Does advertising grow markets?  

Opinion: Strategy Leaders

Research suggests that the majority of planners think so. But a publication set to be released by the Advertising Association’s Credos think tank suggests otherwise…

‘Does advertising grow markets?’ is one of two ‘Big Questions’ soon to be republished by Credos in part because of recent policy swirls and in part because, well, we really should know the answers as practitioners.

Modesty prevents me from unduly commending its sister paper, Does advertising increase consumer prices?

But the short answer to that big question is this: yes, on the one hand, advertising often improves a brand’s relative price position.

Indeed, this may be the most frequent and valuable contribution we make to our client’s business, not that we like to talk about it.

On the other hand, no: because advertising’s informational and competition-enhancing role means it also works to keep prices down at an overall market level.  (Think supermarket basket price wars.)

Lest we forget, advertising also of course reduces the price of much of the media we consume, to zero in the case of all those platforms where the product is free and the audience therefore the product. (Not that we ever learnt that lesson.)

New ‘hard-line’ policies around advertising

Suffice to say that the call last summer from Boris Johnson’s short-lived cost-of-living tsar — David Buttress, the co-founder of Just Eat — to swap advertising budgets out in favour of price cuts looks ever stranger.

But it’s the long-running and equally nuanced debate about whether advertising grows markets that is back in the news due to the Scottish government’s proposal to ban alcohol advertising across everything from TV and outdoor to sport and event sponsorship.

And across the Irish Sea, Ireland’s Gambling Regulation Bill proposes a similar blanket ban and is proving equally vexatious.

The implications of such hard-line policy initiatives are many and varied.

Scotland’s brewers, distillers and media owners will bear the obvious brunt, but so too will the arts and culture sectors, having long provided a less problematic home for alcohol branding efforts than allegedly scattergun broadcast media.

On 27 February, no broader a coalition than the Scottish Tourism Alliance declared the unanimous objections of its members in the form of an open letter to the government, whose consultation on the proposal ends shortly.

It’s difficult of course to object to the overarching aims of such potential restrictions, not least the Scottish government’s stated ambition “to reduce the appeal of alcohol to our young”.

But quite aside from the fact that there is pre-existing protective legislation in place — and turning a blind eye to the technical issues that might now arise in a world of global, digital media and events — much of the evidence base remains contentious.

And the larger question remains whether advertising restrictions are the most effective way to tackle societal problems.

What do advertising restrictions achieve?

Beneath it all, the case for restrictions like these hinges ultimately on whether advertising grows markets: because if it does, the reverse must also be true.

But based partly on its dogged analysis of years of IPA Effectiveness Awards winners (by definition, the industry’s most effective), the Advertising Association’s conclusion is that — in the absence of some very specific market conditions — it does not.

Successful advertising campaigns tend not to grow markets, if only because of the quotidian truth that “when a consumer bought more of one thing they bought less of something similar”.

And if this is true at a campaign level, it’s unlikely — albeit unproven — that the effect would be any different at an aggregate level.

It might, of course, be misplaced to map the Advertising Association’s more generally-derived findings too lazily onto what has been described as a ‘public health crisis’ in Scotland.

To conclude that the government is proposing to use a sledgehammer to crack a nut, or that advertising is once again a handy bogeyman and its outlawing a simplistic or even tokenistic answer to a problem that is more deep-rooted.

But — informed as we are with decades of data — it’s difficult also to argue with the author’s assertion that “[Advertising’s] main potency lies in presenting consumers with different options to meet their existing needs and wants…Those of us looking to grow or shrink markets should look to other levers first.”

It’s a conclusion that might be more readily — and certainly less controversially — applied to the more straightforward client advertising assignment you are likely to be working on right now.

The chances are that the campaign you are planning won’t grow the size of the market your client is operating in.

Instead, it might well make their pricing more resilient. And most clients will thank you for just that.

Laurence Green is one of the UK’s most renowned advertising strategists and creative leaders. He was co-founder of the agencies Fallon London and 101. He is now an independent adviser to creative businesses and writes monthly for The Media Leader.

Strategy Leaders: The Media Leader‘s weekly bulletin with thought leadership, news and analysis dedicated to excellence in commercial media strategy.
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