THE SHORT STORY:
Great advertising has a value in itself. Sara Rosengren and Micael Dahlén, professors at the Stockholm School of Economics, have studied this phenomenon and established the concept of “advertising equity”, for advertising that is not only tolerated, but also popular. It creates both more value for the company and added value for consumers. This means that people will want to watch more advertising from these brands.
A high advertising equity weakens the resistance towards advertising and instead of consumers trying to avoid the advertising, they choose to watch and even search for it. One effect of this is that the brand can communicate more efficient at a lower cost.
This is of benefit for the brand, employees, consumers and even media.
Advertising equity is a form of trust capital. However, advertising equity is not captured by traditional brand strength measures. Or measures such as brand attitude, purchase intentions or loyalty. The traditional dimensions tend to focus on the value of the company’s products and services, while advertising equity focuses on the perceived value of the company’s advertising.
THE FULL STORY:
The attitudes toward advertising is mainly negative by default. This was clearly illustrated in earlier research by professor Sara Rosengren and her colleagues. They studied advertising from ICA, the leading supermarket chain in Sweden. ICA established its advertising platform in 2001 as a sitcom set up in a small grocery store, which featured the retailer Stig and his employees.
In their studies of ICA, the research team randomly presented two variants of the same question to two groups of consumers: “What do you think about ICA’s advertising sitcom?” and “What do you think about ICA’s TV-sitcom”. It became clear that if the word “advertising” was included in the question, the reaction was more negative than if it were not. An example of the generally negative attitude to advertising. However, many see ICA’s films more as entertainment than advertising. An example of this is the mobile app “ICA Play”, where the ICA-commercials are gathered, and you can order push notes when it’s time for a new one. When the app was launched in November 2013, it quickly became one of the five most downloaded in the Apple Store in Sweden. In 2007, ICA’s advertising appeared in the Guinness Book of Records, as the longest running television advertising drama. And it still continues today.
A similar, British, example is John Lewis. Their advertising is noticed, discussed and loved. Not least, it applies to their Christmas advertising.
In September 2018, rumors began to spread in the media that Elton Johnwould participate in the John Lewis Christmas advertising of the year. This also proved right, when the campaign started two months later on 17 November. As is often the case with their Christmas advertising, the new campaign was first released on social media in the morning with immediate, wide sharing across digital platforms. The same evening, the campaign was launched on national television at prime time. The great interest in the forthcoming ad, the speculation about who would star, and then the rapid spread of the Christmas campaign are proof of the very strong advertising equity which John Lewis has built over a number of years.
Both ICA and John Lewis have both also realized the importance of working long-term and consistently at a high creative level. This has made their advertising equity strong, as well as their brands and profitability.
There are, of course, several more examples of brands with high advertising equity. But unfortunately, there are also many examples of companies that have failed to manage and develop their advertising capital. Instead, they have changed concepts and embarked on brand new tracks. Sometimes because they just, themselves, wanted change and sometimes because new market managers wanted to make their own mark on the work.
So, what can you achieve with a strong advertising equity?
First:If a company’s previous advertising is perceived as worthy of attention, consumers are likely to want to see their advertising even in the future.The research indicates that strong advertising equity means more to the attention of a company’s advertising than both brand attitude and buying intentions.
Secondly:Advertising equity signals positive characteristics of the brand and shows respect for the consumer. The message is “We don’t just steal your time, we have made every effort to make you want to give it to us”.
Third:Micael Dahlén has in his research also found that companies that have made an effort in their communication are also perceived to offer better products and be better at product development. Sara Rosengren, in her turn, has shown that these companies are also assumed to take better care of their customers. As well as of their employees. In other words, the overall attitudes towards the companies are more positive.
Forth:Advertising equity is also of great importance internally. The theory has often been that if you care a lot for your organization, you like the advertising. In their research Sara Rosengren and her colleagues have found, that it might as well be the opposite. That is to say, if the employees like the advertising and perceive it to be effective, it gives stronger motivation to participate and contribute to the company’s development. It strengthens the identification. It is also important that employees perceive that the company has made an effort to make good advertising and that it fulfills a function.
Fifth: A strong advertising equity also adds values evem to the context of the advertising. That is to say, even the media where the advertisement is published serves on the advertising equity of the brand. Studies show that consumers have been prepared to pay more for media that contains advertising from strong brands, than for media with the same editorial content, but advertising from weaker brands. The same relationship has been seen when comparing high quality ads – in terms of production technology and/or creativity.
Thus, high-creativity advertising with high, production-technical quality makes consumers prepared to pay more for the medium itself. This can give advertisers room to negotiate better terms with media, which in turn gets added value through the brand’s advertising capital.
Sixth: A strong advertising equity can also open up to new collaborations. One such example is Volvo’s advertising with Zlatan Ibrahimović. This became possible since Zlatan himself saw Volvo’s commercials with Swedish House Mafia and wanted to cooperate with the brand.
How to measure advertising equity, and why
Sara Rosengren and Micael Dahlén have designed a simple model for measuring advertising equity. It is based on people’s overall impression of the company’s previous advertising.
They argue that it is worth-while to regularly measure advertising equity. Not least when deciding on future investments. How big they should be and what types of media should be used are some of the questions that can be answered when you know your advertising equity.
However, when measuring advertising equity, it is important to clearly define advertising, or perhaps even replace the actual “a-word”, in order to get around the problem with the automatic negativism. Instead of advertising one could, for example, describe the type of communication that the brand uses. When this is formulated, the questions can be relatively simple of the type “I think X usually do – interesting advertising/advertising that is worth paying attention to/advertising that is rewarding to take part of”, for example.
Sara Rosengren’s advice is that if the advertising equity is low, it is wise to work mainly with broad mass-media channels. If you have a high advertising equity, the possibilities of SEO, viral spread and earned media increases.
The advertising eqity can also be used as a tool to ensure the long-term view of advertising work and that it is steered in the right direction.
“Of course, it may sometimes be necessary to replace or update an advertising concept. The problem is only when you do it without first having known what advertising equity the concept has built. If there is no such analysis, it is easy for the decisions to be taken a little too easily. If we only evaluate the effect of advertising over time in terms of the brand, we will easily miss the long-term value of the advertising itself ”, Sara Rosengren emphasized earlier when I interviewed her on the matter.