Why most market expenditures fail to generate any impact
The astonishing fact is that most marketing results in no change in sales or profit if you disregard short-term blips. Nearly all marketing budgets are designed to affect brand preference in established categories and subcategories with established competitors. The great majority of these, on average, have no long term sales impact.
In virtually all categories, any major change in market position comes from the emergence of new subcategories. I studied the Japanese beer market for over 50 years and a major change in market share trajectory came only four times. Three of these were when a new subcategory was introduced (dry beer, Ichiban, Happoshu) and the fourth was when a subcategory was repositioned. In between, huge marketing expenditures simply did nothing. In computers big changes in competitive position occurred only with the introduction of new subcategories such as minicomputers, network computers, tablet computers, and so on. In automobiles we have seen 4 wheel drive, minivan, SUV, hybrid, and all-electric and more vehicles change the competitive landscape while “my brand is better than your brand” competition has little effect.
The implication is that firms should spend less, probably far less, on brand preference competition and more, probably far more, on brand relevance competition, winning by creating new categories or subcategories. That means that more investment is needed on big innovation i.e. those that are substantial or transformational, and less on little or incremental innovation.
Changing investment priorities requires a new mindset, strategic vision, culture, and perhaps people and processes as well. There are barriers-- the clout of the large business units, the pressure for short-term results, the difficulty of predicting untested ideas, and the incentive systems in place. However, to make market budgets have healthy ROI levels and to see real change in sales and profits, moving toward winning brand relevance competition is an imperative.
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