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Why Imperial Leather’s explanation for poor results just doesn’t wash…

Why Imperial Leather’s explanation for poor results just doesn’t wash…
All Response Media's Ed Feast examines the relationship between PZ Cuzzons' falling sales and their ad spend.

Recently, an article in the Telegraph caught my eye. PZ Cussons, owner of brands including Imperial Leather and Carex, was complaining of “tough trading conditions” in the UK.

The company blamed its troubles on shoppers responding to the economic uncertainty by hunting out cut-price shampoos and shower gel rather than shelling out for top brands. It warned that this difficult market was likely to drag down profits in that division.

At face value, you could understand this explanation. However, dig a little deeper, and suddenly it’s not that clear cut. And this is where the value of advertising comes to the fore.

What the company did not draw attention to is that along with its faltering sales, its advertising budgets have also been declining year-on-year since 2012. In fact, from 2012 to 2017, PZ Cussons’ traditional advertising budget dropped by 78%, from £3million to £653,000.

Whilst there may be reasons for clients to divert their spend from traditional advertising into areas such as price promotions that can generate more immediate results, it is useful to look at this reduction in the company’s ad spend in the context of consumers’ worsening perceptions of its brands during the same period. The chart below illustrates the trend in both these areas.

869 Ed Feast Chart

Source: YouGov, Brand Index, Addynamix 2018

Quarter-on-quarter drops in these brand metrics would be almost unnoticeable, and could be explained away by sampling error in the tracking study, However, when you trend the data over five years, you see another story – the similar trajectory between the decline in ad spend and the decline in consumers’ perceptions of the company and its brand.

Over time, as the brand’s ad spend has fallen, the equity within heritage brand Imperial Leather (in red in the chart), has been eroded.  Is it the case that PZ Cussons is spending less on advertising and more on promotions to shore up its flagging sales? If so, as IPA research as shown, this would be a short-term tactic which would undermine its brand equity and make its brands more sensitive to price at the long-term cost of their profitability.

At the same time, it is worth noting that there are signs that the market in which PZ operates has also shifted, with consumers increasingly valuing provenance and quality when selecting cosmetics. According to the Soil Association (2017), sales in organic health and beauty products have increased by over 20%, with the market now worth around £61.2 million in the UK alone. More people may actually be willing to pay a premium for quality, and to ignore brands which are perceived to be lower quality.  So the company may be finding itself squeezed at both ends of the market.

What does this mean for PZ Cussons?

If the market really has moved on, the company clearly needs to reassess the segments that it is targeting, and its brands’ positioning to these segments.

Without investing in advertising, and I mean proper above the line, TV, Out of Home and Print advertising, it is going to be an almost impossible task to change the way its brands are viewed by consumers and ultimately turn round its struggling UK performance.

As the IPA’s respected Media in Focus  report by Les Binet and Peter Field attests, marketing budgets and mass reach matter more than ever. So does the need to invest in award-winning creative, with a long-term investment strategy measuring results over 18+ months, with proxy measures in the short term. This is the most effective way to drive perception change and deliver the biggest profit.

It’s my personal opinion, that many top decision makers in business are forgetting how advertising works, particularly within the FMCG sector. Using advertising to build and strengthen memory structures which support brand values such as quality, value for money and reputation is invaluable, particularly for brands that need to stand out on crowded retail shelves where they face tough competition from own label products.

I choose that word, ‘invaluable’, quite deliberately. It is invaluable, because it’s ‘valuable beyond estimation’, which unfortunately is part of the problem. If decisions about marketing spend are driven by short-term tactical approaches such as price promotions, metrics, which are more difficult for companies to put a financial value on – such as brand perceptions – may be written off as being ineffective or as not contributing to the bottom line, and therefore will be easier to cut.

However, the evidence from ‘Media in Focus’ as well as successive other IPA publications, is that businesses which continue to invest in brand building, even during times of economic uncertainty, are most likely to be successful over the long term.

Last updated 01/03/2018

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