Brands lose more in sales than gain in ad savings

The failure of customers to return to Nakamatt stores in big numbers following its restocking of more than 13 key branches in Nairobi, Nakuru and Mombasa, last week triggered a call by the supermarket chain for support in rebuilding and rescuing its venture.

“The chance of recovery for Nakumatt is fair and can be accelerated by the support of specific stakeholders such as suppliers to fuel its engine, the new legal frameworks provide a good platform for the administrator to work for the benefit of all creditors,” said Peter Kahi, the Nakumatt administrator.

“The management team is undertaking a variety of integrated marketing programmes. Most importantly is an ongoing effort to enlist the support of suppliers as we seek to get the engine to gain more momentum. Some of our restocked branches include; Nakumatt Mega, Nakumatt Prestige, Nakumatt Galleria, Nakumatt Village, Nakumatt Nyali and Nakumatt Nakuru among other branches.”

The retailer’s marketing efforts at the moment have been concentrated on social media, updating its customers on the stores and products that have been restocked. Plans are, however, underway to increase its advertising on other platforms.

Still, in its current reduced marketing, away from traditional media, it is underselling its brand thus risks losing potential customers as they are already adapted to the fact that the store lacks even the basic products.

In fact, a research by cross-media research, measurement and analytics company, TiVo Research and Analytics Inc, shows that in reducing advertising spend companies reach only 25 per cent of their purchasers, leaving 75 per cent of those customers as available to competitors.

“Companies are trying to plan their media buys as efficiently as possible to increase reach and eliminate waste. To do this, they are dispersing spend across more platforms such as social media and are reallocating advertising dollars to digital spend,” reported TiVo Research and Analytics.

“But our research shows that for every dollar decline in ad spend, a company loses three times that amount in sales; reduced spend resulted in reach and frequency declines, which led to the drop in sales and return on investment.”

“Therefore brands stand to lose more in sales than they stand to gain in media savings. Hence, maintaining reach to customers through various media platforms is a key driver of ROI, and brands need to keep those factors in mind as they consider budget allocations.”

In this, marketing for retailers in different platforms instead of one is still important even during a downturn because it can lead to a return on investment, keep a company ahead of competitors and increase or maintain foot traffic in the store.

An example of a retailer that cut its marketing budget and suffered losses is American chain of department stores, Sears, Roebuck and Company. In an attempt to save money, it cut down on advertising from two billion dollars in 2010 to $850m in 2015 replacing traditional marketing with digital and tailored advertisements.

Thus, consumers’ knowledge of what the retailer had stocked declined and so did its foot traffic as well as its sales.

They opted for its competitors that kept them informed on their latest offering through traditional media advertising.

As a consequence, its shopper share dropped at least 40 per cent, its shopper preference share dropped 53 per cent from January 2006 to January 2016 and it was ranked 15th in stores that consumers prefer, with US women apparel shoppers stating a preference for Goodwill, a store that sells donated clothes, over Sears.

READ: Kenya’s radio advert spend largest in Africa

“Sears has spent very little on capital expenditures compared to other department stores. It also has reduced advertising spend significantly. Thus, shoppers are less likely to go to Sears in the first place, and if they do go, they may be put off by the store look, according to a case study by a financial services company, Seeking Alpha, on the consequences of underinvestment.

“The company has been affected by the loss of store traffic leading to a decline in sales. Its competitor, J.C. Penney spent nearly as much ($792m) on advertising in 2015, despite being half the size of Sears Holdings (based on revenue) and trimming its less efficient advertising spend as well.”

- African Laughter