A recent report by the UK’s IPA sent tremors through the industry when it revealed that the correlation between creative excellence and advertising effectiveness was breaking down.
"Selling Creativity Short" showed that increasing short-termism and reduced ad budgets are breaking the bonds between creativity and effectiveness. Here the report’s author, Peter Field, explains why cutting advertising budgets is damaging creative effectiveness.
To a degree, the worst recession since World War II was bound to have an impact on marketing budgets because of its impact on market growth. Figure 1 illustrates the considerable effect that the recession (shown as the negative dip in GDP growth) had on the proportion of cases in buoyant categories. The GDP data is lagged and averaged over two years to reflect the typical period that IPA cases cover: the two years prior to the year of submission.
Not only was category growth adversely affected during the recession, but the long, slow climb back that is characteristic of this recovery has also left a legacy of sub-par growth. This, in turn, has left a trail of damage across the spectrum of marketing inputs and outputs.
Sales and profits stutter
Most obvious of these is the impact on the levels of sales and profit growth that campaigns have been able to achieve (Figure 2), neither of which experienced much of a post-recession bounce and have faltered thereafter. But perhaps the most pernicious impact of recession has been on budget levels. Companies have become much more reluctant to invest in share growth.
Figure 3 shows the dramatic effect recession has had on average budget levels, measured as ESOV (extra share of voice). ESOV is the difference between share of voice and share of market – the most important budgetary metric.
Lower ESOV results in lower levels of market-share growth. According to academic and author John Philip Jones, small brands may need five points of ESOV simply to maintain share, though this maintenance level is likely to be lower for the highly effective campaigns in the IPA Databank. So, very small levels of ESOV indicate a share-maintenance mentality.
Figure 3 reveals a "lunge" towards this maintenance mentality even among the relatively ambitious campaigns in the IPA Databank.
This has endured during the weak recovery, with no real sign of any feel-good surge to a growth mentality: budgets may have been raised by ambitious brands, but only in line with that of competitors, so ESOV has not recovered.
In doing so, many have been encouraged by a growing, but unfounded, belief that ESOV is no longer important in the digital age; that market forces linking investment to impact no longer apply. It is certainly not true that "earned" exposure is a reliable or sustainable substitute for "paid" exposure – it can boost paid impact, but, as the report shows, needs the fuel of paid exposure (ESOV) to deliver reliably.
The implication of Figure 3 is that marketers are increasingly looking to the campaign, rather than the budget, to make the difference to growth. This is naïve to a large degree: growth is a product of effective advertising and above-maintenance levels of investment behind it. The economic realities of media market forces mean that this will always be so.
Awards bring less budgetary reward
While this maintenance mentality is a general observation, Figure 4 shows that creatively awarded campaigns have been particularly affected since the beginning of the recession.
After a brief improvement to creatively awarded campaign budgets for the period 2006-2008, for the first time in the entire 20-year data run, the average awarded-campaign budget has subsequently moved into negative ESOV territory.
The significance of this should not be underestimated: creatively awarded cases from 2010 onwards, in general, had no right to expect to drive share growth. In fact, their expectations should have been for static or declining share.
Not only have creatively awarded campaigns entered dangerous new budgetary territory, but the impact of this on their effectiveness is actually greater than for non-awarded campaigns.
Creativity needs backing to shine
Figure 5 shows the relationship between ESOV and share growth for awarded and non-awarded campaigns, revealing the familiar steeper gradient (greater efficiency) of the former.
Efficiency in the report is a measure of the growth achieved per unit of investment behind the campaign. The chart has very important implications for investment behind creatively awarded campaigns. It powerfully demonstrates the benefit of creativity – that if you invest in growth with highly creative campaigns, you get a much bigger return on your investment than you would with less-creative campaigns.
But there is a flip-side to this where under-investment is concerned. The chart shows two widely overlooked features that reveal this.
If ESOV is cut to negative levels, awarded campaigns are likely to achieve less growth than non-awarded ones, meaning that the benefit of investment in creativity will have been wasted.
This is not hypothetical; it is the case with about 40% of awarded IPA campaigns. Their average share growth was in fact less than half of that achieved by non-awarded campaigns with negative ESOV. If ESOV is cut below about -8%, growth will tend to turn negative. No amount of creativity will overcome this.
Relative lack of investment behind creatively awarded campaigns has been a constant feature, because creativity is often used as a substitute for investment, rather than a multiplier to it. There is a false logic behind this; creativity delivers its business benefits only with positive levels of ESOV.
The brief rally over the period ending 2006-2008 was partly a result of some bigger, better-funded brands swelling the creatively awarded ranks. Since then, there has been a return to the long-run situation of brands with awarded campaigns being, on average, slightly smaller than those with non-awarded campaigns.
This has a double-whammy impact on effectiveness: not only are smaller brands less able to afford the investment in growth levels of ESOV, but they need greater levels of ESOV to drive the same level of growth as larger brands.
Of particular importance in the post-recession marketing world is that brands with dominant market shares achieve much greater share growth at zero ESOV than small brands with single-digit market shares.
'Earned’ exposure is not a reliable substitute for ‘paid’ exposure
So the reduced budgets resulting from the misguided belief that ESOV is unimportant are likely to reinforce the grip of brand leaders on their categories. Without adequate media investment, creativity’s potential as the challenger’s best shot at gaining on the leader is lost.
Of course, reduced campaign budgets are probably linked to short-termism because of the growing sidelining of comms budgets into non-campaign, short-term digital sales activities. So tackling short-termism is also vital.
But this will go unchecked until CEOs realise that there is a long-term cost to diverting marketing budgets into digital sales.
The report argues that the long-term health of brands, and of creative effectiveness, depend on a renewed commitment to brand-building investment. Hopefully this article has gone some way to putting a greater share of voice behind that message.
Peter Field set up the IPA’s Effectiveness Awards Databank. A former account planner, he is now a marketing consultant and author.