[0:10]Okay, so over the next 40 minutes, we're going to take you through some of the key findings of this new report, which is very attractively priced at 25 pounds as a special discount for today. So that's about as much of the activation messages as you're going to get from us today, because we're going to be talking quite a lot about brand building. Now, look, in 40 minutes, we can't really delve into too many of the nooks and crannies in this report. It looks at context in lots of different ways, so this is going to be in some ways disappointing to those of you who have very deep interests in particular areas, because we're going to just give you a sense of what it covers. And there will be a series, hopefully a series of follow on presentations where we dig more deeply into individual issues. The first of those is next Tuesday, if you want to know more about it, visit Thinkbox's website and they will appraise you of all the details. And that's the way we're going to play this out, because we can't really cover it all today. So, um, this is, as you will know, the latest in a series of publications, and very simply what we're looking at here is how does context, how does the context in which the brand operates, that is to say, whether it's big or small, online or offline, which kind of sector it's in. How does that influence the strategy and in particular, how does it influence how we should balance uh, brand building with activation, which is one of the key things we'll be talking about today. It does make a difference, we've been talking about that in vague terms for many years and quite rightly we've had lots of questions about, could you guys stop being so vague about this? So we're going to try and nail this now to the extent that we can uh and we'll talk more about that as we go through. As always, we've got 500 digital era case studies that we're looking at. I think you'll know the IPA database, but very simply what it enables us to do is to examine how inputs in the sense of strategic or media choices influence outcomes in the sense of business effectiveness. And, as I've said, we're going to be looking at that in the sense of context. Now, as always, you will never escape a presentation from Les and I without this chart. So my apologies in advance, this is the lens through which we view effectiveness and it and in a sense sets up an enormous amount of what we're going to be talking about. And that is to say you cannot generalize about effectiveness. Short term effectiveness happens to be almost exactly the opposite of long-term effectiveness. And unless we understand how these two work and pull us in different directions, then uh effectiveness is an incredibly complex issue. So here is our chart from uh the long and the short of it, 2013, in which we identify that there are two ways that marketing works. As always, we have said brand building is the primary driver of long term growth. If we are looking for year on year improvements to our share or our trading position or indeed our price sensitivity, then we need to be brand building. The steps in the growth ladder tend to be relatively modest, because it takes a long time to build a brand. We have to keep reinforcing the associations that we're trying to build, but when we do that, it primes uh growth very powerfully. Simply because these decay very, very rapidly. Um and as I'm sure you you learned from Orlando's presentation this morning, that consistency and building on what we've already done is a fantastic way to keep driving growth. And if we do keep investing behind a consistent set of brand associations, then uh this is the kind of pattern we see. But in recent years, of course, all the excitement has been around the sales activation model, often data driven in the current era, uh where what we're essentially doing is serving behavioral prompts to people. Behavioral prompts could be a deal or an offer, could be some kind of time of day or seasonal message, or just a piece of information, reason why ad that will nudge us to go and buy the brand now. Now, these of course, can generate very powerful short-term effects, they can really make us want to go and buy now, but they decay very, very rapidly. Sometimes they're time limited, always they're not very memorable, because we don't remember facts and information in the same way that the emotional associations that we use principally when we are brand building, they just don't, they're not memorable in that same way. So the decay rates are really linked to how memorable these different approaches are. And that's where of course, brand building scores over sales activation. Um we always, as always, observe that the the problem with all of this is that the cusp point at which brand building starts to take over as the dominant driver of growth is around about six months into the life of a campaign. Assuming of course, the campaign even runs for six months, and the horrifying truth is that increasingly they don't. So increasingly we're putting campaigns into the marketplace that we will never ever see significant long-term effects from because they're just not there long enough to embed the behavioral change that we're trying to make.
[5:15]Now, a lot of people have used that last chart, and yes, I think we may know who you are. Have used that last chart to justify short-termism, to say, look, we're in a kind of short-term world so we're just going to live in the left hand side of that chart, and that's what we're going to do. So I want to nail the myth that brands and brand building are no longer important in the digital era if I can in two charts, because it is possibly the most corrosive and idiotic piece of thinking that we've we've heard in recent years.
[5:48]So let's just look, we're going to split our 500 case studies into four piles. So Dunster's Corner on the left, those that didn't do any very much for the brand, nor did they activate sales very, um, strongly. The next the next column, which in a sense is the new way of thinking, this is what many more campaigns are doing, we're going to put most of our energy into activation, we're not going to worry about the brand too much. Then my third column is going to be in a sense the old fashion campaigns, the ones that says we're going to put all our energy into brand building, but all that new fangled activation stuff, digital activation, we're probably not going to do too much of that. And then the fourth column is the one that Les and I are championing, the ones that do both and do both in balance, so they build a brand and they activate the hell out of it. Uh probably somewhere not hugely adjacent to a 60/40 ratio. So this is how this plays out in terms of effect, this is our standard effectiveness metric. And you can see two very clear things from this. Firstly, that you have to do both, you have to do both. It's not good enough just to brand build, it's not good enough just to activate the hell out of whatever you've got. You have to do both if you really want to be as effective as possible. But the second point is that, if you look at the third column and compare it with the second, it is brand building that is the primary driver of long term growth. If we're not doing it, we're automatically putting ourselves in the slow lane. Unless of course, we're measuring success in the short term, in which case we're fine, but we're going to die in the long term. Now, then, a lot of people then say, yeah, yeah, but Les, Peter, you know, we're we're in this kind of really fast moving business. You know, we're very agile, we move, we turn on a sixpence, you know, that's the way we are. All of that brand building stuff is a luxury for the fairies, we don't do that. So I just want to nail that one, too. And we're going to divide our case studies into three piles now, and we're going to look at how each of those kinds of brands, these kinds of businesses, were able to drive short-term effects. So the ones that did nothing for the brand, the ones that did something moderate for the brand, and those that did something powerful for the brand. And this is how it plays out. So there's one terribly obvious conclusion, which I'm almost ashamed even to point out to you, which is that if we are not, if we don't have a strong brand, if we're not strengthening our brand, we can kiss goodbye to being agile in a marketing sense, and we've known this for decades. You know, we've we've known for decades that response campaigns are much, much more powerful when they have a strong brand behind them and the brand is there to build them. So anyway, let's just cut to the chase before I hand over to Les. The principles of balance actually turn out to be relatively simple, though it does get more complex in certain situations. This, as you will know, is the shape of the response curve that relates effectiveness to how we split our budget, 100% brand on the right, 0% brand on the left. And the sweet spot actually, over the last 20 years or so, at the moment is about 62% brand. More on that later, but that's an average over a long period of time and an enormous diversity of brands. I wanted to just make two points about this. Firstly, that there are two ways we can make a mistake. We could go to the right hand extreme, put all our money on brand building. The cost of doing that is about a 20% loss of effectiveness, but the brand will remain strong. We can correct that in effectiveness at a moment's notice by simply upping the activation. On the other hand, if we go this this way, which more and more business have done, and Les will give you a lovely example of a brand that did precisely that at the end of the presentation. This is the problem. We're not only do we get an enormous loss of effectiveness, more than effectiveness more than half, but the brand weakens. And as the brand weakens, the effectiveness loss will get bigger, and there is no quick come back from being this side. No quick come back, it takes time and money to get back from it. Les is agency, did a brilliant job for their client, but generally it's very, very difficult. So if there is a mistake to be made, it's going to the left, not going to the right on that chart. But let's look at the principles, and the principles are really very, very simple. When activation is easy, we shouldn't do what most businesses do, which is to pour ever more money into it. We should do exactly the opposite of what most businesses do, and that is to put money into brand building, more money into brand building. Because we're trying to achieve a balanced set of effects. And if one gets easier, we put money into the other. So take this as an example, where the purchase decision is very high consideration. That makes activation easier. So what do we do? We put more money into brand building in order to get that balanced set of effects. Opposite of what we think. Where emotions are very powerful in the purchase decision, that makes brand building a whole lot easier, because brands about creating emotional connections. And where that is the case, we can afford to put more money and we should put more money into activation. Les is now going to take you through a number of scenarios where each those kinds of factors play out. Over to you, Les. Okay, so brand and activation working in synergy.
[10:43]And they need to be balanced, but that balance is different for different brands in different contexts. And the new book examines the many different factors that influence that balance. I'm just going to give you some examples, because I think some of these might seem counter-intuitive. Um I think we can all understand that the balance might be different for different brands, um but in many ways, I think it's fair to say that it points in the direction you wouldn't quite expect. Let me give you an example. As Peter has sort of hinted, the nature of the purchase decision affects the balance. For some purchases, activation is easy, for some purchases, brand building is easy. And that affects the balance, but it's not quite what you might expect. So, for example, brands that are heavily researched online, high interest purchases that people will go and explore and Google and do some research on. Maybe the brands that they might go to price comparison sites for. Activation is easy. You tend to get much bigger activation responses for those high online search brands. And because activation is easy, you don't need to do so much of it.
[12:00]You can tilt towards the harder job, which is brand building. So the kind of brands that people are going to actively seek online actually need a higher balance, more like 74/26, tilting towards brand. So activation is easy, tilt towards the hard job, which is brand. Now, I don't think that most marketers would have thought it that that way through. I think I think because activation is easy for those kinds of brands, they would tend to think, oh, well, let's do the easy activation efficient job. You're going to see a whole series of graphs that look very similar, so watch closely. Um, brands that sell online also you get a bigger activation response on the left hand side there. Basically, if the brand is available to buy online, it's much easier to to close the deal and make the sale. So the activation job is easy, and therefore you focus on the hard job, which is building the brand. So for online brands, brands that sell online, again, it's more like 74/26. Online brands need more brand building, not less. And again, that's not the lesson that marketers have taken out of this. It's not the lesson they've taken out of this.
[13:16]Um, the way in which people buy matters. Um, and another way in which, which, which you can make a distinction about the purchase process is about the difference between what we call series purchases versus subscription purchases. So, series purchases, you know, FMCG, for example, subscription purchases will be something like, maybe buying insurance, where you sign up for an annual premium, or a gym membership, or could be something like dollar shave club. Now, when you've got a subscription brand, you get much bigger activation effects because typically you've got your customers' names and addresses. It's easy to do that activation job, and therefore what you need to focus on is the hard job of building the brand. So for subscription goods, it's more like 74/26. Again, that's not the lesson that marketers have taken out of the subscription model. Innovation. Innovation is tremendously important. There's a chapter in the book of the on the role of innovation. One of the things that we find very clearly is that product innovation, as long as it's significant, massively increases effectiveness.
[14:34]And one of the things it does is it makes the activation, the short-term activation job much, much easier. So if you've got a great new product, it is easy to get that those short-term sales. So you can dial down the activation spend and you need to spend more on brand, so it's more like 72/28 for products that have significant levels of innovation. And that needs to be flexed depending on the scale of the innovation involved. So for highly innovative products, brand building is more important. Now you see a pattern now. We've said that online research, online selling, subscription models and product innovation all make brand building a more important part of the mix, not less. Here's a different one. New brands, brands that are new to market. This is different from product innovation, this is where the brand is new, it's a brand that people have never heard of before. In that situation, it's easy to do a to move the brand metrics. If your brand awareness is starting at zero, it's easy to go up from there. So for new brands, the brand effects are actually much bigger in the early phase of the brand's career. Um therefore, for brand new brands in the early phase of their growth, we're talking about 56/44.
[16:25]But as brands grow and mature, the balance shifts. So as brands get bigger, what we find is that activation gets easier.
[16:36]Um well established, big, mature brands tend to have wider distribution, have a much more established customer base. These brands can do the activation job more efficiently than small or new brands. So actually what they need to do is to tilt towards brand building to maintain their market dominance. So as the brand grows and matures, you begin to tilt away from activation and towards brand building. So for brand leaders, for example, you're talking about 60 76/24, roughly. I mean, these are rough numbers, so but that gives you a rough idea. Um, and then the final dimension I'm going to talk about is pricing. This is different again. Pricing, it's not so much the scale of the effects, but it's the importance of brand building in the um, flow of profit. Um, what we know from our previous research is that if you want to reduce price sensitivity and I was very pleased to see John Webb talking about the importance of reducing price sensitivity. Because it's a massively important profit lever, which is under-utilized. If you can reduce price sensitivity and justify premium prices, that's a really, really good way to make more money. And the only way you can do that is through brand building. Um in our database, in the IPA databank, what we find is there is not one single example in all the over 1000 cases of a brand that's reduced price sensitivity through short-term activation.
[18:13]It can only be done through long-term brand building. And the more that you strengthen the brand and the more brand metrics you move, the bigger the reduction in price sensitivity.
[18:26]So this is a job that only brand building can do. And what that means is if you want to justify premium prices and higher margins, then you need to tilt the balance away from activation and towards high higher levels of brand building. So for premium brands, we're talking about say 64/36, and as you move up to the higher end, super premium, possibly even more. So these are indications of the kinds of flex of the rules and the flex of the of the 60/40 mix. It also affects the balance, the the share of voice rule that Orlando talked about this morning. So the the responsiveness of the brand to share of voice, how fast it will grow for a given level of share of voice, depends on exactly the same um contextual factors. And and the new book's going to or gives a a list of these these kind of modifiers of the rule. Um rather like Orlando's modifier that he talked about this morning, for different brands in different contexts. But Peter's now going to talk about how that flexes and how that plays out in different sectors. Thanks very much. And I should say that, um, because we're such kind people, um we've we've put a kind of ready reckoner in the back of the book, which will explain to you how to combine these factors. So you're probably sitting there thinking, yeah, but you know, what if I'm a big brand and it's new and it's, uh, so we we answer that question. And I think some very smart person at the IPA is working on a kind of online version of the ready reckoner. So we're spoiling it, you know, absolutely spoiling you. Uh so let me just talk a little bit about how this plays out across sectors, um, which is probably the question we get asked more than ever. And I should say in advance there is a limit to how far we can drill down. I'm just going to give you top line here. The book does go into more detail than I'm going to give you now. Um, but we just don't have time to go into all the little nooks and crannies. But I just wanted to open by making the point that and this is a placeholder really for a broader piece of work that we do in the book, which is to say, there is no situation where brand building is not the primary driver of long-term effectiveness. You know, even if you are some kind of, I don't know, trappist vegan beer somewhere, brand building is still going to be your primary driver of growth. Cut that one short. So here we see, um here is the by category by sector. In all these sectors, yes, there are nuances. There are some sectors in the in the other services sector, which is a bit of a hotchpotch of of very, very heterogeneous kind of kind of businesses. That does raise all sorts of issues. Um we go into those in some detail in the book. I'm not really going to go into them now, because it's a bit of a mind field. But essentially you can see the pattern. Whichever one we're working in, we have to build the brand if we want to drive long-term growth. The same, of course, is true of driving short-term effects. It's true in all these categories. If we want to maximize our short-term agility, you want you want to better word, we need to be building the brand. And again, it doesn't matter whether we're financial services or um durables, it's the same the world over. Now, it gets quite complicated. And Les has already touched on this, sometimes other factors come into play, many other factors come into play. So it is a little simplistic to say, let's just look at the activation effects and the brand building effects that are associated with each sector. But it does go a long way to predict the patterns in terms of 60/40 sweet spots that we observe. So you can see here, if you like, that activation effects are much easier to achieve in some sectors for many of the reasons Les has already talked about. So in financial services, for instance, and in services in general, non-financial services, activation effects are quite easy to get. A lot of online, uh, a lot of subscription, lots of online research of are going on in those. All sorts of factors are bubbling around in this area that just makes it easier to activate. So you kind of know where I'm going already, don't you? But let's just balance it off with some brand effects. There are differences in the ability to build brands in different sectors. Perhaps they're not quite as widespread as that. Retail, it turns out, is particularly difficult, but and in durables particularly easy. And again, that's probably more connected with the emotional power of many durables brands, particularly obviously the automotive sector. But you know, hell, even a window cleaner could possibly be exciting. Uh, so that varies. And it's the balance of those two. We said earlier that what we're trying to do is achieve a balanced set of effects. So where activation is easy, we might want to scale down. And where brand building is easy, we might want to scale down both of that. And sometimes they pull in opposite directions. It gets all a bit complex. Um, so let's just look at how it plays out. Now, you can see there are some surprises. The other service, the non-financial services is a bit of surprise when you look at that. But as I said, it's very heterogeneous. We need to divide it into perishable services and non-perishable services. Um and when you do that, that becomes apparent why you got that slightly anomalous result. I'm not going to say any more about that now. I just want to draw your attention really to financial services. Financial services, it turns out, is the sector where we need to up the brand building game most strongly. And of course, as we'll see in a minute, it's one of the sectors in which precisely the opposite is happening. Uh, we're putting more and more money out of brand building financial services than in any other sector. But it is because because it can be difficult to build brands and it is so easy to activate. So we need to really lean into the task of brand building in that sector. The others, durables, FMCG, not widely different from the 60/40 rule that we've banged on about for years. Retail again, not widely different, but again, we need to slightly up the brand. And then lastly, we'll end on our familiar belief. We keep on, we keep banging on. One day, one day, uh the world will come out in our direction. We urgently need to restore balance.
[6:29]I know it is very sexy to do all the activation piece and all these wonderful new tools we have, but we really urge you to take a look at our recommendations, use our ready rec now widget. Um think seriously about the context of your brand. And try and get yourself to the sweet spot that we're advocating. I promise you, it'll be a sensible start point, you may well want to tweak it over time. We can't cover every particular context or avenue that you might find yourself in, but start with that and see where it gets you. I promise you, because we've seen more and more businesses around the world who have followed our guidelines and have had enormous success off the back of it. So, please give it a whirl, don't dismiss it out of hand. Thank you very, very much. I think we may have a few questions. That's really interesting. Thank you. Hi, it's Kate. I work for Go Daddy, which is a very big digital brand. Okay. Um I love this. We we saw when you did the announcement in Australia and I pinned it around our US colleagues. So totally buy it. I guess one question I'd have from a real digital um sector is you know your lovely ziggy zaggy charts of short-term effectiveness. At some point usage, so short-term drives usage which drives brand. So that should be going up uh incrementally. Have you ever sort of figured that piece of the equation out? Because, you know, short-term, there's less risk involved with that sort of strategy than putting it in a digital sector with very short-term goals.
[8:44]Okay. So, well, first of all, something that we don't always say is all activity does a bit of both.
[8:55]Um so, what we're talking about is two different kinds of effects. Um the short-term effects are basically what you've got is existing demand and interest in the product is being triggered. And that is a pure short-term effect which doesn't necessarily build. The brand building effect is the degree to which you create new demand. Um so, um one of the feedback loops whereby brand building works is through repeated usage. You're right. Um but you don't the sorts of activity, for example, that um say price promotions. Price promotions are very good. So price promotions, the logic is that you you do 10% off and then that brings a whole load of new people into the brand.
[9:47]Um and um they've read a couple of books by some guys called Bennett and Field, which they quite liked. Um and um they decided to turn things around and reinvest in share of voice, using the share of voice rule, and to reallocate the budget more along the 60/40 rule. Um and they made, or we helped helped them to make um a brand ad like this. So that was quite different. Oh, sorry.
[10:19]I I normally pay for more plants in the audience than that actually. I couldn't afford it. Um um that was quite different from what they had been doing, and much broader reach.
[10:48]Instead of tightly targeted activation going to a small number of people, they did something that reached a much bigger part of the population. They used about two thirds of the budget went on TV with online video providing amplification. Um less focused on price messages and more rational reasons to buy.
[11:15]There is a message in there, but actually, a big part of it is just making people feel good about the brand and feel warm towards the brand again, so that when you do some kind of activation, it works more efficiently. Um and the results were I think quite pleasing. So the brand metrics improved as you hope they would. We could see that people were now searching for the AA again rather than some sort of generic search term. Acquisition and retention both improved despite the fact that they weren't discounting as much. Um but I think perhaps the most important point here is that we actually turned their market share around, which had been declining for five years or more, in a single year. So we often talk about the fact that brand building is important for the long term, long-term growth and it's a long-term investment. But going right back to the beginning and Peter's point, brand building makes the short-term stuff work better as well, because they work in synergy. So it actually does a short-term job as well. So, it's actually not that hard. And seeing Paul here, Paul Feldwick in the front in the front of the audience. I mean, we sometimes overcomplicate our job, don't you? Don't we? Don't you? Actually, you know, it's not that hard. You need a singing baby and uh and a song and enough money behind it. Um and obviously a lot of 60/40 stuff from Less and Peter. Okay, thanks. So I'm going to wrap with some conclusions and and with a bit of luck, there's a time for a few questions at the end. So what we've set up is that in a sense, the principles that guide the balance that we need to find are actually very, very simple. Um we're very simple, so it couldn't be that complicated. Where brand building, um where activation is easy, we need to put more money into brand building. It's very simple.
[13:21]At the end of the day, we're aiming for balanced sets of effects. We're not looking to put all our money into one thing and just trying to achieve balance between the two. Um generally speaking, for a lot of the reasons that Les touched on, activation is getting easier over time. That has been one of the fantastic contributions of the digital revolution. It's more than anything else made the job of activation easier. It's beginning now, I think, to make the job of brand building easier, but frankly, it's main contribution to date to the world of effectiveness has been through activation. And so, brand building media are becoming more important. No doubt about it. That's one of the reasons we're seeing particularly established brand building media get more effective over time, which we reported on in media in focus. So the 60/40 rule is shifting further to brand. And quite a way further towards brand, certainly not going the other way. Um so what it means is, as I said, is brand building media are becoming more important. We need to invest more in those media that are proven to build brands. Um and you only have to go back to media in focus to know where we come out on that. Um the trend in investment, of course, because it's a crazy world out there, is away from brand. And we know the reasons why, we know we live in a short-term world, financial pressures on businesses to to achieve powerful short-term results. But it is very, very corrosive on in marketing. Um and those businesses that protect marketing from the worst ravages of short-term financial pressures will always do better, whether they are partnerships like, um, John Lewis or, um, some of the German owned, um, retailers or or whatever. If you can be defended from the short-term pressures of a very short-term investment community, it makes a big help, of course. Um but some sectors, some context clearly, it has become more of a problem than others. And I'm afraid I pointed the finger at financial services. Uh if there is one sector that is showing us where things can really go wrong, it is it is that particular sector. But the flip side of that, of course, is that those brands that adhere to the rules and stick to doing great brand building advertising can clean up and can do extremely, extremely well.
[16:11]Um but I think I think one thing that we do talk about is that, um, we are surprised by the extent to which, um, brand building is becoming more important. I don't think we'd thought it was going to be quite as as extreme as that. Um but it's clearly quite a growing factor. I don't think either of us really thought that was going to be quite as quite as that. I thought of one. Um, um, which is about innovation. So, um, what we found was innovation really boosts effectiveness and that's quite that's not counter-intuitive. But actually what we found was minor innovation turns out to be worse than no innovation at all. Um which, um, I think some marketers would find that counter-intuitive.
[17:53]And the relentless drive for new news through doing product tweaks and minor variant launches and so forth. So we do have a real pop at the new news model of advertising, which we think is not very productive and not very helpful. But actually quite a few of the markers I've uh presented that to say, yeah, I thought that was the case all along. Um you know, innovation is great, there's got to be significant. Yeah, so Okay, thank you so much, Peter and Les.
