It goes without saying that advertising plays a crucial role in generating sales and shaping consumer behavior, but contrary to popular belief, the primary function of advertising is not to immediately drive purchases but rather to create lasting memories that influence future buying decisions. This insight, shared by Jon Lombardo, Global Head of Research at LinkedIn’s B2B Institute, challenges the common misconception about the immediate impact of ads on consumer behavior. These thoughts were expounded on in this week’s Cumulus Media/Westwood One Audio Active Group blog.
According to James Hurman, a renowned expert on brand building and marketing effectiveness, and the World Advertising Research Center (WARC), the two most important jobs of an advertiser are to convert existing demand and create future demand. Converting existing demand involves targeting and capturing the relatively small group of consumers who are ready to make a purchase at any given time. On the other hand, creating future demand focuses on building familiarity and positive associations with the brand among a larger group of consumers who are not currently in the market but may become potential customers in the future.
Converting existing demand requires precise targeting and rational messaging about product features and pricing to persuade consumers to choose the advertised product over competitors. Creating future demand, on the other hand, requires broad audience targeting and emotional messaging that stands out and creates positive memories of the brand. These distinct approaches necessitate different creative and media strategies.
While converting existing demand can yield short-term sales spikes, it offers limited long-term benefits. Sales events and promotions can generate quick sales uplifts but often result in rapid drop-offs afterward, resembling “sugar highs” that are unsustainable. In contrast, creating future demand through brand building advertising leads to sustained long-term sales and profit growth. It strengthens the brand, reduces price sensitivity, and allows for increased sales volume even at higher price points.
To illustrate the importance of creating future demand, Hurman references the research of Les Binet and Peter Field, known for their work on marketing effectiveness. They recommend allocating 40% of marketing budgets to converting existing demand through sales events, while the remaining 60% should be devoted to creating future demand through brand building advertising.
Measuring the impact of advertising campaigns involves assessing short-term metrics like clicks, conversions, and cost per acquisition for converting existing demand. In contrast, evaluating the creation of future demand focuses on measuring brand equity indicators such as awareness, consideration, and preference. Gain Theory, a marketing media mix modeling firm, highlights that the majority of advertising’s impact occurs six months and beyond, demonstrating the importance of long-term brand building.
Ultimately, the effectiveness of advertising lies in creating positive memories and associations with the brand. Building a strong brand leads to increased sales volume at every price point and establishes a lasting connection with consumers. Brands that invest in creating future demand through brand building strategies not only drive sales growth but also enjoy a competitive advantage in the market.
In summary, the two primary jobs of an advertiser are to convert existing demand and create future demand. While converting existing demand focuses on capturing the small group of ready-to-buy consumers, creating future demand involves building positive brand associations with a larger audience. Each task requires different creative approaches and media strategies. Although converting existing demand can result in short-term sales spikes, creating future demand through brand building advertising leads to sustained long-term sales and profit growth. Strong brands drive higher sales volume at better prices and are built on creating lasting memories rather than relying solely on clicks or short-term metrics.
