Other people's business

RSS

Sponsored advertorial - It pays to advertise, but not enough to revive Britain

New Statesman

This is sponsored content from Advertising Association.

House of Commons, 25 March 2013, 6pm

For the motion

Laurence Green, founding partner, 101 London

Luke Owen, student of advertising, London College of Communication

Against the motion

Sam Blackie, Deloitte

Max Lehner, student of advertising, London College of Communication

The UK economy is in a hole. We’ve lost our triple-A credit rating, the Budget deficit is rising and growth remains stagnant – leading many commentators, including the New Statesman’s economics editor, David Blanchflower, to believe that we are in a triple-dip recession. And as the commentators often stress, we need to find a strong and effective cure for our economic woes – and we need to find it fast.

Could advertising hold the key? This might appear to be a tall order. After all, it is a particularly deep hole the Chancellor has dug for us and there is only so much that a few television and display adverts can offer. On closer inspection, however, it would seem this is a question worth asking – particularly when the results from a recent study by Deloitte are taken into account.

The research, conducted on behalf of the Advertising Association, set out to quantify and qualify the economic effects of the £16bn spent on advertising in the UK every year. Using data from 17 countries over a 14-year period, Deloitte was able to demonstrate that, for every £1 spent on advertising, £6 was generated for the economy – something that amounted to a £100bn effect on total GDP, and which led the report authors to write: “We need to think differently about advertising – as an industry, important in its own right, but also as a business activity, and a fundamental driver of UK competitiveness.”

Is this an accurate view or is it the case that the industry has fallen for its own spin? To put it to the test, the New Statesman and the Advertising Association gathered a mix of the UK’s top creative and analytical thinkers, as well as emerging talent from the London College of Communication, for a House of Commons debate: “It pays to advertise but not enough to revive Britain.”

The first person to speak was Laurence Green of the 101 London advertising agency. Arguing for the motion, he opened with a reference to some of the hugely successful advertising campaigns he has worked on, such as the Skoda “It’s a Skoda, honest” and “Cake” adverts; the Cadbury’s drumming gorilla; and the Sony ad that featured coloured balls bouncing down the streets of San Francisco to mark the arrival of its Bravia LCD range. However, while one can’t dispute the value of these advertising campaigns for the companies in question, Green felt they did little to stimulate the economy.

“We didn’t sell a car to anyone who wasn’t already in the market for a car,” he reflected. “And even though Sony had to build a new factory to cope with demand, it was the collapse of the price that was driving market growth – we were simply harvesting a share of that market.”

In Green’s view, advertising supports individual organisations, and those alone, because most companies use advertising to preserve higher pricing structures rather than create demand. Therefore, he said, the role advertising has to play in reviving the British economy is limited: “When faced with a similar tough economic environment, President Roosevelt did not build a brand, he built bridges. I suspect bridges are a better way to build Britain.”

This idea that investing in infrastruc-ture offers a viable way out of our economic mire was not disputed by the next speaker, Sam Blackie of Deloitte. He agreed that it was hugely important to get the country spending.

“There is consensus in the UK and ­Europe about needing to use economic growth and spending to get us out of this mess,” he said. “We need to grow markets to escape our malaise and advertising is fundamental to doing that.”

Blackie referred to advertising as a “Darwinian process that improves products, brings people together, matches buyers with sellers, and creates markets that otherwise wouldn’t exist”. For evidence of what this means in practice, readers should turn to the aforementioned Advertising Pays report, which demonstrates how advertising facilitates competition through price promotion, product differentiation and innovation, which in turn helps new entrants to penetrate markets. Take broadband advertising, which Deloitte estimates is responsible for 36 per cent of take-up in UK households; or the £200m savings on schoolwear that parents benefited from in 2010, “thanks to supermarkets advertising their intense price wars”.

Advertising also enables the digital economy by providing funding for free search activities, social media, instant messaging and most websites, which in turn provide £5bn in value to customers. And let us not forget the social contribution of advertising such as the government campaign “Don’t Advertise Your Stuff to Thieves”, which reduced the cost of crime by £189m.

Indeed, the findings of the Deloitte report are supported by other studies, such as a McKinsey paper, published in March 2012, which concluded that advertising is an economic growth engine that accounts for 15 per cent of GDP growth across the G20 economies; and Leo Burnett’s research into the effect of the Department for Transport’s drink-driving campaigns, which stated that over a 30-year period “this relentless pursuit of potential drink-drivers saved almost 2,000 lives, prevented more than 10,000 serious injuries, and created a value to society of £3bn”.

Nonetheless, doubts were raised about the value of relying on a sector that encourages consumerism in order to help any country recover from a debt crisis. As Luke Owen, a student at the London College of Communication, argued: “How can an industry that encourages people to spend bring us back from this [crisis], when it is this [debt] that got us here to start with?”

Owen also felt that advertising was becoming increasingly irrelevant as “people don’t watch adverts any more”. “The harder advertisers strive to get attention, the more annoying they become,” he said. “Dave Trott [founder of the Gate advertising agency] said 90 per cent of ads are invisible. Ninety per cent is far too high a fail rate for an industry capable of saving an economy.”

Max Lehner, however, wasn’t convin­ced of this argument. Also a student of advertising at the London College of Communication, he said that regardless of how ineffective some may consider ­advertising to be, in the main it still works. He referred to the case of Nike, which, in the early 1990s when everyone was cutting back on advertising spend, did the opposite.

“They did something different to what everyone else was doing. Instead of saving money, they spent even more money on building their brand. Recognition is now 900 per cent higher than when it [the campaign] began.”

But the main focus of this debate was not on how effective advertising may or may not be in terms of brand awareness. It was on whether the advertising industry could provide a much-needed boost to the UK economy. And on that issue, the house was united in favour of the motion.

It is not advertising that is going to revive the economy, it was argued, but better, stronger manufacturing – “We’ve sold our gold reserves, water companies, air-traffic control, Land Rover, Jaguar and Rolls-Royce. When we want new railways we go to Germany; when we want new power stations we go to France,” was one comment. “Our economy is at the mercy of politics” was another, highlighting the proposed merger between BAE Systems and EADS, which failed as following intervention by the German government: “No amount of advertising would have closed that deal.”

Meanwhile another guest blamed the advertising industry for not stepping up to the plate. If an advert can result in a product selling out almost immediately – such as the M&S ad for a chocolate pudding that sold out within 48 hours – then the reason why advertising is “failing to lift us out of recession is that advertisers aren’t good enough”, she said.

The debate closed with Sam Blackie attempting to rebut some of these sensible comments. “The point was made that, if no one has any money, how can they spend it? Well, if you don’t tell people about a product how are they going to buy it?” he retorted.

“We can’t advertise our way out of trouble, but equally we can’t get out of trouble if we don’t advertise.”

Persuasive as he may have been, it was not enough to turn the house, and when it came to the final vote it was overwhelmingly in favour of the motion. Advertising, it would seem, does pay – just not enough to revive our economy.

Sponsored content from Advertising Association. For further details about advertising’s economic impact please go to www.adassoc.org.uk/advertising-pays