The Warc Blog

The Warc Blog

Budgets don't matter
Mythbuster, Les Binet and Sarah Carter, DDB

Les Binet and Sarah Carter get a little bit angry about some of the nonsense they hear around them… like the idea that budgets don't matter

Recently, we were given a task by a big multinational. Could we review their research data and look for insights to help them grow market share? We read a mountain of material – everything from packaging semiotics to obscure product usage in emerging markets. But something was missing. In over 2,500 pages of research, there was only one mention of budgets.

To us, this is symptomatic of a trend. People obsess about the architecture of their brands, and the content of their communications. Meanwhile budgets get remarkably little attention.

Why is this? Agencies may be less interested in budgets now that they're not paid on commission. Clients often have to work within budgets outside their control. The constant drive for efficiency (rather than effectiveness) has made cutting budgets a point of honour – encouraged further by digital evangelists, the most extreme of whom advocate cutting paid media spend to zero.

But budgets still matter. To understand why, let's remember some inconvenient truths about advertising. As Ehrenberg and Sharp have shown, the single most important factor driving brand preference is 'mental availability': how well known a brand is, and how easily it comes to mind. Brands with low mental availability tend to struggle – rejected in favour of more familiar rivals, or not considered in the first place. Brands with high mental availability don't have to push so hard to sell, and so tend to have higher market shares and better margins.

Building mental availability means constantly reminding people of your existence. What you say and how you say it are important, of course. But the most important thing is just to be out there. Psychologists call it the 'mere exposure effect' – any kind of exposure to a brand increases propensity to buy. As Ehrenberg said, advertising is about publicity, not persuasion. And don't focus on some segment of the market. Successful brands build high mental availability among all users of the category.

This requires many, many exposures. Econometric studies routinely show that number of exposures is a crucial determinant of effectiveness. There are diminishing returns, so reach is more important than frequency. But, generally, the more exposures you get, the more you sell. And strong brands are built through millions of exposures over many years.

Owned and Earned media don't generally deliver enough exposures to do this job on their own. Unless your brand is exceptionally interesting, few people will beat a path to your Owned media without prompting. You may occasionally get lucky and have a viral hit, but few brands are capable of repeating this. The notable exceptions are brands such as The Huffington Post or BuzzFeed that devote huge resources to producing interesting content, every day.

Hamish Priest, of Dove global media innovation, says: "Content without reach is like building cathedrals in the desert." For most of us, promoting brands that ordinary people don't find interesting, paid media is still the only reliable way to get that reach. For this reason, budget is crucial. Research shows that, all other things being equal, a brand's market share tends to follow its share of voice in paid media. And that doesn't seem to be changing. Evidence from the IPA Databank suggests the influence of paid share of voice is increasing, not decreasing.

Creativity, clever media planning and technology can make budgets go much further, of course. But the best cathedral in the world will stay empty if the budget is too small.

Subjects: Marketing, Advertising

03 October 2014 14:18

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