Why Big Brands Continue to Invest Heavily in Advertising Even They are Famous?
Big brands are known for spending huge amounts of money on advertising. Even if they are already famous, why do they continue to do so? There are several reasons behind it.
While there are various factors that contribute to this, two key reasons stand out: their ability to do so, and their obligation to their shareholders.
Why Big Brands Invest Heavily in Advertising Even They're Fame?
There are several reasons why big brands continue to invest heavily in advertising campaigns:
The Impact on Profitability
One reason is that big brands have the luxury of having massive budgets to work with. They have established themselves in the market and have enough financial resources to continue advertising.
Moreover, big established brands are often corporations that answer to shareholders, and the role of a corporation is acquisition and distribution of wealth back to the shareholders.
This means that a company's success and profitability can have a direct impact on its stock price and shareholder value.
As such, advertising can play a crucial role in the company's overall profitability by generating more revenue and driving more sales.
highest rate of return on investment (ROI)
While big brands continue to spend a lot of money on advertising, they also need to make sure that they are getting the best return on investment (ROI).
For example, P&G decreased its digital budget by $200 million as they found out that they were not reaching their target market effectively through digital ads. However, this did not decrease their overall ad budget.
Another reason why big companies spend so much money on advertising even if they are already famous is to acquire new customers and to communicate with existing customers.
Advertising plays a significant role in the introduction of a new product in the market. It stimulates people to purchase the product, enabling the manufacturer to expand their market and explore new markets for the product and retain the existing markets.
In addition to the above reasons, there are several other reasons why companies spend a lot of money on advertising.
One is to introduce new products to the market and stimulate people to purchase them. Another reason is to expand the company's market by exploring new markets for the product and retaining existing markets.
The Power of Advertising in Building Brand Image
Advertising plays a significant role in the introduction of a new product to the market:
Ads create trust. When there are too many choices on the shelf, people usually pick the brand they trust the most. A brand which is almost a brainless choice.
Advertising helps in creating awareness and building a brand image. Companies want to make sure that their brand is at the top of the mind of the consumer when they are looking to make a purchase.
Stay Relevant and Competitive in Today's Market
Big brands also use advertising to differentiate themselves from their competitors. They spend heavily on marketing to set themselves apart and justify their goals.
Outdoor advertising spending has been on the rise because it helps big brands achieve their objectives, including communicating with their customers.
Successful Product Launch
Furthermore, advertising can be especially beneficial for companies that have high-ticket value goods in their product range or cheap products with a large bulk.
In such cases, advertising can be more effective than storing the products and waiting for someone to come and purchase them.
Creating Brand Awareness
The ultimate goal of advertising is to increase brand awareness, promote new products and services, and maintain customer loyalty.
Big brands continue to invest in advertising even if they are famous because it helps them achieve their objectives, which include communicating with their customers and setting them apart from their competitors.
Big Brands Shifting to Digital Advertising
Digital advertising is gaining popularity despite some major brands investing a lot of money in more conventional forms of advertising including TV, print, and outdoor.
Digital advertising is both more cost-effective and gives companies a more specialized way to reach their target market.
It is important to keep in mind, though, that digital advertising is not always successful, as demonstrated by Procter & Gamble, who cut their digital advertising expenditure by $200 million since they weren't efficiently reaching their target demographic.
Why Companies Must Tread Carefully in their Spending and Strategy?
While advertising plays a significant role in the success of big brands, companies need to be careful in their spending:
ROI Should Be a Key Factor in Spending Decisions
On average, the return on investment (ROI) of advertising is usually not worth it. In many cases, companies spend more on commercials than they earn back in additional sales.
This means that companies need to be strategic in their advertising, ensuring that their advertising budget is spent in a way that will give them the most significant return on investment.
The Hidden Costs of Advertising
There is also the issue of ad fraud, where a portion of advertising dollars is being stolen. According to an accounting firm PwC study, on average, 15% of the dollars spent on digital ads go missing.
Companies need to ensure that they are spending their money on legitimate ads and that they are getting what they are paying for.
Avoiding Political Missteps
Finally, there is the matter of political influence. Corporate campaign contributions do not always buy meaningful political favors.
Companies need to be careful in their political spending and ensure that their contributions are going to candidates that align with their values and beliefs.
In conclusion, big brands spend a lot of money on advertising even they are famous for various reasons, including their ability to do so, their obligation to their shareholders, to introduce new products, expand the market, enhance brand loyalty, and remain competitive in a rapidly changing market.