An award winning paper - IMM Journal 2001

Could it be that there are no strong or weak brands only big and small ones? This is a powerfully held view in some marketing quarters. Its proponent- in-chief is a discrepant professor of marketing from the London South Bank University, Andrew Ehrenberg. My advertising text book, once called Make the Other Half Work Too, drew substantially on Ehrenberg’s “Weal Theory” of advertising. I found his papers when researching the first edition of the book in the London library of J Walter Thompson in 1985. In these he stated with conviction that advertising lacks the strength and potency that had long been ascribed to it. At best it creates awareness of brands, stimulates trial of a new product and reinforces brand knowledge. As for persuading people to change brands or adopt a new one, it is, he claims, a weak and impotent force.

It seemed clear to me then that advertising was failing to live up to its promises. Big expenditure was not achieving big success. The days when a massive campaign on television using print and outdoor for what was called “image transference” were ending. There was too much clutter on TV and consumers were becoming cynical video zappers; deleting unwanted commercials from the recorded programmes they would watch later.

Ads had to be highly creative to be seen and to have an effect. This is why the agencies that grew were those that won creative awards. But even they were fighting a battle the impact of which is only just surfacing.

The shift of money away from advertising to promotions has been under way for two decades. In the US and in Europe half of all marketing allocations are spent in trade promotions to keep brands on the shelf and featured in retailer joint promotions. The balance is split evenly between classical media advertising and consumer based promotions. The power of the retailer is a key reason for this but it is aided and abetted by brand management who will willingly achieve short term results by buying a promotion that boosts immediate sales rather than invest in the unclear consequences of an expensive advertising campaign.

Our IMM paper is focused on this dilemma.

Ehrenberg has fostered a school of thought that states that consumers do not buy brands because of what they think of them. They buy them because they are present at the point of sale. In other words brands that were made big decades ago, retain their status by maintaining consumer awareness and by maintaining in-store presence.

The opposing view states that consumers buy brands because they hold a positive attitude towards them. This is the image school of thought.

We argue that these two concepts are not irreconcilable but are the opposite ends of a continuum. At the one end there are the brands that are image driven such as perfumes and some shampoos – Timotei, for example. At the other end are the famous, established brands that are selected because people know them and which are always available. Detergents, toilet tissues and dairy products are examples. The management challenge is to know where a brand fits on the continuum and to be able to allocate a blend of promotional funds appropriate to the brand’s position.

The mechanism we devised to assist management in this task is a derivative of the Capital Asset Pricing Model (CAPM) as used in corporate finance. CAPM is a central component in our well known brand valuation methodology. At its heart is the beta that is calculated by regression analysis. In its securities use, the beta is a measure of how the return from an investment in a share relates to the market return overall.

We see brands in a similar light to shares in that they too sell in a market and are a reflection of the market’s overall performance. By regressing the performance of a brand against its market, over a lengthy period of time, we are able to use the beta coefficient to illustrate how some brands are highly volatile and others extremely stable.

It seems that there is a relationship between low beta brands and those which are driven by in-store presence (Ehrenberg’s salience) and high beta brands which, by observation, are those that consumers demand due to their image.

This is work in progress but if what we seem to be illustrating in our early work is proven, we might have stumbled on a methodology that will provide marketing management with a vital tool to optimise the performance of their brands.