According to an Ernst & Young study, the failure rate of new U.S. consumer products is 95%. 95%! Imagine if Boeing or Airbus had a 5% success rate! Yet despite this appalling return, companies spend approximately US$1.5 trillion on marketing, and in particular advertising, annually!
A couple of years ago, (before the explosion of social media, Dominique Hanssens, a director at the Marketing Science Institute in the US and a professor at UCLA’s Anderson Graduate School of Management, reported that the average advertising elasticity for established products is .01. He went on to say that if one of those brands increased its advertising expenditure by 100%, it would see a sales increase of only 1%.
He used as an example Anheuser-Busch. If the firm doubled the US$445 million that it was spending at the time on TV, print, radio, outdoor, and Internet advertising, it would enjoy a 1% increase in net revenues from the then base of US$5.7 billion. Put another way, Anheuser-Busch would spend a total of US$890 million to make US$57 million.
We have to accept that mass economy models that made global brands out of such products as Coke, Budweiser, Marlboro, Sony and others are no longer relevant. And if firms continue to invest in outdated tactics that no longer work, their products will join the 95% club.
If they are to survive, brands today must address current branding imperatives. Current branding imperatives include building and maintaining relationships with customers and partners, internal communication, education, understanding and adaptation of corporate goals throughout the organisations.
Clearly defined organisational processes that are developed with the customer in mind and not shareholders or the organisation. These processes must be developed for both customer facing and non-customer facing departments, not independently but in tandem.
Communications, including advertising are important, but not the traditional one size fits all mass market approach. Communications must understand the requirements of prospects and customers and communicate with them using content that resonates with them via channels that are relevant to them.
Branding imperatives also require effective use of technology and, most important of all, ongoing feedback, measurement and improvement. These establish the foundations for identifying prospects and acquiring and retaining (key to brand success) profitable customers.
If John McEnroe were to play tennis against Roger Federer today, using the racquets he played with back in the day, he might win a few points but he is going to lose the match. It is the same for companies who fail to adapt to the branding imperatives of today.
If consultants recommend you emulate models used by such brands as Coke, Pepsi, Sony and other mass economy brands that were built when tennis racquets were made of wood, show them the door. Likewise, enormous budgets, integrated, synergistic, holistic, innovative, design or creative driven, energetic, positioning campaigns will not establish a brand.
Companies, and governments must understand that there is no quick way to build a brand. It is this obsession and belief that there is a silver bullet and it is called advertising that keeps the 95% club growing.