FMCG Consulting

New Zealand based strategy consulting and technical training practice focused on assisting consumer product organisations achieve step changing growth.

FMCG Consulting is an Auckland, New Zealand based strategy consulting and technical training practice focused on assisting consumer product organisations achieve step changing growth. 

When FMCG advertising is a waste

In the consumer products industry, especially within large organisations, asking to reduce or totally cut advertising is almost a sign of admitting defeat or signalling that the brand is on its last legs. By cutting advertising, marketers signal that the long term strategy is to ‘milk’ the brand and finally exit.

Quite often brand marketers are given global guidelines specifying that X% of top line has to be invested in advertising, almost as if that box has to be ticked or the world will end. Mind you, some brands continue to rapidly decline even with all the advertising spend which makes one wonder if global guidelines are the way to go in each market? Haven’t we heard stories of increasing Facebook likes and declining sales for a brand with a big social media budget but a totally ineffective trade and shopper strategy?

As we know, advertising is one part of making a consumer try and then repeat purchase of a brand. Simply put, it is about making a sale again and again. Please don’t give me the means as the end with answers like : improving engagement or bonding scores, increasing considerers and dependables, improving empathy etc. etc. – yes all that will help and are good indicators to gauge– but it is about making the sale which has always been the short, medium and long term objective of advertising.

With most mature brands that continue to grow and have a NPD pipeline, a relevant percentage of top line needs to be invested consistently to keep the brand healthy. What you advertise, could be a theme ad highlighting the brand’s values, new news as in NPD or a major range extension or sometimes a large but strategic consumer promotion. All of the above could be injected with a twist to change consumer behaviour based on an insight. In isolation, new product advertising is known to have the biggest direct sales impact while theme brand advertising has the least sales impact in the short to medium term. That subject however, is for another article.

What metrics are impacted as a result of advertising a new brand? The traditional ones are: awareness, followed by trial. To put it simply advertising ensures there are enough people who know who you are and what you offer, and if the creative unit is well thought out, it should make the audience want to try or buy your product.

But besides awareness, which is a pure derivative of advertising or other forms of mass communication, all the other key metrics of trial, repeat etc. get impacted by other variables of the product. These include product relevance, price, distribution, packaging, shelf layout, in store visibility, competitive activity among others.

So when is it a waste to advertise your product? The following situations qualify:

1. Killing a brand: when you are trying to kill a brand and exit a business, advertising maybe a waste of money. This one is very obvious.

2. Inappropriate creative unit: When the creative unit you have available is off strategy. This requires skill & experience to evaluate and tact in selling the thought internally. It is better not to advertise if you are going to be sending the wrong message. Waiting a few months to develop and use the right creative unit is almost always a smarter strategy with FMCG products.

3. Inadequate distribution: if weighted distribution is below par then advertising will have a reduced impact causing wastage. This is key as the brand may have the best ads and biggest budgets, but if the retailer has declined to put it on shelf, then it does not get the opportunity to sell.

4. Lack of In-store activation: if there is no alignment on a strong in-store execution plan with the retailer, advertising will have a sub-optimal impact. Brands need the cues seeded by mass media advertising to be reminded once the shopper is in-store.

5. Incorrect pricing: this is critical especially in segments where volume sold on promotion is quite high and consumers are price sensitive. Most marketers tend to overestimate the price consumers are willing to pay for a product; they then correct it by promoting excessively. Sometimes this over estimation is so high that all the good work done by advertising to get the shopper in front of the shelf does not covert to trial, due to the price barrier.

6. Commoditised Category: when the category is totally commoditised. No player advertises, no player has any differentiation as there is no innovation, and nearly all product is sold on price – the cheapest on the day gets the sale. Prices are so depressed that Private Label cannot offer any price advantage. Advertising in this case may remind consumers about the brand, but once in front of the shelf the cheapest brand on the day will win.

7. Small but mature category: when the category is so small that spending the minimum threshold in advertising will result in a negative P&L for the brand, even with a high market share. Spending below minimum advertising threshold levels is one of the most common marketing crimes.

I am sure you can come up with more circumstances when advertising can be a waste. Please add them in the comments section below


All content owned by FMCG Consulting