Effectiveness in Context: A Manual for Brand Building

Effectiveness in Context: A Manual for Brand Building

by Les Binet and Peter Field

Binet and Field have analyzed 18 years of data (1998-2016) from the London-based Institute of Practitioners in Advertising’s IPA Databank, “the confidential data submitted alongside entries to the biennial IPA Effectiveness Awards competition.” This book presents their findings on what works best—in general and in various contexts.

Topics include market penetration, brand-building vs. sales activation, emotional vs. rational consideration, share of voice, pricing, and innovation. 

PENETRATION / CUSTOMER ACQUISITION

“Regardless of the state of the category, sales and market share are primarily driven by penetration [i.e. customer acquisition]. The main way brands grow is always by expanding their customer base, regardless of whether the category is new or old, fast or slow-growing. Indeed, the [principal] reason why market-share effects get smaller as categories mature is that it becomes harder to gain more customers… Whether you’re EasyJet or Emirates, the main way you will sell more flights is by recruiting more customers at your chosen price point, rather than by getting your existing customers to fly more often.”

“Most marketing works by increasing volume. Getting people to pay higher prices is a far harder task, but it can be very profitable. And increasing volume and price at the same time is even more profitable, if fiendishly difficult.”

BRAND-BUILDING VS ACTIVATION

“Our model is that there are two ways that advertising can drive sales growth: brand building and sales activation. These work over different time scales.”

“Brand building dominates long-term growth and involves the creation of memory structures that prime consumers to want to choose the brand. This priming effect also improves pricing power and so, over time, has a strong impact on profitability.”

“Sales activation dominates short-term sales uplifts and involves behavioral prompts that nudge consumers to want to buy now; promotional messages, seasonal or other occasion-related prompts and minor new product news are the main messages used. They are focused on a particular behavioral response that may involve an intermediate response action, such as clicking a web link. They have little effect on long-term growth and pricing power, so their impact on profitability is modest at best, but they can produce powerful short-term sales spikes.”

“Brand and activation work in synergy, each enhancing the other. Brand communications create enduring memory structures that increase the base level of demand and reduce price sensitivity… Sales activation triggers these memories and converts them efficiently to immediate sales. The net result is a sustainable revenue stream with high margins and high ROMI.”

“We have seen that activation works harder in rational categories, while brand advertising works harder in emotional ones. Intuitively, one might therefore expect that the balance of spend should tilt towards activation as things get more rational. And that is quite a common approach… But in fact that is not the best strategy. Regardless of your category, you need both a strong brand and efficient activation. So when brand building is hard, you need to spend more of your budget on brand. And when activation is less responsive, you need to spend more your budget on activation.”

In general, the optimum budget split is:

• Offline brands: 55% brand, 45% activation
• Online brands: 74% brand, 26% activation

“In not-for-profit sectors… relatively high consideration levels and relatively strong emotional decision-making… make brand effects relatively easy to achieve. The optimum balance therefore shifts to 44:56.”

“Activation spend should be relatively heavy when a completely new brand is first launched… 35:65 early on…  But once the initial launch phase is over, the brand:activation split should be normalized.”

“Because activation is relatively easy for very big brands, they don’t need to devote such a high proportion of their budget to it. As market share increases, the optimum balance shifts slightly away from activation and in favor of brand building.”

“Finally, when the category goes into decline, there should be a bigger shift towards activation—there is less value in brand building at this stage, though it still helps boost activation and so does still play a role in getting the most out of declining budgets.”

“Online brands are… more likely to be in high-consideration categories.” Binet and Field note “the growing online fallacy: the belief that because consumers are choosing and buying brands online then advertising messages are best served to them online, usually as activation messages. This simply doesn’t follow.”

SHARE OF VOICE

“We have seen that marketing is most effective in the early years of a brand’s life, when penetration and market share are low. But what about efficiency? Our primary measure of efficiency is based on share of voice [SOV] analysis.”

“The share-of-voice model assumes that for any given level of market share there is an equilibrium level of share of voice… The simplest version of the model assumes that the equilibrium level of SOV is equal to share of market (SOM). In that case, growth is proportional to ‘extra’ share of voice (ESOV), defined as SOV minus SOM… Brands that set their ESOV above the equilibrium level will tend to grow; brands that set their ESOV below it will tend to shrink.” The authors use the term ESOV at least six times prior to defining it on page 69.

“As brands get bigger, ESOV Efficiency rises. This is a new finding.”

“The ability to activate short-term sales is vital to ESOV Efficiency, so in sectors where this is especially difficult we have to work harder at it. If your category is one of these you should consider increasing activation allocation above our norms.”

“The fact that new brands can get away with low (or even zero) share of voice makes good sense. The Bass Diffusion Model  [i.e. product life cycle] predicts that new brands can grow exponentially in their early years, even without advertising. Some people will always try the new product unprompted, and if it’s good they’ll recommend it to their friends.”

“However, just because new and niche brands can get away with low share of voice doesn’t mean they should.” For maximum long-term sales in a competitive environment, “a brand launch needs to accelerate early trial as broadly as possible. But also, as we have argued, at some point the brand will cease to be an interesting new contender for which brand building is relatively easy. It will then simply become one of the pack, and unless it has acquired a dominant position, brand building will be much harder. This argues for a shifting balance of brand and activation over time: high activation at first whilst early trial is vital and brand interest is high; higher brand building subsequently as brand interest starts to normalize and less enthusiastic ‘late majority’ adopters have to be won over.”

“Advertising works best when it goes with the grain of existing memory structures, rather than against them… Once a brand is established, relaunching or rebranding is slow and highly inefficient, and requires high spend levels over a long period.”

PRICING

“The key to reducing price sensitivity is brand building. The stronger the brand the more power you have to increase price. This cannot be achieved through short-term activation. In fact, price-based activation often increases price sensitivity…  It is very hard to reduce price sensitivity by rational persuasion. In fact, there are still almost no successful examples of this in the IPA Databank. If you want to make people less price sensitive, you need to engage them emotionally; people are willing to pay more for the brands they love.”

“What about changing price position? Here the evidence is unequivocal. Only emotional brand building has the power to reduce price sensitivity and support premium prices. So firms that want to move their products upmarket need to spend more on brand building.”

“Brands that want to move upmarket have at least two options. The first is to reposition the brand as a whole. This is a slow and expensive business, as brand perceptions take time to change… The second option is to launch a premium sub-brand. This gets results faster. ESOV Efficiency is high for launches so launching a premium version tends to be a quicker and less advertising-intensive way to recruit upmarket buyers. However, there are additional NPD [new product development] costs involved, and there is always the risk of cannibalization.”

INNOVATION

“Minor innovation dominates FMCG [fast-moving consumer goods]… This pattern reflects a widely observed phenomenon in FMCG of regular churning of minor innovation to create product stories that will invigorate rational product-benefit advertising. The benefits are very short-lived and minor innovations are quickly copied, so the brand has to race on to the next minor innovation. These ‘innovation junkies’ would be better off pursuing a more long-term growth model: i.e. using emotional brand advertising with the occasional major innovation.”

“This is a trap that many firms fall into. Convinced that brands need a constant stream of ‘new news’ to keep people interested, they end up on a constant treadmill of minor product launches. New flavors, new sizes, new ingredients, new packaging, new features—anything to give the marketing team (and the sales force) something to say.”

“Advertising doesn’t need ‘new news’ to be effective. In fact, advertising doesn’t need to contain rational messages at all. In general, the most effective ads work at the emotional level, and the less focused it is on rational messages the more effective and long lasting it tends to be.”

“Minor variant launches of this kind are often worse than no innovation at all. Retailers will give the new products shelf space, but often at the expense of existing SKUs. Shoppers will try them, but the purchases often cannibalize other variants of the same brand. New variants often have quite brief lives and, even if they cling on, they can cause problems. Brands that are addicted to minor NPD can end up hopelessly fragmented, leaving potential customers baffled and confused. Try buying shampoo or mouthwash and you’ll see what we mean.”

“Worse still, NPD often distracts brand owners from the important job of supporting their core products. The best-selling products in the portfolio still need marketing support to maintain their sales, even if they are very well established. Indeed, the highest ROIs comes from advertising core products, not new variants. Core products usually have a bigger sales base and higher margins, both of which boost the ROI from advertising. And core products are more likely to have a halo effect on minor variants rather than vice versa.”

“Reduction in price elasticity tends to be less likely when there is innovation. It is much harder to charge high prices for new products… The only form of innovation that tends to reduce price sensitivity is launching a premium sub-brand… So, innovation is more about gaining customers, increasing volume and gaining market share. Increasing prices and margins tends to come later, once the brand is more established, and the product is more familiar.”

“Innovation does boost long-term brand effects if it is major. But innovation has particularly strong activation effects. So it is not surprising that innovation-led campaigns tend to be more short term. This is especially true when the innovation is minor—e.g. new variants. This again suggests that minor launches are short-term tactics that trade on existing brand equity.”

“ESOV Efficiency is much higher when there is product innovation, which means that new products get much faster growth for a given advertising budget. Or, alternatively, innovative brands are less reliant on advertising, and can get away with lower budgets if they wish.”

TRENDS

“We have reported at length the rise of short-termism amongst the campaigns submitted to the IPA Effectiveness Awards competition. It is important because in many ways it is the mother of the problems we have been identifying: many of the behaviors flow from a fixation with short-term results.”

Binet and Field call out the financial services industry, which “has embraced all of the destructive trends most enthusiastically: short-termism, overactivation, investment reduction, loyalty marketing. It serves as a timely reminder to others how not to respond to the pressures of modern business.”

The authors’ previous books include Marketing in the Era of Accountability (2007), The Long and the Short of It (2013), and Media in Focus (2017). Binet also co-authored How Not to Plan: 66 Ways to Screw Up (2018) with Sarah Carter.

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Binet, Les, and Peter Field. Effectiveness in Context: A Manual for Brand Building. London: Institute of Practitioners in Advertising, 2018. Buy from Amazon.com

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