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Big brands have ‘wasted’ cash on unproven digital advertising, warns Ehrenberg-Bass Institute

Brands are wasting money on targeted digital campaigns and making other flawed marketing decisions amid a false belief they are losing out to smaller rivals, a new report has claimed.

The conclusion was contained in a study by the respected Ehrenberg-Bass Institute, a research body highly regarded in marketing circles.

Under the title Are Big Brands Dying?, the South Australia-based Institute investigated – and pulled apart – several myths which it said have wrongly been peddled as fact.

Those beliefs result in ill-judged and wasteful marketing strategies, the report found.

“When someone shouts that big brands are dying they get a lot of attention because big brands pay the salaries of many, and make up a large chunk of our pension funds,” Ehrenberg-Bass director Professor Byron Sharp said. “But the scary story that large brands are dying turns out to be wrong.

“These claims are dangerous because they are being used to justify hasty, ill-thought out marketing strategy.”

Contrary to “popular opinion”, the report found no evidence that loyalty towards big, corporate brands was declining or that trust was an issue. It also exposed as a “myth” that smaller brands command more loyalty and warned that larger brands have been “hurt” by “wasted advertising spend on unproven new media”.

It is the last of these findings that will interest, and concern marketers the most.

In drawing the conclusion, Ehrenberg-Bass Institute has become one of the most prominent bodies yet to question the amount of cash thrown at digital channels.

The Institute’s findings emerged after exploring the “assertion” that digital media has given smaller brands a cheaper way to reach consumers and that “big brands need to use more new media”.

Such a view was described as the “wrong interpretation”.

Professor Byron Sharp

One of the “mistakes over the past 10-20 years” listed by the authors of the report was “allocating too much advertising expenditure to overly targeted new digital media with unproven abilities to reach consumers and build mental availability”.

Another mistake cited was “creating too much low quality advertising content in an effort to cater for media fragmentation and capitalise on the (over-estimated) value of targeting”.

“The effect has been to increase the percentage of non-working media spent,” it said.

Turning to the advertising strategies in more detail, the report suggested that display advertising, and in particular programmatic buying, has been “plagued with problems of fraud, non-human exposures, ‘middle man’ costs and lack of viewability”.

“Leading brands have probably lost more marketing dollars in this area than start-up companies or brands,” the report said, explaining that start-ups were either more cautious with their ad spend or didn’t have the “size or complexity of spend” to delve into programmatic buying.

It added that a major advantage of leading brands is their ability to fund “outstanding creative and vast media options” which provide reach at low cost.

But it argued too many brands have fallen into the trap of diverting too much money to digital channels.

“It’s true that many large brands over the past five years moved large portions of their advertising budgets into new untested media options and away from big consistent creative campaigns,” the report continued. “There have been many failures.”

It identified the Pepsi Refresh project as one such failure.

“Our analysis reveals that in more than 40% of cases, leading brands actually do better among under 25-year-old consumers than they do selling to older consumers,” co-author Magda Nenycz-Thiel said.

“While there is certainly a trend for brands to signal virtues like being eco-friendly, the idea that young people increasingly distrust and reject big brands is not back by the evidence.

Magda Nenycz-Thiel

“Hipster coffee shops attract both young and old and the same is true for Starbucks.”

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