Every €1 invested in advertising in Ireland delivers a net return on investment of €5.44 for marketers according to Core Media and AAI

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Every €1 invested in advertising in Ireland delivers a net return on investment of €5.44 for marketers, according to new report by

Core Media and the Association of Advertisers in Ireland

 

  • ‘Marketing Multiplied’ report outlines importance of marketing for economic activity as it provides jobs and boosts growth in an unambiguously positive way
  • Advertising, in particular, is a major engine of growth, contributing nearly 6 million jobs across the EU and driving 4.6% of total EU GDP
  • Boardrooms strongly criticised for not recognising real contribution marketing makes to business growth – but marketers told they need to ‘up their game’ and provide more accountability through better use of analytical measurement tools
  • ‘Marketing is among the least understood drivers of corporate performance. It is seen as an expense rather than an investment and this mind-set has to change’ – Patrick Coveney, CEO of Greencore Group plc and Chairman of Core Media

Every €1 invested in advertising in Ireland typically delivers a gross sales return of €8.26 and a net return on investment of €5.44 for brands operating here, according to a new report released today by Core Media, Ireland’s largest marketing communications group, and the Association of Advertisers in Ireland.

The report, entitled Marketing Multiplied, also highlights how creatively-awarded campaigns are six times more efficient than non-awarded campaigns in growing market share, loyalty programmes have very little long term effect, emotionally-based campaigns outperform rationally-based campaigns and marketers should spend 60% of their budget on long term brand-building activity and 40% on short term sales activation to achieve maximum efficiency and maximum effectiveness.

Authored by economists Chris Johns and Jim Power and Alan Cox, CEO of Core Media, the report

is the first ever large scale study that reviews the impact of marketing communications from both a macro-economic and micro-economic basis and demonstrates the significant contribution that marketing makes to national economies and individual businesses.

Marketing Multiplied highlights how marketing is a major driver of economic growth as it provides consumers with information, encourages innovation, promotes competition and leads to lower prices – all contributing to increased sales, higher employment and stronger economic activity. It also includes some of the most compelling local and international case studies in existence that prove and quantify the significant influence that marketing campaigns can have on the growth and profitability of businesses and brands.

Jim Power, economist and co-author of the Marketing Multiplied report, says the evidence is clear about the impact advertising has on economic growth.

Since the 19th century, economists have analysed and argued about advertising. But from both a theoretical and empirical perspective the position is clear – advertising is good for growth, promotes competition, helps innovation and leads to lower prices. The point about growth is worth emphasising as it is the least studied link to advertising. The evidence, however, strongly suggests that advertising is extremely important for the overall level of economic activity. It oils the wheels of economies, provides jobs and boosts growth in an unambiguously positive way. The evidence is clear that the influence advertising has on economic growth is extremely positive. The debate is mostly about the size of the effect. Researchers have found that €1 of advertising generates €5.70 for the Irish economy while other research, across different countries, finds similar – often larger – effects.”

This point is reinforced in a recent report from Deloitte and the World Federation of Advertisers which finds that advertising is a major economic engine, contributing €643 billion to GDP across Europe, representing 4.6% of the overall EU GDP. Advertising also contributes nearly 6 million jobs across the EU.

Despite the evidence about the significant contribution marketing makes to the economy, the Marketing Multiplied report highlights the fact that boardrooms are still not fully convinced of the importance of marketing and advertising in driving business growth.

It notes that while $542 billion was spent worldwide on advertising in 2016 and advertising fueled, on average, 15% of growth for the major G20 economies between 2001 and 2010, a recent Forbes study of S&P 1500 US boards found that just 2.6% of 65,000 board members had managerial-level marketing experience.

Patrick Coveney, CEO of Greencore Group plc and Chairman of Core Media, says marketing is among the least understood drivers of corporate performance and this mind-set has to change:

“The absence of marketers from boards cannot be good for companies. It means that a critical part of the business is not being given sufficient voice or respect and it goes a long way to explain why marketing budgets are thought of as an expense rather than an investment. Boards tend to be dominated by people with financial or engineering backgrounds, who are not necessarily trained to understand the consumer, the competitor landscape and external environment in a way that a skilled marketer can.”

“Boards often explain this shortcoming by saying that marketing is a tactical rather than a strategic pursuit and therefore has less of a place in the boardroom. This is plainly ridiculous. Of course, this challenge cuts both ways – marketers need to ‘up their game’, to make their input, agenda and style more relevant to their board peers. What’s needed here is to configure senior management teams and corporate boards with complementary skills; to embrace diversity of thought; to balance creativity, analytics and performance discipline.

Alan Cox, CEO of Core Media, says while boards can be criticised for being so uniformed as to devalue the role of marketing, the responsibility for this lack of support at board room level rests with the marketing communications industry.

“Put simply, we, as an industry, have not invested sufficiently in proving our case. We need better measurement, accountability and transparency in the advertising ecosystem. While this may have been excusable in the distant past, when measurement techniques were more intuitive and less reliable, that is no longer the case. The role and practice of marketing is changing and the ultimate destination is to get to a stage where marketing insights, and creative ideas, are devised using data analytics as a core ingredient in the decision-making process. The advances in data science will bring us to a point where marketers will be able to predict outcomes for brands based on thousands of case histories and billions of rows of data. Historical evidence is essential to the marketing industry as it helps to build credible cases for investment and provides clear learnings in relation to the building blocks of effective strategies.

“In such a hyper-digitised age, when brand identity is vulnerable and loyalty can’t be taken for granted, it is essential that we recognise the value of marketing and place it at the centre of our businesses. While embracing the opportunities that technology and data analytics now offer, we must also not forget the importance of creativity and innovation in driving business performance.”

The report identifies Econometrics as a key analytical tool for the measurement of marketing and advertising effectiveness. Econometric modelling can measure the contribution of any variable that has a role in driving the sales of a product or service – everything from TV advertising and promotions to the weather, the economy and even competitor communications – and quantifies their effects. By understanding past performance, this information can be utilised as a forecasting tool and offer immediate guidance on how to grow profit, properly evaluate marketing performance and make evidence-based decisions.

Utilising an integrated analytics approach can free up between 15% and 20% of marketing spend, equating to as much as $200 billion worldwide that can be reinvested by companies or dropped straight to the bottom line.

Some other key points highlighted in Marketing Multiplied include:

  • Creativity has a profound and quantifiable influence on marketing effectiveness, with creatively-awarded campaigns six times more efficient than non-awarded campaigns in growing market share.
  • Recruiting new customers is more profitable than trying to increase frequency of purchase. Compelling evidence supports the contention that loyalty programmes have little effect and when they work, they do so by mainly recruiting new customers, not by reducing churn or by extracting more value from existing ones. Marketers should advertise to everyone in the market for their product, rather than focusing on a small segmented audience. Loyalty strategies can produce cost-effective short-term activation effects, but the true cost of this is long-term ineffectiveness.
  • Emotionally-based brand campaigns outperform rationally-based activation campaigns on every business measure. They are significantly more profitable, they are better at generating awareness, they are stronger at creating differentiation and they form more durable memories of the brand in consumers’ minds. Marketers should adopt a carefully balanced approach that drives both long-term brand preference (through emotion) and short-term sales (through rational messaging).
  • Brands using paid media typically grow three times faster than those that rely on owned and earned media alone. Owned media typically increases the effectiveness of a paid campaign by 13% and earned media by 26%. However, very few campaigns generate these effects without having paid media in place.
  • On average, marketers should spend 60% of their budget on brand-building activity (long-term, broad reach, emotional) and 40% on sales activation (short-term, tightly targeted and information rich), to achieve maximum efficiency and maximum effectiveness. Both activities have their place, but over or underinvesting in one or the other will damage the growth of a brand.
  • The size of a brand has a major impact on the efficiency and effectiveness of marketing communications. Large brands have inherent advantages over smaller brands. They have higher penetration, wider distribution, stronger range and pricing strategies that help to maintain and increase share. As a result, smaller brands need to over invest, relative to their market share, to compete effectively. They must also devise campaigns with above average effectiveness, from a creative perspective, to drive growth.

Marketing Multiplied also points out that short-term marketing is on the rise and is damaging the profitability of marketing. Since 2006, the percentage of short-term marketing campaigns has more than quadrupled. Long-term campaigns – those that are evaluated over periods of longer than six months – are approximately three times more efficient than short-term campaigns. Short-term initiatives are more effective at driving transient sales effects, but they deliver weak long-term growth. Businesses need to employ both techniques, but in the correct proportion.

Barry Dooley, CEO of the Association of the Advertisers in Ireland, says the dramatic shift to short-termism in marketing is damaging the effectiveness of creativity and the return on investment it generates.

“This shift has been caused by recession-driven urgency, which is damaging to the profitability of marketing. Now, more than ever, there is a requirement to ensure that the marketing ethos informs the boardroom agenda. It’s time for marketers to regain control. Marketing should be seen as the engine room and not as a service function. Marketing really matters. It’s an economic catalyst, driving competition and innovation. It enriches the brands that people enjoy and trust. It contributes to society, not least by funding an independent, varied media and, fundamentally, it facilitates choice.”

 

For further details, please check out www.coremedia.ie

 

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