BRAND PAPERS - MARKETING THEORY: A clean
bill of health
Publication info: Brand Strategy ; London (Oct 9, 2006): 34.
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ABSTRACT
Does the business world truly recognise the value of a brand? Many senior managers still do not recognise the
necessary role that marketing plays in their business. Without clear support for brand health at the board level, it is
nearly impossible to build a new brand from the bottom up or, even harder still, to create a major shift in a flagging
brand's direction and health. Marketing directors generally know what they need to do to turn around a failing
brand, but are simply unable to implement the most effective brand-building campaign because they do not have
the necessary board support to access the type of budget or time resources required. No amount of brand
consultancy, customer research, or market analysis can replace the financial support of buy-in from the boss.
FULL TEXT
Meeting the quarterly targets will not turn around a brand in the doldrums, says Jolyon Roe, marketing activity and
boardroom support is essential
Does the business world truly recognise the value of a brand? It is tempting to look at the handful of company
directors such as Richard Branson or Donald Trump, who embrace the image of their own business and its
products wholeheartedly. These people would make you believe that the corporate world is entirely convinced that
branding means bucks.
But setting aside these examples, many senior managers still do not recognise the necessary role that marketing
plays in their business.
Without clear support for brand health at the board level, it is nearly impossible to build a new brand from the
bottom up or, even harder still, to create a major shift in a flagging brand's direction and health.
Marketing directors generally know what they need to do to turn around a failing brand, but are simply unable to
implement the most effective brand-building campaign because they do not have the necessary board support to
access the type of budget or time resources required. No amount of brand consultancy, customer research, or
market analysis can replace the financial support of buy-in from the boss.
In today's business environment, the intense pressure from investors and shareholders to deliver short-term
performance can often lead to decision making that doesn't take long-term brand health into account. For
consumer brands especially, this is an unsustainable model that ultimately leads to erosion of the consumer
franchise and leaves the brand vulnerable to competitors.
While marketers tend to see their activity in terms, at least partially, of building sustainable brand value for their
product or company, the financial director or chief executive is not likely to be as in tune with brand health. Their
job tends to be about exceeding quarterly performance targets and meeting shareholder expectations.
When this is coupled with the speed of communications and consumers' desire for instant gratification, it has
created an environment with an unhealthy focus on the short term, where it is increasingly difficult to manage
different time horizons within businesses. But it is possible for consumer-focused companies to manage the long
term and there are a number of ways to defend the marketing budget.
Explaining short termism
It is no surprise that so many companies are not focused on branding when the whole business world lives a selffulfilling prophecy of reaching short-term goals. According to The Economic Implications of Corporate Financial
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Reporting by Graham, Harvey and Rajgopal, the majority of business managers would not make an investment
which had a decent return on capital if it meant missing a quarterly target. This is highlighted by a comment made
by a marketing director for a struggling brand: "without short-term performance, there is no long term."
While this perspective is certainly valid, executives must seek balance. A stock price reflects not only current
earnings but the future cash flows generated by a company beyond the next three years. A business without
strong brands or powerful new product developments will ultimately be marked down, regardless of its most
recent revenue growth.
All activity, to some extent, has a long-term effect. This is manifested in sales but it is actually a consequence of
changing consumer perceptions. FMCG brands that rely heavily on price-based marketing may discover that over
time, consumers will begin to see the brand as overpriced at its normal levels and resent paying an apparent
premium.
Chief executives cannot be involved in the strategy and implementation of all aspects of their business. This gives
departments that work to tangible metrics - such as production facilities, logistics and finance - an advantage.
Marketing directors must step beyond simple market share and use metrics such as awareness, loyalty,
penetration and weight of purchase that link less well to financial understanding.
Brand marketers must unravel how each type of marketing activity affects consumer perceptions and convince the
board-level leadership of its importance as a long-term strategy.
Traditionally brands invest between 5-10% of their sales in marketing, with budgets fluctuating depending on
whether it is a new product launch, how the brand is performing and how the business is succeeding as a whole.
Marketing officers have an uphill struggle to raise funding for a brand-building campaign as the payback is not
easily demonstrated.
In a recent study by Warwick University, CEOs were asked which departments they would seek to make budget
cuts if required. The results speak for themselves.
The financial benefit is always going to be underestimated if no account is taken of the change in consumer
perceptions and the resulting long-term sales impact. I believe the return on investment (ROI) is increased between
two and five times when including these long-term changes.
Quantifying marketing success
By necessity, the language of business is financially driven. A consumer's needs and attitudes are not so easily
managed in pounds and pence. Most business professionals today will accept the basic reasons behind marketing
when business is going well and the products are selling but when a brand is experiencing a long-term sales
slump, the marketing director's purse strings are often the first to be cut.
Without a language to quantify the success of marketing activity, it is not easy for executives to communicate the
financial benefits internally and to external stakeholders. With the understanding of how activity affects consumer
perceptions and changes long-term purchasing, it becomes possible to move from esoteric and less defensible
language to the financial implication of supporting brand health over other forms of investment in production
facilities or short-term promotional activity.
Marketing directors can give their bosses the tools to prove the financial benefits of strong consumer brand buy-in
on purchasing and market share - making it easier for the chief executive to convince the board he is in control and
thinking strategically.
How to be best in class
Chief executives run their businesses by keeping a constant eye on how to derive the highest returns from their
allocation of resources. By tracking the relationship between marketing activity and changes in consumer
perceptions toward the brand and sales data, marketers can demonstrate the future of the brand's strength.
Without tracking these dynamics, a brand experiencing a gradual loss of brand equity won't realise the severity of
the situation until it's too late.
Retailer brands continue to grow and weaken the proposition of manufacturer brands. Historically, manufacturers
have relied heavily on the use of price to maintain their position rather than enhancing their credentials. As the
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retail space given to food comes under pressure from the growth in non-food and general merchandise, we see
brand casualties.
Del Monte was delisted in the rationalisation of the ambient juice fixture within a major supermarket in the UK. The
retailer felt it could delist the brand because its own label accounted for more than half of sales; the Del Monte
brand was not felt to be bringing anything extra despite its very prominent association with the fruit juice market. I
believe this shows a lack of investment in maintaining the health of the Del Monte brand.
Retail brand Marks &Spencer was in a similar situation when a few years of brand repositioning led customers to
feel disconnected with the store's traditional values of quality, sensibility and reasonable cost. When Stuart Rose
took over as chief executive two years ago, he made a clear investment in the brand's traditional values - vital for
getting back in the black.
But not all executives are so forward thinking and many appreciate the value of brand perception but are unable to
justify the cost without immediate ROI to shareholders. Thankfully, today there are techniques that allow
marketers to determine that.
Studies across more than 50,000 products in over 55 countries worldwide have provided the link between brand
perceptions and sales. The responses show the impact that activity has on long-term brand health.
For example, advertising has a short-term impact on sales as consumers are reminded of the product, triggering a
purchase. It also works over the long term through shifting consumer perceptions. This element has been
notoriously difficult to quantify using traditional econometric approaches. Through linking back to changing
consumer perceptions, the ROI for advertising is more than doubled creating a much stronger case for building
brands through advertising.
Another key driver of sales is the value for money represented by a brand. Traditionally, one would consider the
price elasticity of a product, but this fails to reflect the complex calculation that consumers make as they weigh up
the cost benefit. Value for money reflects how well the brand is perceived and its price reflects the 'trade off'
consumers make against the utility of a product. The stronger the perceptions of a brand, the better the value for
money.
The examples of advertising and value for money demonstrate the important role that consumer perceptions have
in determining brand health and the resulting sales. Incorporating this understanding into brand and business
planning can provide the hard evidence to support the cultural change to assess, think and act with a long- term
perspective.
Jolyon Roe is associate director of Novaction &Vantis, the product development and forecasting arm of Ipsos
MORI.
Copyright: Centaur Communications Ltd. and licensors
DETAILS
Subject:
Retail stores; Marketing; Brand identification; Consumers; Advertising; Brand names;
Budgets; Stockholders; Market research; Market shares; Market strategy; Customer
relations
Business indexing term:
Subject: Retail stores Marketing Brand identification Consumers Advertising Brand
names Budgets Stockholders Market research Market shares Market strategy
Customer relations; Industry: 54191 : Marketing Research and Public Opinion Polling
Classification:
7100: Market research; 54191: Marketing Research and Public Opinion Polling
Publication title:
Brand St rategy; London
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Pages:
34
Number of pages:
0
Publication year:
2006
Publication date:
Oct 9, 2006
Publisher:
Centaur Media USA Inc. (A member of Centaur Plc Group)
Place of publication:
London
Country of publication:
United States, London
Publication subject:
Advertising And Public Relations
ISSN:
09659390
Source type:
Trade Journals
Language of publication:
English
Document type:
Feature
Document feature:
Photographs Tables Graphs
ProQuest document ID:
224156812
Document URL:
https://ezproxy.sit.ac.nz:2050/login?qurl=https%3A%2F%2Fwww.proquest.com%2Ft
rade-journals%2Fbrand-papers-marketing-theory-clean-billhealth%2Fdocview%2F224156812%2Fse-2%3Faccountid%3D46872
Copyright:
(Copyright (c) 2006. Centaur Communications Limited. Reproduced withpermission
of the copyright owner. Further reproduction ordistribution is prohibited without
permission.)
Last updated:
2020-12-19
Database:
ProQuest Central
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