Braintrust Query: Are Marketers Mortgaging Their Brands’ Future?
Rubinson, Chief Research
Officer, The Advertising Research Foundation
the early 1980s, $50 billion or more was shifted by U.S. marketers from
advertising to trade promotion. The
reason was that IRI and Nielsen made weekly store scanner data available
that showed huge spikes in weekly sales when a trade deal (e.g., end of
aisle display with price off) was run. A
typical result was that only 5-10 percent of lift above baseline was
associated with advertising. Obviously, trade dealing was the way to
2005, in an ANA Advertiser paper, I asked marketers to consider, “Where
did the baselines come from”? Why
do some brands have 5-10X the baseline of their competitors? Maybe
we should start focusing on the baseline as much as the spikes.
Len Lodish noticed the same thing and in HBR 2007 co-authored a paper
entitled, “If brands are built over years, why are they managed over
notes that promotions lift sales but also reduce baselines and increase
a brand’s price sensitivity. However as brand management rotates from
brand to brand, they hit their numbers with effective promotion and,
by cutting the 4th quarter ad budget, leave the problem for the next
assessment? Marketers are mortgaging their brand’s future.
even if a marketer commits to measuring advertising’s impact on brand
value, the path forward is unclear.
Lodish calls for a dashboard approach, where baselines are re-calculated
regularly so the effect of brand-building can be assessed against brand
baselines and changes in price sensitivity. Unfortunately, excessive
promotion will reduce the baseline making it appear that promotions are
working and incorrectly concluding that a simultaneous ad campaign is
reducing the baseline, leading to more promotion and less advertising —
reinforcing the exact wrong conclusion.
approach would be to calculate the financial value of a brand in a way
that is trackable over time. However,
at this point, two main ways the industry can choose to do brand valuation,
BrandZ and Interbrand, produce quite different answers as shown in the
following graph (2008 data) that depicts brand value (in millions) on
those brands (ranked by BrandZ valuation) in common to both sets of rankings.
in recessionary times, marketers are tempted into make exactly the wrong
decisions by cutting advertising and minimizing sales declines through
promotions and this temptation is not offset by a way of linking advertising
to brand value. This
will have the long-term effect of cheapening national brands and mortgaging
Questions: How can one measure the impact of advertising on a brand’s
value? What are the main challenges of coming up with such measurements
in a promotion-driven climate? To what degree are marketers mortgaging
their brand’s future in the downturn?