What should a company's marketing expenditure focus on, product advertisement or brand building?



What should a company's marketing expenditure focus on, product advertisement or brand building?

 A company's ultimate objective is to increase the wealth of its shareholders. Eventually, all companies try to increase their revenue by increasing the sales volumes. But, the increased volume is possible only when people know about what the company is offering and therefore, all companies incur a considerable cost on sales and advertising expense. 

 Companies compare the advertisement cost with their peers in the same industry by comparing the cost to acquire each additional customer. The lower the marginal cost to acquire a customer, the more efficient are the company's advertisement efforts. Now, the question is where should more emphasis be placed, the product or brand name. 

 1. Product Advertising: Product advertising involves focusing on educating customers about a particular product such as a camera, car or a unique solution to a problem. This strategy is followed by companies who know that their company's product may become obsolete in the future due to the competition. They try to make the maximum sales they can under a short period of time. These companies face very high competition from peers and need to innovate very frequently to be able to maintain or improve their market share in the business. For example, Fidget spinners made a mark on the market and millions of dollars were earned by the companies who made them. However, product advertising, in the long run, has a limitation that if the new product is not good enough to satiate customers there may be very low sales and the company wouldn't be able to maintain even sales throughout the year.

 2. Brand Building: Brand building refers to spending money on making the brand name come on the tongue of people whenever a particular is talked about. Brand building has many advantages as well. Today if you think of premium smartphones, the first company that comes in our mind is Apple Inc. Similarly, Nestle has done a commendable job in establishing the brand name "Maggi" in the FMCG industry. Today, Maggi is used for all types of products be it noodles, ketchup, pasta or soups. The benefit of investing in the brand name is a lot of loyal customers. For example, Oneplus has made remarkable progress in the Indian smartphone space in just 6 years. The company understands the speed requirement of the customers and therefore makes one of the fastest phones for an extremely affordable price. Every new product by the company gets a lot of prebooking and there is a long line on the launch dates of new products. Therefore, another benefit is that new types of products can be launched in the same brand name and people will buy it because of the goodwill of the company. In the case of Oneplus, it now has wired as well as wireless headphones, car adapters, backpacks, caps, back cases, and many other products.

 So if you plan on starting a new business or already run a business, try to focus more on building a community of your users and figure out what exactly the customers want and what problems they face. This would help you bring customers closer to the brand name of the company and eventually help meet the ultimate goal i.e. maximizing the wealth of the shareholders.

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