I have been fortunate enough to have been exposed to some fascinating and thought-provoking leaders in our industry, both from a global and a local perspective. One such person in particular is Professor Mark Ritson, a cool ‘ad man’ who is currently professor of marketing at the University of Melbourne. He asks a very simple question: “What is the opposite of brand equity?”
The answer has its roots more in economic theory than in marketing, but, hey, what’s the difference anyway, right? You see, the opposite of brand equity is not loss equity or equity decline, but brand commoditisation.
Think about it. When we talk about a brand having real value, we define it in terms of its equity. There are, in fact, a multitude of methodologies that attempt to define brand value in economic terms but everyone seems to understand the word equity. In economic terms, it means ‘ownership of interest’ and in many ways, the audience’s stake in a brand can certainly be defined as their interest (or equity) in a brand.
So, what happens when a brand loses this interest? Yep, you’re spot on: it starts commoditising and therefore loses value to the audience. We all know this. That is why we prefer to ‘build’ brands instead of commodify them.
One of the fastest ways to commodify a brand is to devalue it by using price. In some European markets (and many others around the world), there is a rampant, recession-fuelled price war across categories such as grocery, retail, transport and services. Many advertisers are seeing their brand equity scores slowly erode as their costs increase. In the short term, it may have been the right thing to do to stay relevant but in the long term even categories have declined. Fast moving consumer goods and retail are the biggest losers in this colosseum of price bloodshed and to date, there has been little advantage for any of these businesses and their corresponding economies. Profits are down, cost cutting is rife and margins are at an all-time low.
So now that we know how dangerous the opposite of brand equity can be, we’ll do anything to avoid it, right?
Really? Then why do we as agencies do it? The fact is that just as brands have commoditised on a global scale, so have media agencies. I’m sure there were some high-yield gains in the short term. However, long term we have a talent crisis we cannot manage and media innovation is suffering. Larger agencies have been able to absorb the margin shortfall into rebate deals, early payments and diversified services. But smaller agencies have been hard hit (did I hear someone say “double jeopardy”?). Due to cost, media creativity has become the distant friend we used to know intimately.
Locally, the telltale signs are excruciatingly evident. South Africa had two (out of 194) shortlists at the Global Festival of Media Competition – the international benchmark for media innovation. Locally, the Roger Garlick award entries dropped from 54 in 2012, to 26 in 2013, a remarkably worrying 52% difference. So, the question is: Are we uncompetitive because we have commoditised or have we commoditised because we are uncompetitive? There certainly is a lot of data to suggest that it’s the former over the latter and, without competitiveness, how do we attract great talent to the industry?
So what’s the answer, I hear you ask?
Well, essentially we have two options. First, we could get all media agency heads into a room and agree on a policy of fair business practice. Now that you’re done laughing and have picked yourself up off the floor, consider the second option: differentiate.
Go back to those old-fashioned brand-building principles and differentiate. Have a point of view on the most topical discussions in the media at the moment. Are we ready for big data? Who is best placed to run social media? Is the market ready for transmedia? What are some new talent models?
We are fortunate at our agency to have a perspective on most topical discussions in the media. We have a view because we have to have a view. No clients are going to give us their business because we’re the cheapest. They’re going to award us the business because we help them solve their problems. Our operating system, called Source, is a testament to the fact that we have differentiated. Source uses the collective intelligence of the entire network to solve client problems. It’s not a tool; it’s an MMOG (massively multiplayer online game) which rewards contributions through ‘pings’, in many ways, helping to build our equity.
And so, I leave our commodifying competitors with this final thought: be careful on the race to the bottom, you might actually win.
Wayne Bishop is managing director of PHD in Johannesburg.