March/April 2007

Supply Side

Does advertising work?

By J. Baird

In the increasingly globalizing mining market, companies that understand advertising and use it well will have a crucial business advantage. Those who don’t may get left behind.

No matter what business you are in or how big or small you are, advertising can make or break your bottom line. Think about it - who will buy from a company that they have never heard of or one that has a less than industry leading image?

Advertising in today’s multi-channel universe offers both challenges and opportunities and it is becoming more and more important as a tool. Advertising encompasses all the ways you can use to get your name out there and build your brand. For suppliers dealing with the mining industry, this includes print advertising, media releases, trade shows, websites, direct mail and email, graphics, brochures, newsletters, technical papers, sponsorships, and more.

The words ‘brand’ and ‘branding’ are commonly used, but what do these words actually mean? A brand has been described as “everything you do,” that is, the whole company, including the products and services that it offers. Branding is the communications program that conveys your company’s image to prospective clients.

Perhaps the most important point to remember about the ‘brand’ concept is that your brand resides primarily with the customer. It is fine for you to know yourself and believe in all the good things that you can provide the world of mining; however, if you do not communicate the message frequently and well, you will not succeed in becoming a preferred supplier.

Those who do not know about advertising typically ask three questions. First, is there proof that advertising works? Second, how does advertising  actually work to build a brand? And third, what is the financial payoff?

The fact is that study after study has shown that advertising makes marketing more efficient by:

  • Making contact far beyond the reach of the sales force
  • Arousing interest
  • Generating brand awareness
  • Creating leads
  • Building brand preference
  • Increasing sales
  • Increasing market share
  • Boosting profits

You may feel great about having two established clients in Chile, but how are you going to reach the other 100 mining operations in that country that should be buying from you? Sales calls would be expensive - advertising is the answer.

A 20-year study of 375,000 leads created by advertising revealed that 82 per cent of those showing interest had never met a salesperson from the company they enquired about. Sixty-one per cent did not know prior to seeing the ad that the company made the product, while 35 per cent were buying the product from the advertiser or a competitor and 19 per cent bought from the advertiser. This is proof that advertising gets a company’s message in front of new, interested prospects.

A US supplier of pumps and compressors measured the awareness of petroleum industry executives and found that it had risen fully 2 1/2 times after advertising. A study in the chemical industry of 2,594 product lines showed that buyers were 250 per cent more aware of the 614 that had been advertised than the 1,980 that had not. Many studies show that the higher the level of advertising, the higher the level of brand awareness.

The next question is, does awareness lead to brand preference? Again, the answer is yes. The same chemical industry study showed that advertised products had a 330 per cent greater increase in buyer preference than those not advertised. Further, the higher the level of advertising, the greater the increase in preference.

So far, we have seen that advertising plays a major positive role in establishing contact and arousing interest among customers and prospects. And we’ve seen how it increases brand awareness and builds brand preference, which in turn leads to increased sales and greater market share. But, does advertising increase profitability?

Again, research shows that there is a direct relationship between advertising investment and profits. For a portable safety product, advertising raised profits six times. For a $10,000 commercial transportation component, a high level of advertising raised profits by a factor of four.

There’s proof - all kinds of proof - that in business-to-business marketing and selling, advertising works.

Jon Baird
Jon Baird is the managing director for CAMESE.

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