Advertising Needs To Have An Immediate Effect

After the interview is over, he fishes out a Leica m7 camera from a green Tupperware carry-pouch, and clicks the correspondent and the photographer, exactly in the same background as BT did him for this interview. It is this exuberance, this jest-for-life (pun intended) that makes John Philip Jones, Professor of Public Communications, Syracuse University, New York, challenge advertising myths. His soon-to-be-released book, The Ultimate Secrets of Advertising (his 11th or 12th, we lose count), promises to be an empirical treatise on measuring long-term impact of advertising on brands. Yet, Jones believes that any advertising that does not deliver sales in the first seven days is completely ineffectual. On a recent visit to India, to speak at the CII-organised Marketing Summit, Jones took time off to speak with BT’s Shailesh Dobhal. Excerpts:

60 minutes: INTERVIEW WITH JOHN PHILIP JONES

India is in the grip of an economic slowdown now. What’s your view on advertising investments in such times?

It is easy for me to say that you have to maintain your advertising expenditure (at such times). In a recession, the manufacturer feels the pressure to maintain profitability; if he doesn’t, his stock price will crash. To maintain his profitability, he reduces his advertising expenditure. But the fact is that those manufacturers who maintain their advertising expenditure, gain marketshare because everyone else is cutting. And when you gain share you also keep it.

But nobody will take this advice because of the pressure to keep the profits up. One manufacturer I know who is good at this, is Toyota. They tell themselves, now is the time to gain share. It is a wonderful opportunity because your investment, when compared to those companies cutting back advertising spend, is increasing. My impression is that in India, HLL tends to keep its investments, in key brands, intact.

What about the Indian advertising industry itself? From the global perspective, is it a relevant player?

In quantitative terms, it is terribly insignificant. The advertising market in India is just about $1 billion compared to $120 billion in the US. But, India, for Lever, is the market that generates the largest sales of Lux and Lifebuoy. This place produces large volumes, and has a terrific growth potential. Thus, the importance of India far transcends the numbers. There is too much to be done in India, for the advertising industry. In the past four years, the consuming class in India (with monthly household income greater than Rs 5,000) has grown at an average of 12 per cent.

The world is full of clever people, across countries, who are Indian. It is great for these countries, but bad for India. I have so many ex-students who are Indian, who are working all over the world. Look at the opportunity cost of this talent to India!

I saw this advertisement for a car, Esteem. The ad has one simple idea: the brand as a take-off point in the consumer’s life. I guess advertising in India should be talking more on the lines of ‘motivating arguments’, because many product categories are in the under-developed or the developing stage, unlike in mature markets such as the US. There, the advertising needs to more led towards ‘discriminating arguments’.

How do you view marketing/advertising in the age of the internet?

Well I am a glorious agnostic. I am yet to see anything substantial come out of those ‘net promises’ made by the dotcoms. It is under-developed as an advertising medium, with a large part of it in a state of tentative experimentation. Only a small fraction of the medium has found acceptance for either direct selling or pure product information.

You have maintained that it is difficult to measure the long-term effect of advertising on brand equity, even while you propounded the model of Short-Term Advertising Strength…

I tell you that this brand equity is a very amorphous term for measuring advertising’s long-term impact on the brand. Yes, there are essentially six factors, all measurable. The brand’s penetration, purchase frequency, price elasticity, the actual price, advertising flexibility, and finally advertising intensiveness.

Penetration measures how many people use a brand. Purchase frequency is how many times your brand gets picked vis-à-vis others in the category, because there is no such thing as a one-brand consumer, at least in the FMCG category. Price elasticity, is a brand’s sales responsiveness to price changes, over time. Actual price, or consumer price, is the price-premium a brand is able to charge in its category, because of added-value, over and apart from functionality. And advertising nurtures all sources of added-value, be it consumer preference, belief in effectiveness, or the physical presentation of the brand.

What is the difference between advertising flexibility and advertising intensiveness?

Advertising flexibility is a measure of advertising responsiveness. How much extra sales did you get from the extra advertising? Advertising intensiveness, on the other hand, is a measure of aggregate investment vis-à-vis the size of your brand. And in some cases, evidence proves that you can under-spend, within limits, and still achieve the same sales.

Can all brands under-spend, irrespective of their size or lifecycle stage?

Well only big brands can. And that too, only to a certain degree. One of my research efforts, called the Advertising Under-investment Barometer in the US, revealed that the difference between investment (or under-investment) in Share-of-Voice (SoV) vis-à-vis Share-of-Market (SoM) is only safe to the tune of 2 per cent. Beyond that it starts gnawing at the brand’s value.

Typically, how I see it is if your SoV is greater then SoM, you are in investment phase. But big brands do under-invest in advertising, and more often then not, to such a point that it starts hurting the brand’s long-term value. You can quantify the medium-term effect of advertising on the brand: say at the end of a year, every rupee invested in advertising resulted in 60 paise of sale. But if you factor in the long-term effect, you have to add the Accumulated Added-Value (AAV), which feeds brand purchase. Once you add this (you find that), advertising more than pays for its cost.

What’s your view on brands being extended to other categories?

I have no opinion here: either that it should or shouldn’t be extended. All I say is that if you want to use the brand in more ways than its present guise, then do it. But don’t think you can save money. The problem is that marketers think they can move over some of the values, and, therefore, spend less. But the fact is you have to move the brand over, but you are spending less, therefore, you fail.

What is your next book The Ultimate Secrets of Advertising about?

Essentially, it will be about the long-term measurability of advertising. Basically, advertising itself depends on three things, assuming that the client has got a good brand. The creative (execution), the budget, and the media (planning). And you can’t do those things efficiently, unless you know what’s been happening in the past and have been able to measure it. Knowledge and measurability is essential for efficient practice.

The focus is on immediate action. I believe that if advertising does not have an immediate effect, we do not need to advertise. The attempt will be to check and evaluate its medium- and long-term effects. What is already proven is that a strong brand gives a company a longer staying power in the business. Ivory and Coca-Cola are brands which are over 100 years old. Lux is a 75-year-old brand. A strong brand also gives a reason to charge a price premium. Listerine from Warner Lambert is mass brand in the US, with a marketshare of nearly 30 per cent. And it still charges a 47 per cent price premium!

3 thoughts on “Advertising Needs To Have An Immediate Effect

  1. Nice writing. You are on my RSS reader now so I can read more from you down the road.

    Allen Taylor

    Vika: Hi Allen, thanks for visiting my blog, and yr support.. will visit you..

    Like

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