Where’s the value: buying investments; why purchasing behaviour matters Tom Lewis Finance Director Institute of Practitioners in Advertising
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Where’s the value: buying investments; why purchasing behaviour matters
Tom LewisFinance Director
Institute of Practitioners in Advertising
- Marketing’s two (main) levers
- The manifold effects of marketing
- Short-termism vs effectiveness
The myths
- linearity- shareholder value concept- financial savings vs economic losses- the professional-buying myth
- fixed value- buyer’s behaviour irrelevant- minimising seller’s profit as a proxy for value
The reality – Effectiveness (IPA research)
a series of short-term effects does not necessarily lead to successful long-term effects; long-term effects are more than just an accumulation of short-term effects
volume growth is quickly achieved (via activation); reducing price sensitivity (via branding) takes longer. Optimum profit growth requires both
long-term effects are generated differently from short-term effects
Time
Sale
s upl
ift
Sales activationFocus on immediate sales
Big volume upliftsFast decay
The short term approach
Source: Binet & Field 2013
Time
Sale
s upl
ift
Brand buildingFocus on long-term “saleability"
Smaller volumes, but slower decayReduced price sensitivity
The long term approach
Source: Binet & Field 2013
Time
Sale
s upl
ift
Sales activationShort term sales blips,
but no long term growth
Short term strategies under-perform
Source: Binet & Field 2013
Time
Sale
s upl
ift
Brand buildingLong term sales growth,
Increased margins
Brand-building drives profitable growth
Source: Binet & Field 2013
Short-termism is rising
2006 2008 2010 2012 2014 20160%
5%
10%
15%
20%
25%
30%
10 years ending
% ca
ses s
hort
-term
Source: Binet & Field 2016
Is effectiveness declining?
19801982
19841986
19881990
19921994
19961998
20002002
20042006
20082010
20122014
2016 -
0.5
1.0
1.5
2.0
2.5
Avg.
no.
VL b
usin
ess e
ffect
s
Source: Binet & Field 2016
Buying investments as investments
The Challenger approach:
How are you buying?
“You can’t table thump for genius” (David Meikle, How to Buy a Gorilla)
What are you buying?And what does that mean you are getting?
- inputs (hours, timesheets, staff costs)
- outputs (spots, campaigns, media plans)
- outcomes (reduced base erosion, price increases, market entry)
Final thought:
- would the Sex Pistols have gone on a reality talent show?
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