ECONOMICALLY-ACTIVE POPULATION

300 millionECONOMICALLY-ACTIVE

India(conservative est.) 60 million

Japan 128 millionGermany 83 millionU.K. 61 millionFrance 60 million

800 millionECONOMICALLY-MARGINAL

JOHN PHILIP JONES

ECONOMICALLY-ACTIVE MEANSBRAND CHOICE:

For All

Repeat-purchase Cars Jewelry

Airline travel Luxury cars

Cultural pursuits Overseas travel

Funds for some

investment

Funds for major

investment

Branded clothing

Financial services

Consumerelectronics

packaged goods

For Some For A Few

A brand is a product that provides

functional benefits plus added values that

some consumers value enough to buy.

To the consumer, a strong brand provides:-

A guarantee of homogeneity and quality;

Ubiquity;

Extra perceived value for a premium price.

To the manufacturer, a strong brand provides:-

Profitability, from a premium price;

Profitability, from the scale economiesof large output;

Long-term staying power.

LINE EXTENSIONS

Searching for pockets of growth in mature categories

Searching for a new group of users, ideally in expanding segments

IN MOST CASES THEY DO NOT ADD NEW USERS - THEY CANNIBALIZE EXISTING BUSINESS

IMPORTANCE OF WOMEN

REPETITION OF PURCHASE

BRAND REPERTOIRE

TYPICAL CONSUMER'S BUYINGPATTERN

BOODGBOCOBGBGABBGBBDBGBCBBGGBBB

Primary brand (B)Secondary brand (G)Tertiary brands (O,C,D,A)

1579

REQUIREMENTS

Getting the important things right does notguarantee success but it reduces the odds of failure

- Functional superiority- Positioning- Name- Price

- Distribution- Trade promotions- Consumer promotions- Consumer advertising

Blind Test Named Test

2615

27

26

47

59

Blind Test

26

27

47

FUNCTIONALITY

. . . . comes from what is in the box

. . . . comes from what is in thethe consumer's mind

ADDED VALUES

SOURCES OF ADDED VALUES

Personal experience of the brand

Type of people who use it

Belief in the brand's effectiveness

The brand's appearance

BRAND BUYING AND AAV

BRAND BUYING

ACCUMULATEDADDED VALUE

BRAND BUYING AND AAV

BRAND BUYING

ACCUMULATEDADDED VALUE

PRICEDISTRIBUTIONDISPLAY

ADVERTISING

SALES PROMOTION

Strong immediate sales boost

BUT . . . . .

Large reduction in receipts

Large increase in direct costs

Substantial reduction in profit

SALES PROMOTION

Shrinks profit

Fuels competition

Reduces brand loyalty

No repeat purchase

Mortgages future sales

Debases image

MAINTAINING A BRAND AS A PROFITABLE ENTITY

Advertising almost invariably incurs a net cost:

This is normally less than 50 cents per dollarinvested, after deducting the Payback fromthe sales directly generated

Advertising is a necessary expenses to sustaina high level of sales, which generates scaleeconomies and which in turn maintain lowprices which underpin a brand's totalmarketing effort

DEVELOPED RETAIL MODEL

MANUFACTURER CONSUMER

Single link but multiple levels of negotiation

Rapid stock turnover

Little spoilage

Large volume per store

Welcoming environment

Pressure on manufacturers

Low prices

INDIAN RETAIL MODEL

MANUFACTURER CONSUMER

Multiple links

Slow stock turnover

Heavy spoilage

Small volume per store

Less-than-attractive environment

Little pressure on manufacturers

Relatively high prices

INDIAN RETAILING

15 million retail outlets

4% of shops reasonable size (46 sq. meters plus)

Spoilage of 35-40% fruit and vegetables

"Organized" retailing 3% of total sector but

growing by one-fifth every year

450 shopping malls in place or under development

Reliance and Wal-Mart both have plans

HOW MUCH ADVERTISING WORKS

Direct($bn.)

Globaladvertising

350 (100%)150

100 110

70

70

(41%)

(14%)

(28%)

Positiveshort-termeffect

Positivemedium-termeffect

Pays its way

General($bn.)

DevelopedCategories

UndevelopedCategories

MotivatingArguments

DiscriminatingArguments

DevelopedCategories

UndevelopedCategories

MotivatingArguments

DiscriminatingArguments

USA

India

RESEARCH BEFORE ADVERTISING EXPOSURE

WhereAre We?

StrategicDirection

GenerateCreative

Ideas

CreativeDirection

CreativeCommunication

Pre-exposureHealthCheck

Why areWe There?

Concealed and indirect:people are not told to "watchthis".

entertainment program.

calculation of average scores.

Single screening within an

Broad battery of cases;

MAXIMUMANNUALCONTINUITY

OPTIMUMWEEKLY GRPs

MAXIMUMANNUAL REACH

BACK TODRAWINGBOARD

CREATIVEGATE OPEN

CREATIVEGATE CLOSED

THE GATEKEEPER

For any short-term, medium-term or long-term effect, advertising must immediately influence consumer behavior:

In growing categories, to boost salesIn static categories, sometimes to boost salesTo maintain sales against strong competitionWhere brand is losing ground, to decelerate decline

MEDIUM-TERM EFFECT

Year-end is the time for stocktaking and review of the past and future

Evaluate overall change in market shares

Evaluate changes in productivity of advertising investment

Examine continuity of advertising schedule

If possible employ econometric evaluation with payback measurement

BRAND-BUILDING

Long-term effect of advertising is expressedthrough strengthening brands

Positive effect on sales is common but not universal

Protection/reinforcement of existing purchasing patterns always takes place

Long-term growth of profitability is the mostgeneral effect

ADVERTISING EFFECTS

PERIOD PURPOSE DRIVER

Short Gatekeeper Creative

(one week)

Medium Annual sales Creative/budget/

(one year) measurement media

Long Brand building Accumulated

(distant horizon) added values

ANNUAL SALES OF BRANDS XA AND XBIndex (Sales Of XA In 1975 = 100)

125

100

75

50

25

01975 1976 1977 1978 1979

XA

XB

WEEKLY SALES OF BRAND YAIndex (Sales In First Week - 100)

VOLUME

SALES

INDEX

150

125

100

75

50

25

0Weeks

PURE SINGLE-SOURCE RESEARCH

A technique that measures each household'sreception of advertising for specific brands . . .and relates this to the purchasing of thosesame brands by the same household shortlyafter the advertising.

STAS FOR BRAND AL

BRANDAL'S

SHAREOF

PURCHASEOCCASIONS

100

8

6

4

2

0

STIMULATED (4.8)AT LEAST ONE ADVERTISEMENTFOR AL DURING SEVEN DAYSBEFORE PURCHASE

NO ADVERTISEMENTS FOR ALDURING SEVEN DAYS BEFOREPURCHASE

BASELINE (3.0)

{{

RANGE OF STAS EFFECTS236

164

139

121 116108 103

9789

73

RANGE OF MEDIUM-TERM SALES CHANGES

182

121113 109

103

98 94 9084

69

SA

LE

S

SA

LE

S

ADVERTISING ADVERTISING

More Than200 Cases

Fewer Than20 Cases

MEANING OF DIMINISHING RETURNS - CALCULATION

COSTINDEX

One Exposure 100 100

Two Exposures 200 115

Three Exposures 300 125

SALESINDEX

Every week there are some buyers of the brand . . .

Therefore plan weekly media exposure . . .

For as many weeks as the budget will allow.

To cover a substantial proportion of the targetgroup once with minimal duplication . . .

STASDISCONTINUITY

AD-DRIVENSALES

WEEKS

STASCONTINUITY

AD-DRIVENSALES

WEEKS

ECONOMETRIC STUDY OF 800 CASES

Weeks Index of SalesEffect

Low Continuity 9 61Medium Continuity 22 106High Continuity 39 132

"Brands that are planning to increase weight should first consider adding weeks instead of adding weight to existing flights."

LONG-TERM EFFECTS OF ADVERTISING

PenetrationHIGH

Consumer PriceHIGH

Price ElasticityLOW & SLOWLY DECLINING

Purchase FrequencyHIGH & SLOWLY INCREASING

Advertising IntensivenessLOW

Advertising - ElasticityHIGH & SLOWLY INCREASING

SOM / PENETRATION RELATIONSHIP,BRANDS IN 12 CATEGORIES, 1991

300

300

200

200

Pe

ne

tra

tio

n In

de

x

Share of Market Index

100

100

PURCHASE FREQUENCY BY SOM QUINTILES,12 CATEGORIES, 1991

Pu

rch

as

e F

req

ue

nc

y In

de

x

Share of Market Quintiles

Bottom

160

140

120

100

80

60

2 3 4 Top

PRICE ELASTICITY

Price elasticity is the percentage by which sales of a brand will increase immediatelyas a result of a 1 percent reduction in price.

It is essentially a measure of how easily consumers will substitute brands. if the price of A goes down, how much will they reduce their purchasing of B in order tobuy more of A ?

An average elasticity is -1.8.

ELASTIC - HIGH SUBSTITUTION

Price

Large Lossof Sales

Quantity

INELASTIC - LOW SUBSTITUTION

Price

Small Lossof Sales

Quantity

PRICE ELASTICITY

Brands with heavy advertising - 1.0

Brands with light advertising - 1.4

PRICE INDEX COMPARED WITHCATEGORY AVERAGE

All brands 100

Largest 10 brands 114Second-largest 10 brands 110Remaining 58 advertised brands 9964 unadvertised brands 97

Advertising elasticity is the percentage by which sales of a brand will increase immediately as a result of a 1% advertising uplift

An average elasticity is +0.2, although there are many cases in which there appears to be no effect at all

SHARE OF MARKET AND SHARE OF VOICEADVERTISING-INTENSIVENESS CURVE

Share of Voice

Minus

Share of Market

Share of Market (%)

+5

+4

+3

+2

+1

0

-1

-2

-3

-4

-5

1-3 4-6 7-9 10-12 13-15 16-18 19-21 22-24 25-27 28-30

XXXXXXXXXXXXXX

AUTOMOTIVEHOW MUCH SHOULD

(ADVERTISING-UNDERINVESTMENT BAROMETER)

SOV Below SOM

-1

-2

-3

-4

-5

-6

-7

Dangerous

Marginal

Safe

UNDERINVEST?

GOOD COOKS MAKE BIRYANI

GCMB

GatekeeperContinuityMedium-Term EffectBrand-Building

====