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A Gruen Transfer perspective on advertising

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Published on: Friday, October 29, 2010

Meet a 20-year veteran of making anything and everything look good – ad man and The Gruen Transfer panellist, George Patterson Y&R’s Russel Howcroft. How can you get more bang for your advertising buck? Howcroft joins Peter Switzer on Sky News Business Channel’s SWITZER to discuss the state of advertising and how it’s an investment for your business.

As a barometer for the economy

Howcroft says in tough economic times, advertising is often the first thing to be curbed, making it a useful barometer for the health of the economy.

“When people aren’t confident, they do spend less,” says Howcroft. “The advertising business does promote the idea that in bad times, it is a good idea to advertise. There are lots of case studies that indicate that that is true.”

However, in many cases, Howcroft says when the economy gets tough, the tough pull back on advertising expenditure.

As an effective tool

While some businesses cull their advertising budgets, Howcroft insists it remains an effective tool in building brand and increasing sales.

“Advertising does work. Advertising generates sales,” he says. “I say to my clients ‘Is advertising working for you? Is it generating sales? So why don’t you do more?’ But people cap the budget on advertising.

“It’s always been one of the difficulties in our industry of proving the correlation. There is direct correlation; it is possible to prove. Let’s say, for example, you decide to run, in the old days, a classified ad in the Sydney Morning Herald on a Saturday to sell your car … That ad would generate a sale. So we know at that pure form, it works.”

Once big advertising campaigns are executed, though, it becomes harder to measure response.

“When you ratchet it up into big brand advertising that costs a lot of money to run, a lot of money to make. Actually providing evidence of a direct correlation is a lot more difficult than selling the car in the classified ads. It’s a far more complex thing.”

As an investment

Howcroft says advertising is also an investment in a business’ brand.

“I talk about return on creativity. There is this x-factor,” he says. “The best definition I’ve heard the former marketing director of Cadbury said a brand is about certainty of cash flow into eternity.

“If you have a brand like something as big as that purple beast, what you must do is continually invest in its health.

“If you’re forever investing in the health of your brand, there’s no reason why it won’t be around literally forever … It should be considered part of the cost of goods sold. It’s not an expense after you’ve made the profit. It should be an expense that you include in the product because it is part of the product.”

Check out Peter Switzer’s SWITZER on Sky News Business Channel, Monday to Thursday from 7pm.

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