NEW YORK TV advertising and strong distribution channels are paramount for driving long-term growth and lowering price elasticity for brands across various consumer categories, according to a new study by Information Resources Inc.
The Chicago-based firm tracked the impact of TV advertising, in-store promotion, distribution and other factors on the long-term health of more than 30 brands from eight major manufacturers. The data gathered for the report included weekly sales and pricing histories, media spending and other comparative data over a five-year period.
Categories included salty snacks, processed cheese, packaged fruit, household cleaners, spirits, soups and juices.
"The key factors that really build long-term brand health and hygiene are advertising and distribution together, getting your products on the shelves and consistently [marketing] the brand," Sunil Garga, IRI's global services president, told Brandweek, adding that without distribution, advertising was "worthless" for packaged-goods products and TV ads gave many companies the awareness boost necessary for long-haul gains.
"We have seen [in the data analysis] that when brands have consistently advertised on television, they have been able to successfully mute price elasticity [and have] created an opportunity for the brand to get a higher margin and achieve better sustainability," he said.
The study found that product distribution had a positive impact on brand growth for more than 75 percent of the brands studied, while television advertising showed positive results for roughly 60 percent. Together, those two factors accounted for some 80 percent of the changes in brand growth over the five-year data period.
The study comes at a time when the consumer products industry—as well as the business world at large—must bear the demands of the shareholders and private equity firms that now have become a norm within the market, demands that often call for meeting short-terms earnings goals over bigger picture profit and sales objectives. To that end, according to the study, one of the biggest pitfalls for brands' long-term growth are promotional efforts—particularly trade and discount initiatives—that seek to achieve more pressing, numbers-driven goals, often at the expense of the brands' future health.
"We're telling our clients that the trade promotions drive short-term sales and amplify price elasticity, making it difficult to raise product prices on a sustained basis to increase revenue," said Garga, adding the study shows marketers a way to synthesize efforts that will drive both more immediate profits while contributing to long-term growth.
"If you need to take the price up, but you've trained consumers to buy the product at a lower price, [TV] advertising can help you raise those prices, but it's a tradeoff between short- and long-term objectives . . . [and showing how] clients can make the right tradeoffs [for overall brand health]," he said.