Media is fuel for the growth engine
A view from Gideon Spanier

Media is fuel for the growth engine

Investing in brands drives business growth, and will do so again after the coronavirus crisis passes.

Editor's note: I wrote this column for the March print edition of Campaign, before the coronavirus outbreak became a global pandemic.

The doom-mongers should stop grumbling about the march of procurement and the demand for ever-greater efficiencies in marketing because they are ignoring some good news.

Media is driving business growth, particularly in ecommerce, and smart brands are increasing their spend (even if there is huge, short-term uncertainty over the coronavirus outbreak). 

Amazon, L’Oréal and Diageo are just some of the companies that have hiked their marketing budgets faster than their sales growth in the past year.

Amazon, now a contender to be the world’s biggest advertiser, boosted its ad expense 34% to $11bn last year – well ahead of a 20% rise in sales.

L’Oréal’s 13% increase in expenditure on advertising and promotion (A&P) out-stripped its 11% rise in revenue. Similarly, Diageo’s marketing outlay rose faster at 8% than sales at 6%.

"The increase in A&P was not something that we had to do but it’s something that we chose to do," Jean-Paul Agon, chief executive of L’Oréal, told investors.

Spending more on its brands is "the best investment" because that will "strengthen our position" and "fuel the machine", according to Agon.

Rapid ecommerce growth means L’Oréal is getting to know its customers better, and "data-driven precision advertising" is delivering greater effectiveness – all of which is helping to increase profitability.

L’Oréal is positioning itself as a "beauty tech" company and more than half of its marketing spend is now in digital and 80% of that is in "precision" advertising.

Everyone should be wary about one-to-one marketing because of privacy and regulatory concerns, plus there’s the demise of third-party cookies on Google’s Chrome browser, which will make targeting harder. 

However, it remains the case that brands are collecting more first-party customer data from their owned channels such as websites and apps.

That means companies are getting better at understanding the whole customer experience and the growing role of digital media, marketing and data that connects so many of the touchpoints.

The new wave of direct-to-consumer companies is proof. They have built their businesses by combining communications, data and delivery seamlessly for consumers in the "bring-it-to-me" economy.

This is not marketing bullshit. Yes, brand-building, emotional storytelling, creating quality products and giving great service are all vital. Differentiation matters in a crowded marketplace.

But, increasingly, digital media is a unifying thread. Look at sectors such as financial services, telecoms or food delivery. Media is the experience from search and discovery to customer acquisition and sale and then after-care and retention.

This is a thrilling time to work in media. If it’s becoming harder to reach consumers with commercial messages because of ad-free streaming and media overload, so much the better.

Successful companies must get smarter. That’s why being able to manage the Adobe technology stack or Salesforce’s CRM platform is becoming central to many brands’ media plans as they need to run and optimise campaigns and collect data. 

There are caveats: the digital media supply chain has problems, including measurement, fraud and brand safety; D2C companies can’t focus on revenue and defer profitability indefinitely; and the pressure to save money remains relentless.

Diageo, which talks about a "culture of everyday efficiency", upset some agencies by apparently pushing for longer payment terms during its global media review.

Yet we should focus on the bigger positive: Diageo is investing more in its brands, "with the goal of fuelling long-term sustainable growth", as Ivan Menezes, its chief executive, put it.

Procter & Gamble and Unilever are talking a similar language. They spent the past few years slashing agency fees but are now increasing spend on "working media" – the money that goes into placing the messages and content that consumers see.

Jon Moller, chief operating officer of P&G, explained why the company is re-investing efficiency savings in marketing: "We would prefer to spend that incremental dollar on advertising or innovation every day of the week. The reason is very simple: There’s nothing proprietary about pricing. We can build proprietary advantage with both advertising and innovation."

Now, more than ever, media fuels growth.

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