A recent Wall Street Journal column points out an apparent opportunity currently facing many companies. For the past year, many businesses have been cutting back on their advertising spending. As a result, their competitors can now capitalize on the relative lack of advertising clutter -- as well as the bargain prices available in many media outlets. Instead of decreasing their ad spending, they can increase it.
As one consultant stated, this represents a great opportunity for marketers, since "companies who increase their marketing right now can really increase their … share of the total advertising pie." They can increase their ad awareness. They can build their brand presence in today's highly competitive marketplace.
According to this line of reasoning, the decline in competitive spending thus represents a superb opportunity for the aggressive, smart marketers of 2002. Bullish companies can outspend their retrenching competition. Marketers can increase their relative dominance in the world of consumer communications.
These bargains may not last, however. The time is ripe. Act now! Don't miss this rare opportunity. Hurry! Be the first one on your block….
Ah, but why? Think first. What is your company trying to achieve -- and, more importantly, is advertising the best way to achieve it?
Something of value
An opportunity is only valuable if it helps the company get where it wants, or needs, to go. Companies that spend more on advertising certainly represent a revenue opportunity for ad agencies and for the owners of broadcast and print media outlets. Of critical relevance, however, is how much of an opportunity it represents for a marketer -- the one spending the money.
The first question for any company confronting this alleged brand investment opportunity is, thus, what do you hope to accomplish?
According to last year's survey of CEOs by The Conference Board, the top management challenge for most companies is "customer loyalty and retention."
Is customer loyalty a worthwhile goal? Given the apparent and consistent link between customer loyalty and company profits, the answer is obvious. As any number of studies undertaken by The Gallup Organization can also attest, "engaged" customers who have an emotional as well as a rational "bond" to the brand spend more, return more frequently, are less price-sensitive, and serve as brand ambassadors to their friends and neighbors.
Is customer loyalty an important goal for marketers in 2002? Yes. A Gallup research and development effort completed this past year found that, across an array of brands in six different product and service categories, about a quarter of the average company's customers are at risk. One out of four current customers are "actively disengaged," or low in both attitudinal loyalty and emotional attachment to the brand, with the stores where they shop, the banks with whom they do business, and even the make of car that they drive. They have no discernable allegiance to the brands they use.
Thus, the typical CEO's stated concerns are absolutely correct. A frighteningly large percentage of the company's current customer franchise seems at risk -- and this could cost the company a great deal, both in the short- and long-term, in irreplaceable lost opportunities for business growth and profit enhancement.
Share of voice versus excellence in performance
If customer engagement and retention represent the company's goals, then seizing on this advertising share-of-voice opportunity might seem an effective strategy to achieve them. But it's not, according to these same Gallup studies.
Advertising has simply not proven to be an efficient means to keep customers engaged or to increase the likelihood that customers will enduringly bond to the brands they're using. Why? Because, in most cases, there are other things that are far more important to customers than the breakthrough quality of the company's advertising. Companies cannot merely advertise their way out of the product or service problems that represent the key reasons for their customers' disengagement. Meaningful action is required. Advertising isn't enough.
As Christopher Locke recently noted in his provocatively titled book, Gonzo Marketing, "advertising is … a ridiculously inefficient means of attempting to reach and form productive relationships with an increasingly fragmented array of networked markets."
The key word here is "relationships." The key challenge is to identify what builds and maintains those productive relationships. That's where investment is needed. That's where investment will pay off.
Advertising represents only one customer "touchpoint" among many -- and, when it comes to building relationships, it's not even the most important one. Far from it. Gallup's analyses found that, for each of the six categories studied, advertising had far less influence than any number of performance characteristics when it comes to increasing the strength of the connection between customers and the brands they're using. Advertising's role was, in all cases, comparatively insignificant.
Customer relationships, the analyses showed, are driven by superior-performing products and by flawless service rendered by outstanding customer-facing employees. Not by ad spending.
In short: customer relationships are more powerfully affected by how well a company keeps its promises than by how -- or how often -- those promises are made.
There is indeed, as stated in the Wall Street Journal, an important opportunity facing today's marketers. The opportunity is to out-perform the competition, not simply to outspend them on advertising.
If companies are hoping to keep customers coming back time and again and to cement enduring bonds with their customers, then investment is clearly warranted. But companies must invest in strengthening their performance on the people and product factors that generate customer engagement and not just on communication activities designed to convey a new package, register a new slogan, or increase brand awareness.
Invest now? Absolutely. But invest how?
