What to do with ad budgets when sales are down

QUESTION: How do we decide on our advertising budget? As they say, you spend what you earn. In 2006, one of our brands performed poorly. So this year, its ad budget is very small, so small that it’s impossible to support production of a TV material. How should we address this problem?

Answer: First, resolve for the New Year that you will no longer make marketing decisions according to “rules of thumb.” Rules of thumb are convenient decision shortcuts that enable us to cope with difficulties including decision challenges. But when they are based on assumptions that are no longer current, they obviously lead to wrong decisions.

This is true when deciding on your advertising budget as a percentage of your sales.

The rule of thumb is: “When sales go up, up goes your ad budget as well. When sales rise, down goes the ad budget as well.” Most of the time, it’s the reversal of the rule that is appropriate.

When sales go down, that’s when your product needs more support from your advertising to help move up sales.

Remember, advertising is one of your marketing mix tools for generating sales. Advertising is a means. Sales are an end. When you say the ad budget should be a percentage of sales, you’re saying the end should determine the means.

As one of your sales generators, any specific ad campaign has marketing functions you want it to perform, like raise your brand awareness by so much, brand image rating by so much and purchase intention for your brand by so much.

You have norms or you can get industry norms for each of these functions and you can benchmark on how much an average ad campaign will cost to undertake each of those functions.

This is the more logical basis for deciding on your ad budget.

Q: How do we properly segment the market for our products when the buyers are mothers but the end users are their children? Whose (product priority) value do we prioritize?

A: Your product category represents the case where the decision-maker or the buyer is one person, namely the mother, while the end-user is another, namely the child. It’s a family product and not an individual product.

Marketing 101 tells us that in such a case, you should respect the differing priorities of your two consumers, the buyer and the end-user.

Take the case of Sustagen when it was relaunched in the early 90s to compete against Milo and Ovaltine. Sustagen’s research revealed that it was in exactly the same situation as your product. The decision-maker and buyer was the Mom. The end-user was the child. The same research showed that the priority value of Mom for the chocolate drink of her child was “nutrition” while “taste” was a secondary value. The child’s priority was almost exclusively for a “yummy taste.” To the child what was yummy must be nutritious.

So what does Marketing 101 mean when it says you ought to respect these differing (and in this case, diametrically opposed) priority values? That simply means that in your communication with Mom, you support and reinforce her priority favoring nutrition. And that’s exactly what the Sustagen TV ad campaign did. It converted the TV into a nutritionist who announced that she’s better off giving her child Sustagen with its 23 “'resistensya' [resistance] builders.” On the other hand, in its communication with the child, another TV ad talked to the child about Susy and Geno, who told the child how to concoct his or her own tasty Sustagen shake.

Was that the right move? Marketing 101’s recommended GMP (Good Marketing Practice) was vindicated.

Q: My daughter, who’s taking up Integrated Marketing Communications, surprised me when she said the 4Ps are out and 4Cs are in.

Here’s the correspondence: product, out; consumer values, in; price, out; consumer costs, in; place, out; convenience, in; promotion, out; communication, in.

Is this true? What’s this 4Cs concept?

A: That’s one of the things daughters are for: to surprise us. Sometimes, they surprise us with the truth and a new reality.

But the 4Ps and the 4Cs are basically the same. Both are about the marketing mix. The 4Ps are the marketing mix components seen from the marketer’s perspective, the marketer’s decision tools for generating sales. On the other hand, the 4Ps are the marketing mix components now seen from the consumer’s perspective, the consumer’s decision considerations for making purchases. Remember, consumer purchases equal marketer sales.

The concept of the 4Cs as the consumer-centric marketing mix came when the “marketing concept” became and was accepted as the single most fundamental marketing principle. This concept simply said this: “In planning or implementing any marketing program, be it a product intro, pricing, an ad campaign, a consumer promo, or even a trade promo, a sales distribution program, never start from where you (as the marketer) are. Always start from where the consumers are.”

This is not of course saying that if you do marketing according to the 4Ps, you will go wrong. If your specific 4P decisions converge with where the consumers are with each of your 4Ps, then your marketing mix will still work. It is when there is divergence between the two that the 4P-driven marketing mix or program will fail or won’t get results as good as when convergence is present.

Just consider our Sustagen example above. The marketer-driven 4Ps concept was about choosing between the Moms and the children as alternative PTM segments. That’s because the Sustagen positioning will be different if the PTM segment is the Moms and if it’s the children. Looking at the marketing decisions from a consumer-driven 4Cs concept told us that the PTM segment decision is not a choice between alternatives. The two segments are the PTM segment because Mom will not buy a chocolate mix that’s not nutritious. But the child will not drink (many or most of them won’t) a chocolate mix that’s not yummy. And if the child does not drink, Mom will stop buying. The problem solution is clearer and more compelling in the 4Cs problem definition than in the 4Ps specification.

Of course, the marketing reality does not always work out in favor of the consumer-driven marketing. In a previous column, we spoke of consumer-driven marketing. That’s the 4P marketing or marketer-driven marketing. We’ve seen that with the phone companies and their very successful marketing and selling of SMS services and ring tones, to mention just two. Here, it was the marketers who taught the consumers that they needed SMS to stay connected with their loved ones. Consumers didn’t tell the phone companies that they have a need for SMS. The process didn’t start there. It started with the marketers. And when the consumers finally learned what the marketing phone companies were teaching them, and were finally convinced, they bought and revenue literally exploded.

So tell your daughter her IMC professor is probably trying to teach through shock value through exaggeration. Tell her not to go for a half-truth but instead go for the whole truth and nothing but the truth. So help us God!