Melinda Wienand, Director, Marketing Effectiveness Practice, Nielsen, SEANAP
You have to spend money to make money. But many of Australia’s manufactures aren’t investing their marketing dollars as effectively as they could be. Their high spending on trade promotions and discounting—to the tune of approximately AU$430 million during the past year—is only helping them make a few quick bucks instead of earning them long-term sales from increased loyalty. At the same time, media spend—a proven driver of purchase intent and loyalty—has dropped 6 percent, equating to AU$150 million in lost value for fast-moving consumer good (FMCG) manufacturers when accounting for the long- and short-term effects of media.
Manufacturers are sacrificing long-term brand health for short-term gains and ignoring the fact that the right marketing mix drives sales, loyalty and brand health. Just offering low prices doesn’t alter long-term purchasing behavior. And shoppers are catching on—only 1 percent of the country’s consumers believe they are receiving better value in-store.
Currently, half of Australian shoppers are visiting two or more retailer brands in a four week period to gain the best deal that week. Or, they are switching brands for a promotional period and returning to their ‘favorite brand’ when pricing returns to normal. Neither drives long-term engagement or purchase behavior for brands. Instead, equity needs to be developed at a range of touch points including advertising and other marketing initiatives.
There are three key ways to flip this around and achieve marketing success:
1. Switch Strategic Focus to Balance Equity and Sales
Media investment within FMCG brands should be approximately one-third the size of trade investment in order to boost long-term sales. Manufacturers need to consider the return on investment (ROI) they want, and take actions to achieve this.
2. Optimize Media Spend with Diligence and Rigor
TV is still the best way to reach a mass audience, and 89 percent of Australians watch approximately 24 hours of TV each week. The key to a successful TV plan is building efficient media strategies to maximize ROI through continuous and regular spots, a unified message, quality copy and layered synergistic media channels to maximize reach and gain higher brand recognition. By coupling this with efforts to drive unduplicated reach via digital advertising, brands will realize further media spend efficiencies while building market equity.
3. Realize Value from Increased Equity
To increase a brand’s value and therefore profits, manufacturers need to focus on building market equity. The ideal situation is to achieve a Virtuous Cycle—continuous brand-building efforts that allow well-timed price increases. However, a recent Nielsen study of 14 FMCG categories found that lower-tier brands are currently increasing prices by 8 percent on average, while prices of high-tier products are declining by 3 percent due to deep discounting and other price promotions—the reverse of the ideal, and an issue that needs to be addressed.
In the current retail market, manufacturers need to focus on getting the balance right and building brand equity through well-placed marketing investment. The current climate of using promotions to drive volume is unsustainable, and trade spend needs to be balanced with media spend to ensure long-term brand health.