Jack Myers Note: Although I believed in 1993 that the dynamics and realities confronting the advertising and media industry today would have materialized by the end of the last decade, the fundamental truths from my 1993 book Adbashing: Surviving the Attacks on Advertising are even more relevant and pertinent now. The downsizing of America is finally underway, with a vengeance. Unfortunately, it may be too late for many advertising-dependent companies to learn and apply these lessons.
Throughout the 1980s, the advertising and media industries were blinded to their loss of share of the total marketing communications pie by the growing size of ad budgets invested to support the influx of new products, services and companies.
The number of automobile brands grew from 18 in 1975 to more than 40 in 1992, with multiple sub-brands within each product group. Rather than three-four major shampoo brands in 1970 (Breck and Prell controlled over 50% of the market), today there are over 100 brands, including generics. The ad budges invested in the launch and growth of new products has been the goose, laying thousands of golden eggs for media companies and advertising agencies. In the 1990s, the goose has died.
Manufacturers are now consolidating brands and shrinking their brand base to support their core products -- those that are strong and profitable. There are fewer product introductions. New products that do come to market receive less media support. Marketers are dependent upon trade promotion, direct marketing and consumer sales promotion for the bulk of their marketing activities.
As an industry, advertising must focus on how it can enhance marketers' ability to establish and maintain brand loyalty. Secondly, traditional media must offer integrated direct marketing and promotional capabilities as a basic component of their business. Thirdly, the ad industry must develop the measurements to prove the effectiveness of advertising for generating sales and establishing brand loyalty.
If the ad industry fails to achieve these goals, corporate investments in advertising will decline at a precipitous rate during the next five-seven years. As total marketing budgets decline, the advertising industry must capture a larger share of existing budgets. Advertising industry growth can no longer depend upon new product introductions. In the era of product consolidation, media must stem and reverse the erosion of its share of total marketing investments.
The advertising industry must re-orient its priorities and understand how, as an industry, it can best compete with promotion and direct marketing. It is not practical to denigrate these services. Advertising should attack only from a position of strength. Established brand equity is a valuable commodity as mega-retailers Kmart, Wal-mart and others allocate more shelf-space to unbranded "generic" products. Only high demand branded products will control their own distribution destiny. Advertising, as an industry, must focus on its ability to create, build and maintain awareness and loyalty for branded products and services, clearly demonstrating, through research, the value of advertising for creating consumer demand and driving retail distribution.
More important than a presentation of why advertising works to build brand identity is how it works. Media companies must fund research to identify the core advertising processes that achieve marketers' specific objectives. This research should be conducted in partnership between media companies and major marketers to establish proprietary knowledge, enabling marketers to refine their media use based upon actual results.
Integrated marketing, which combines advertising with sales promotion, direct marketing and other marketing capabilities, has not proven to be a practical reality for advertising agencies. Ad agencies attempting to absorb promotion and direct marketing is much like the goldfish trying to swallow the shark. Conversely, promotion agencies and organizations such as Michael Ovitz's Creative Artists Agency pose a threat to the ad agency business. They are positioned to absorb the traditional roles of the ad agency by operating as full marketing partners for their clients and, piece by piece, embracing the advertising agency's traditional responsibilities.
Sales promotion, trade promotion and advertising serve three different and distinct functions. In this context, media and ad agencies can slowly incorporate consumer sales promotion and direct marketing budgets into advertising budgets by demonstrating how advertising can support a consumer sales promotion effort. To succeed, media companies should integrate consumer sales promotion, direct marketing and research services into their capabilities, providing marketers with turn-key programs that:
-- establish brand identity;
-- drive sell-through at retail by providing promotional reinforcement and motivation;
-- and measure results in both areas.
A new foundation of strength for the advertising industry will be built upon building brand equity for marketers and drawing revenues from trade promotion budgets into integrated advertising/sales promotion programs. Brand loyalty is the pillar that holds up traditional advertising media. The advertising industry's attack on its competition must focus on:
-- renewed commitment among marketers to building consumer brand awareness and loyalty;
-- rebuilt confidence in the contribution of advertising to brand equity building;
-- research that clearly demonstrates how advertising builds brand awareness and loyalty;
-- integration of consumer sales promotion and direct marketing capabilities into advertising campaigns to join brand advertising with directly measurable short-term sales results;
-- recognition among media companies and trade associations that the competitive opportunity is to draw budgets away from trade promotion to integrated advertising/promotion campaigns.
Jack Myers consults with media, agencies and marketers on transformative business models and revenue growth strategies. He can be contacted at jm@jackmyers.com.
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This post originally appeared at JackMyers.com.