Sharp, and with him quite a number of marketers, believes that successful advertising campaigns have to reach a broad group of consumers. Obviously, this is the case for brands aiming for a significant market share, but not for brands entering niche markets.

Advertising needs to reach not only the group of loyal and regular customers, but also (and especially) the large group of customers that will most probably not buy the advertised brand in the coming week or month. Advertising will influence the memory structures of light buyers in such a way that they will better remember the brand when they are about to make a purchase. In these cases, advertising increases the probability that this light buyer will buy a product.

ZenithOptimedia’s Touchpoints ROI Tracker research, based on interviews with over 700,000 consumers in 47 countries, dug deeper into the empirical generalization of brand recall and published its findings in the Journal of Advertising Research in June 2013. The research showed that – for marketers who want to reach out to all their category consumers through paid, owned and earned media – paid media have a greater potential to reach non- or light buyers, whereas owned and earned media have greater fraction among existing, thus heavy, buyers. Also, users of brands (aka heavy buyers) have a higher propensity to recall brands they use than light buyers. On average, heavy-buyer recall is 1.7 times higher than light-buyer recall.⁴

Sharp’s research also confirms that, in particular, a penetration strategy aimed at reaching potential customers contributes more to brand growth than a frequency strategy, especially in the context of higher price sensitivity amongst consumers.⁵ Neglecting light buyers and non-buyers is therefore not a recipe for sustainable brand growth. Campaigns based on a penetration strategy turn out to be more effective, in terms of sales as well as profitability. In addition, the current buying pattern of light buyers does not offer any guarantees for their future behaviour. Only the acquisition of new customers (in particular, light buyers) ensures sustainable market share growth for a brand.

The existence of heavy buyers and light buyers also explains the difference between the impact of advertising and sales promotions. Traditionally, advertising aims at large consumer groups, heavy buyers and light buyers alike. Sales promotions are geared more specifically towards a brand’s more regular or heavy buyers. As they are limited in time, promotions tend to reach only the people who decide to make a purchase from a category during the period of the promotion. Hence, sales promotion effects are visible immediately.

Yet in contrast to advertising, these effects tend not to last beyond the period of the sales promotion. In practice, consumers return to their pre-promotion buying behaviour once the price promotion has finished. Moreover, sales promotions are expensive for a brand, since they create larger margins for retailers and consumers. Finally, the danger exists that after a sales promotion, consumers will no longer be so willing to pay the full price again. In this way, sales promotions often clear a path for discount brands and supermarket private label – generic – brands.

In summary, Sharp argues that advertising’s primary purpose is to increase the market share of companies in the long term and to maintain sales in the short term. It works mainly by creating and refreshing memories and by building brand salience – the fact that a brand means something or is known by the consumer. This is particularly important in the battle to win over light buyers to a brand. These are the people who seldom or never buy the brand, yet they are a key group of potential buyers. A penetration strategy aimed at winning new customers is therefore more rewarding in the longer run than a frequency strategy aimed at heavy buyers.

TABLE 1.1 Advertising vs sales promotion

	Short term	Long term
Heavy buyers	Sales promotion	–
Light buyers	–	Advertising

Advertising is most effective when it aims at so-called ‘light buyers’ and works mainly in the long term. Short-term effects are created by various forms of price promotion focused on so-called ‘heavy buyers’. They have a very temporary impact.

(Source: Sharp, 2010)

Direct and indirect effects of advertising

While advertising is intended to generate more sales for brands primarily via light buyers, the search for loyal customers plays a central role in other marketing models. These loyal customers (‘fans’) attract other customers through word of mouth and recommendations. This is a phenomenon that has grown more im...

Table of contents

• Cover page
• In Praise of Advertising Transformed
• Title page
• Imprint
• Table of contents
• List of figures
• List of tables
• Foreword by Luc Suykens
• Foreword by Stephan Loerke
• Preface
• Acknowledgements
• Introduction: The era of major transition
• Part one: The essence of advertising today
• Part two: Hybrid marketing
• Part three: The reckoning
• Conclusion: Advertising is dead – long live advertising
• Index
• Full imprint