Reckitt develops new spending model

31 July 2012

LONDON: Reckitt Benckiser, the household goods and healthcare group, is reducing its emphasis on pure advertising spend, instead favouring a model it refers to as "Brand Equity Investment".

Speaking on a conference call, Rakesh Kapoor, the organisation's CEO, told analysts that references to expenditure on advertising and promotions (A&P) was increasingly outmoded in the new media age.

"You know how angry I get when people talk - and still talk - about A&P and all this last century stuff," he said. "I believe that even this discussion around TV and media is really last decade stuff."

While Reckitt closely monitors its TV, radio, newspaper and cinema adspend, it now combines these figures with those for digital and social media, as well as medical professional and consumer educational programmes.

"That for us is a holistic measure of what you look at," Kapoor said. "I truly want our people to make choices across this … measuring just one part of this is just not adequate.

"It's just not an adequate reflection of how brands should be built in the future. So really, to my mind, this is a metric we should use for the next decade, because everything else is really backward."

During the first half of 2012, the company boosted its Brand Equity Investment by 60 basis points, or £40m to 13.6% of net revenues, with media up by 40 basis points, to 12.5% of sales. An additional £60m is budgeted for the second half.

Among the specific activities included in this area are customer relationship management, online video, social media and apps, where Kapoor argued Reckitt is an increasingly major player.

"Really, Reckitt Benckiser is pretty big in this area. In some markets we are probably one of the biggest actually out there," he said.

Adopting metrics not entirely resting on media expenditure levels, he added, also results in a truly customer-centric focus in the digital space, rather than simply benchmarking against corporate rivals.

"We are probably at the front end of competition but perhaps in my mind still behind consumers. So our challenge here is not to be better than competition, our challenge is to be in sync with where consumers are," said Kapoor.

"Increasingly most businesses have recognized the need to actually open up dialog with consumers and to make them a participant in brand choices and brand agendas; we call that share of mind."

Data sourced from Morningstar; additional content by Warc staff