The value of advertising [Archives:2003/07/Business & Economy]
The Road Ahead
BY RAIDAN A. AL-SAQQAF
r_saqqaf@hotmail.com
A lot of injustice is done to advertising in Yemen. It is the first item to be cut if there was any pressure on the business to maintain high profitability, especially in recession times. Yet some businesses maintain and increase their advertising expenditure at those times, so that they gain market share because they know that everybody else is cutting. And when you gain market share, you keep it.
Maintaining profitability in the long term involves more than maintaining advertising expenses. It involves brand building for the medium and long terms, because strong brands give a company longer staying power in business and a reason to charge a premium. However, such efforts for brand building will go to waste if there is under investment in the advertising expenditure, and that hurts the brand’s long-term value.
The focus is on immediate action. Those who cut on advertising budgets believe that advertising which doesn’t have an immediate effect is useless. Whereas the attempt should be made to check and evaluate the medium and long-term effects of it and the strength it adds to a brand name. For example if 100 riyals spent on advertising generates 50 riyals of sales plus the accumulated added value that was generated, measurement of that value can prove that advertising doesn’t only pay back for its costs but also adds more to the value of the product and builds strong brand names.
Advertising depends on three things: creativity (execution), budget and media planning. You can’t do these efficiently unless you know what’s been previously done and have been able to measure it. Knowledge and measurability are essential for efficient practice.
There are six factors that are measurable for a brand’s strength and will be discusses below.
First, brand penetration. It means how many people use a particular brand, for example how many people read a particular newspaper or magazine. The second is purchase frequency; how many times your brand gets picked among others in the same category.
Third is price elasticity. This is the change in sales and the brand’s sales responsive to changes in price over a period of time.
The fourth, actual price, is the price premium a brand is able to charge in its category because of added value, over and apart from functionality.
The fifth is advertising flexibility. It refers to a measure of advertising responsiveness. How much extra sales did you get from the extra advertising? Finally advertising intensiveness is a measure of aggregate investment in accordance to the size of the brand.
By measuring those factors you can understand the real value behind advertising and hence appreciate the long-term effects of it.
Remember: There is more to advertising than immediate effects. There is brand building, which is critical in today’s competitive world. The six aspects mentioned above can help in the process of measuring advertising effectiveness.
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