On Branding Versus Direct Response Advertising
A few weeks ago, I had the pleasure of doing the kickoff keynote presentation at OMMA Global Hollywood and then participated on a panel discussing the state of the advertising industry. We touched on the relative merits of direct response versus branding advertising. And, for the next day or so, as I listened to the other presentations and panels at OMMA, I was struck - as I have been many times previously - by the dichotomy that exists in our industry. It seems to me that we often have one group advocating the value of branding advertising, while another larger, and more vociferous one, claims that the secret to closing a sale is simply a matter of putting the right message in front of the right target audience at the right time. The latter view seems to have prevailed more often than not online because it’s clear that the majority of Internet advertising dollars have been spent on direct response advertising. In fact, I estimate that direct response advertising accounts for about 80% of all ad dollars spent online, while in traditional media the situation is reversed. There, branding dollars are estimated to make up about 75% of the market. Why the disparity?
I think there are a number of things at work. Most important, I believe that the very nature of the speed of the Internet and the young technical minds that first created online advertising both led to a focus on immediate response. The click metric is a good example of that. One can argue that the click came into vogue as a relevant metric simply because it could be measured and not because anyone had considered its relevance to all forms of advertising. As a result, and almost by default, the industry established a belief in the minds of online advertisers that they could expect to see immediate results. Direct response campaign dollars followed and search advertising was born shortly thereafter. Today, however, as we look to the source of the future growth of the industry, I believe it’s important that we step back and remember the fundamental differences between direct response and branding, because unless we do that we’re not going to maximize the movement of branding dollars from traditional media to the Internet.
In my mind, the two strategies differ fundamentally in how they view “time to purchase”. Direct response ads aim at closing a sale or a transaction right here and now. Branding, on the other hand, means investing ad money in building brand equity, which is to say, establishing a brand’s value proposition in the minds of consumers. The return from that investment is probably not going to occur immediately. It may take weeks, months or even years.
Let me give you an example. Let’s say I’m BMW. Do I care about reaching a 20 year old, well-educated male with a promising career ahead of him, but who can’t afford to buy a BMW today? Or should I just ignore him and focus instead on those people who can buy the BMW today? Direct response proponents would say: “Ignore him; BMW should target their ads only to people who are deep in the purchase consideration funnel and able to buy a BMW today.” Branding advocates, on the other hand, would say. “Hold on a sec. Some day that 20 year old is going to be able to afford to buy a BMW and will have to decide between buying a BMW or a Mercedes or a Lexus, and when that happens he needs to have been previously informed and influenced to believe the image that BMW wants him to have of their cars. We need to invest a good portion of our ad dollars building the value of the BMW brand in his mind today.”
My view is that it’s not an either/or situation. For direct response ads to work well, it’s important that a brand’s equity have been communicated in advance of the consumer’s purchase decision. Put another way, the heavy lifting of establishing a brand’s value in the consumers’ psyche has to have already occurred. But, for an advertiser to be willing to make that kind of longer-term advertising investment prior to the sale requires patience. It’s actually the antithesis of instant gratification. It requires the wisdom, long-term perspective and understanding of the many ways in which advertising works that, perhaps, only comes with age. They say that experience makes the best teacher, and perhaps it’s not until one has actually had the experience of building a brand that one can really understand the value of branding advertising. Maybe that’s why the more experienced advertising executives are generally put in the position of making those kinds of spending decisions.
So, how do we ensure that the Internet gets its fair share of the brand-building ad market? One place to start, it seems to me, is research. In that regard, I believe it’s vital to take into account all of the marketing stimuli that affect consumer purchase behavior, not just that which occurred just prior to purchase. For example, we should be wary of attributing 100% of the credit for a purchase to a click on a search ad. Search might well have closed the deal, so to speak, but there is often a lot of other marketing activity that led the consumer down the path to purchase and, without which, closure might not have occurred. The Atlas Institute, Microsoft Advertising’s research division, has done some valuable research in that regard and has shown that “users exposed to both search and display ads convert at a higher rate: an average of 22 percent better than search alone…” Yahoo! has also recently espoused this principle and funded research with similar findings.
At Comscore, we try to do our part. For example, we’ve now conducted hundreds of online advertising effectiveness studies, a good portion of them focused on measuring branding effects. We’ve demonstrated the ability of display campaigns to increase brand awareness, brand favorability, purchase intent and sales - both online and offline. We’ve shown that display campaigns - whether consisting of banners, rich media or video formats – set up the consumer to be more receptive to search advertising. And, as you can imagine, we’re taking advantage of every opportunity we get to communicate our findings at industry conferences and in client meetings.
Last, but not least is education. In that regard, I think it’s incumbent on the more experienced advertising executives to educate their younger brethren to the importance of investing ad dollars in building a brand. And, that probably needs to begin sooner rather than later. Ted McConnell, Director of Digital Marketing Innovation at P&G put it best when he said: “It’s important that we identify the truths that transcend change.”