Traditional agency wisdom for these circumstances is to outspend your competition. The proposition is that excessive share of voice (ESOV) drives market share, with historic data suggesting that a 10 point excess in media spend (Share of Voice) over Share of Market (SOM) leads to an increase of 0.5% in market share. Brands with a market share of 20.5% who grow their media spend to 30% of the market, would grow market share to 21% over a year.
In previous downturns, brands with substantial market share and sustained spending power have typically been able to strengthen their position in relation to smaller players. Higher media spend, supported by strong balance sheets, and combined with spending cuts by competitors, resulted in ESOV and growing market share. Given the channel mix that prevailed in past downturns, the incensed share of voice was typically achieved through TV as the predominant channel. In practice, strong brands seeking ESOV outspent the competition on better creative and more TV time, drowning out the smaller voices in the process.
Since we have moved from a traditional big media marketing environment to a multi-channel digital environment, the applicability of the ESOV-model is no longer certain. The complex new marketing environment is primarily about customer engagement and conversion – not share of voice.
Digital media has surpassed analogue media with a more than 50% share of 2019 paid media in the Nordics. Search, and Search and Social represent 60% of all online ad spending in Sweden. Search alone has surpassed linear TV spend and Social is due to do so shortly. The surge of the walled garden platforms is a key reason why first-party data now is a key competitive differentiator.
In the present fragmented, primarily digital environment ESOV is superseded by excess share of engagement (and conversion). The old concept, which is intrinsically tied to mass media, does not make sense in digital and addressable channels and platforms. You address customers and prospects who you care about and your focus should be on achieving an excess of engagement with those individuals.
Achieving the former benefits of ESOV is therefore possible without massively outspending in absolute euros. Instead, the resources should be focused on highly targeted, relevant and appropriately timed advertising and interactive messaging, excluding audiences or content which are not relevant. Success is measured as engagement, conversion and revenue. The differentiators that make the excess share of engagement possible are data and technology, not bigger media budgets.
On digital platforms, Google and Facebook, data is ‘hired’ to brands. It is fundamentally proprietary to them and never really shared. Brands get access to Facebook’s and Google’s massive data assets, but they cannot significantly enrich their own data or adopt it for use in other channels. This creates a fundamental dependency, and also prevents establishing lasting market advantages without continuous outspending of the competition.
Just as it has become apparent that focusing on share of voice is no longer sufficient, it is also becoming clear that marketing that does not nurture first party data assets – assets which may be leveraged across engagement and conversion channels – will not create sustainable competitive advantage.
This is particularly relevant in industries where new digital-first competitors are changing the rules of the game. In the Nordics this has already happened in media, retail and hospitality, but these will not be the only industries affected. The current crisis may accelerate the development as many of the new competitors not only have balance sheets that can withstand the financial pressure, but are more adept at focusing on the share of engagement, not just share of voice. An example of a currently rapidly evolving landscape is food, as grocery retail, food delivery services, traditional and quick service restaurants are increasingly competing for the same share of wallet, and some have the support of internationally developed technology platforms.
A recent Avaus study showed that Nordic brands understand this evolution. One principal consequence is that the relative share of marketing budgets spent on bought media has decreased over time, while investments in headcount, digital marketing services and capabilities such as data, analytics and martech have increased. Digitalisation has, counter intuitively, increased the labour intensity of marketing.
To gain market share, combined with sustainable competitive clout, brands need to strengthen their first party data capabilities besides making competitive media, channel and touchpoint choices. Proprietary, first party data enables direct to consumers (D2C) engagement and the addressability of existing customers through both own and bought media. First party data is the basis for proprietary customer insight, and customer journey management, as well as the enabler of automated marketing activities.
In downturns and post-crisis circumstances these abilities become all the more important because of changes in customer lifetime value, which suddenly skews the CLV/SAC balance. In downturns, CLV tends to go down while acquisition costs may go up. Due to decreased price competition in some verticals (utilities and other subscription services) customer retention can also temporarily improve. In aggregate, customer value management suddenly requires real-time inputs and analysis.
Business success now requires the ability to identify, address and retain existing high value customers. Keeping the same customers at the centre of your marketing activities when the market picks up again is similarly vital. Neither of these is possible without possessing and leveraging your own data assets, and neither can be achieved by simply raising your voice.
Written by Sasu Ristimäki, Anna Trygg, Kim Weckström, Emma Storbacka
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