Building Brand AND Saving Budget

Here is a simple diagram showing the steps from marketing activity to business outcomes:



Sales here is used to represent a direct, financial business benefit. Whilst some communications may never lead to that I believe most will – sooner or later, via brand.

Brand equity is like a bridge connecting marketing actions to customer buying behaviour. Its role as the pre-cursor of sales has been proven in key studies, such as:
When a product is associated with a high equity brand then customers…
• …see it more favourably; as higher quality; as more reliable and they are more likely to buy it (Footnote/endnote source: Larouche, Kim & Zhou 1996)
• …are less price sensitive and more responsive to marcomms (Footnote/endnote source: Simon 1979)
In fact, financial benefits also arise from brand equity with proof that it…
• …reduces financial risk and is related to a lower cost of capital (Footnote/endnote source: Srivastava & colleagues 1997)
• …can be tapped to reduce marketing expenditure in times of ‘cashflow crunch’ (Footnote/endnote source: Srivastave, Shervani & Fahey 1998).

The problem is advertising often takes credit for all brand equity ignoring the contribution of PR. In turn, PR generally sees only a small fraction of available budgets and commensurate status in many organizations.

PR and advertising are both communications. They both interact and relate, particularly with increasingly sophisticated integrated campaigns. Yet they are often managed separately and external agencies may not plan together.

There seems a distinct lack of thought leadership on how to find the optimum balance of PR and advertising. So, what’s the answer? Post your views now.