Q: Last year, our board hired a new CEO who’s the “P&G type.” That means he’s a believer in advertising as the organizing center for getting a brand to a market leadership position. He replaced his opposite, a CEO who in contrast is all promo.
Our former CEO believed that we are in an industry just like the telcos.’ Some 80 to 90 percent of our revenue comes from consumers like the telcos’ prepaid subscribers. They switch to the competitor with the latest promo or lower price. While revenues are high, they go up and down like a roller coaster.
Our board said they wanted more “peace and quiet because everybody’s tired.” And so they hired someone who promised “a steadily rising revenue because advertising will build the brand that will in turn keep consumers loyal.”
What do you think? We all somehow miss the excitement of our former promo-driven marketing days. But at the same time, we’re beginning to like this more predictable daily routine. Sales have not gone up that much but neither has it gone down. Still we all ask one another every now and then: “For generating sales, should we now stay with advertising or get back to promo?”
A: Often our sense of uncertainty comes the way we frame the choice condition we confront. Look at the way you’re framing your choice: “Either stay with advertising or get back to promo for generating sales.”
What about framing it in terms of both advertising and promo working together?
After all, the marketing budget refers to these two marketing mix variables as A&P (advertising AND promo) and not as A/P (advertising OR promo). Marketers with a marketing mix mindset also think in terms of the A&P mix. Each has a purpose that complements one another. Here’s the specific thinking of marketers about the A&P mix’s complementing purposes.
“If you advertise, you must promote.” Advertising reaches a lot of consumers. But because advertising is a “pull promo,” it’s still up to the reached consumers to decide whether or not to take action on the advertising’s message. As a “push force,” consumer promo provides the incentive to heed advertising’s call to action. That’s to buy now and not later.
This is not to say that advertising won’t lead consumers to buy and therefore create sales. But whatever sales advertising will bring about will be sub-optimal. More and even much more sales can come if promo will be a co-worker of advertising. This is what is really meant by that reference to your new CEO as the “P&G type.” It’s about the A&P mix and not just to advertising without the promo.
The obverse of the rule, “if you advertise, you must promote,” says: “If you promote, then you must advertise.” But what you advertise is what you promoted. Why so? By definition, promotion reaches a limited audience size. So if you wish a wider audience to participate or benefit from the promo, then advertise it. This was exactly what the Unilever promo event, Lovapalooza, did. Instead of advertising the promo’s brand sponsor, the ads especially the billboards were all about Lovapalooza with only a side mention of Close-up. Those ads called for more participation in the Guinness’ Book of World Record breaking event. In fact, the later promo effectiveness research showed that a good percentage of consumer respondents could not even remember what brand was being advertised. The advertised promo overwhelmed the brand.
The more practical question is: “When should you have an A&P mix that’s advertising-driven and when promo-driven?” You and your board seem to think that it’s a matter of purpose. If you’re after a steady sales growth driven by brand equity building, then it’s the ad-driven A&P mix that’s appropriate. On the other hand, if your game is to grab market share whenever you can, then the promo-led A&P mix fits this purpose.
That’s a thinking which is about the individual element of the A&P mix but not about the mix itself. The mix mindset considers both ad and promo and their co-working relationship. The deciding factor here is the responsiveness of the target market segment. If you’re after a premium price segment, this market’s priority in favor of quality more than price predisposes consumers in this segment toward an advertising-driven A&P mix. This is what you referred to as the “P&G type” of thinking to raise revenue and market share. P&G’s faith in advertising’s revenue productivity power is widely known in the FMCG (fast moving consumer goods) community. The head of marketing in P&G does not hold the title of Marketing Director. He’s known as the Advertising Director.
What if your target market is the economy price segment? Consumers in this segment are primarily motivated by price and its varied forms. Concern over quality is secondary. So, it is the promo-led A&P mix that induces consumer purchase and therefore sales. There is advertising in the A&P budget but it is in support of the promo more than the brand.
So there’s the answer to your question: “For generating sales, should we now stay with advertising or get back to promo?” First, think in terms of the A&P mix and not each element of the mix. Advertising has its purpose and so has promo. They often complement each other. So when implemented as a mix, the total effect is greater than the sum of the effect from each element of the mix. Second, the A&P mix comes in two configurations: (1) an advertising-led A&P mix where promo plays support to advertising, and (2) a promo-driven A&P mix where it’s now advertising that’s in support of promo. The first fits the needs of marketing in a premium price segment while the second is appropriate to marketing in an economy price segment.
Keep your questions coming. Send them to me to ned.roberto@gmail.com.