50% of Advertising works …but which half? Demand-supply answer to the conundrum
Advertising works forums have adequately answered the question of when is an Ad considered to have “worked”? Is it upon getting the creative awards? Or upon creating a top-of-the-mind recall of the brand? Or its success is when SALES happens because of it? Thankfully, there has been a consensus (even amidst the glamour of “Creative” awards), that the final objective is met when the advertisement fulfills the “task” of consumer purchase or what a Company would typically call a Sale (a tertiary sale or offtake, to be more precise).
Okay, given the “constraints” of client ‘budgets’, and the quagmire of media-planning, even when the ‘Creative’ was perfecto, what is it that finally boils down to a consumer making the final purchase? Not getting into Consumer Buying Behavior, one can simply say that a consumer purchase happens when the following 3 conditions are met :
There is ‘adequate’ pull in the market,
There is willingness in the channel partners to ‘trade’ in your product, and last but not the least
The product itself is ‘Available’ when the consumer goes to purchase it!
Wearing different hats at different times, of Marketing for the pull, Sales for the channel or Supply chain for the availability, one can go on debating which of the three is ‘most important’. Some supply chain ‘gurus’ go even to the extent of claiming that the other two factors become redundant if availability is not there in the first place and also that ‘availability creates its own demand’, citing the much known examples of Haldiram and Kinderjoy. But rather than working in silos, it is now time to look at each of these factors as a link which feed each other, and complete the circle!
The much debated chicken and egg story of whether the product should be placed first and then the pull creation (advertising) should be done, or vice versa, needs to be put to rest once and for all.
To be fair to the advertising and media, a reasonably good creative with a reasonable media presence does create the initial awareness and curiosity in the target audience to at least “look at” the offering! The catch is, when the poor consumer does try to find the new offering, the seducing product is hard to find. Now let us not restrict our dismay to new product offerings only; mature products of renowned brands also find themselves in this sorry state of “unavailability”! So who is to blame? Blame it on the poor salesman? Or on the over-flooded retailer?
Let us delve down to get to the core of the problem …
A retailer has limited space and limited cash for business. On the other hand, every Company has a large range of products, complete with “variants” and “sizes”. The fast-moving portfolio is less than 10% of a Company’s entire range, which means there is a considerably long “tail” of ‘not-so-fast-movers’ (how I detest the word ‘slow-movers’). It is a known fact that retailers stock more of fast mover, and the others they stock minimal, if any. The fast-movers are the ones which any Company produces in bulk and pushes down to fill the “demand”. So when we go to a store, the product which should be not available would be the so-called “slow-mover”, right? Think again! Even the fastest of the fast brands are the ones which you are disappointed not to find at your regular store. Who has not experienced this?
So where lies the problem? The problem lies with the rain. It was supposed to start in July but arrived in June! And now when it is supposed to end in Ganapati, it is most likely go on till Diwali! Weather forecasting employs the most expensive supercomputers in this world! And yet the rain “forecasts” go predictably wrong! Over a short span of 3 to 4 months! Imagine what would happen when Companies plan “Annual Sales”, region-wise, depot-wise, brand-wise, SKU-wise, and God know knows what else-wise! In the beginning of the year, we try to “forecast” what we will sell, where, and how much… month-wise…till the year end! Isn’t it natural that such forecasts go horribly wrong? Sorry, sorry, we have “rolling forecasts” in our Company! Hello, where were you when I was telling the rain story? Today it rained, and tomorrow I can’t predict with accuracy whether there will be rain or not! Forget about annual forecasts…even rolling quarterly or monthly forecasts can never be even close to accurate. Why? Look at the number of SKUs and the number of locations that you are forecasting for! Forecasting errors happen across time and locations, when the period is more than the immediate visibility and also with the multiplicity of items and places.
So where lies the answer? The answer is fairly simple and well-known, but very very difficult to digest and follow! The solution lies in demand-based (or consumption-based) supply chain, as against a forecast-based model. The hard efforts of the advertising and media fraternity are reversed by the ill-wisdom of a forecasting community! If advertising is “creating demand”, then why not also supply “based on demand”, and not some number-crunching forecasting ego-trip?
For having an agile, responding demand-based supply chain, one has to integrate it end-to-end… from RM/PM to Manufacturing to Distribution and Sales upto the Retail, all talking the same demand-based language! Then will the era come when we can say : Advertising Works! 100% !!!
Partner @ Syncore Consulting India
The author is a Marketing Professional with 2 decades of experience in FMCG marketing in India and overseas, having launched 2 mega brands in Foods and Cosmetics. Drawing upon his vast experience, he is now a Management Consultant for the past 7 years, having advised top Companies who are market leaders in their segments. He specializes in Theory of Constraints (TOC) based advisory and implementation for consumer goods industries.