Why do many household brands continue to advertise? In the eyes of many people, for a household name like Coca-Cola , is it okay for it to not advertise?

Will people really stop buying Coca-Cola if we stop advertising? Why does it continue to spend so much money on advertising as always? Today I will talk about this issue:

We say that Coca-Cola is a household name as a result of its continuous advertising, however, "household name" is never reliable - let's look at a typical example of a "household name" - Jianlibao. Jianlibao, which was once called "Oriental Magic Water", was a miracle in the local soft drink market.

Its outstanding advertising made it the number one in the domestic beverage market. In 1997, its sales reached a staggering 5.5 billion, which is the combined sales of Pepsi and Coca-Cola in China. At that time, the orange can of Jianlibao was a collective childhood memory of many people born in the 1980s. It was no exaggeration to describe it as a "household name". But now, for those born after 1995 and 2000, many people do not know what Jianlibao is.

The reasons for Jianlibao's decline are complex and certainly cannot be attributed to the cessation of advertising, but it objectively provides us with an excellent case to answer this question - the result of a brand that was once a household name not advertising for many years is that consumers will forget it.

In fact, Jianlibao has not gone bankrupt and is still selling. Now, Coca-Cola, Pepsi and Jianlibao are three kinds of beverages on the shelves at the same time. How many consumers will choose Jianlibao? For many young consumers, the three words "Jianlibao" no longer bring up any associations with the brand.

Jianlibao is a typical phenomenon that we use to explain brand advertising, so what is the essence of this phenomenon? Let’s look at the following:

The forgetting curve of German psychologist Ebbinghaus tells us that the speed at which people forget something is not linear, but they start to forget quickly and then forget more slowly. The theoretical guiding significance of this discovery is that any memory must be repeatedly reinforced and repeated before it is forgotten . Advertisers understand this truth well - repeatedly deepen the impression before people forget in order to establish a solid image, otherwise others will forget you.

Whether in the era of television advertising or the current era of Internet advertising , an indicator that brands are very concerned about when placing advertisements is coverage frequency . Usually, an advertising campaign will be broadcast on TV for four weeks and then stop for two weeks. When it is placed on the Internet , it will cover the same group of people at least three times. The idea behind this is to use the memory curve to strengthen your impression before you forget it.

According to Nielsen data, the average American is exposed to more than 120 advertising brands. Advertising is a direct and effective means to stand out from the crowd.

Even if the impression has been repeatedly reinforced, if it is not reinforced after a period of time, it will slowly disappear in the minds of consumers . Let’s take another example: Li Ning, the former gymnastics prince, was an idol of all Chinese people in the 1980s. It is not an exaggeration to describe him as a household name.

However, more than 20 years have passed. How many people still remember Li Ning, the living gold medal athlete? If you ask the younger generation, many of them only know that Li Ning is a sports brand and are not aware of the former national idol and world champion. If Li Ning is willing, how many sports brands would be willing to have Li Ning as their spokesperson? Therefore, Li Ning has long been aware of people's forgetting curve and has made his own name into a sports brand early on.

By the same token, without the exposure of NBA games, Yao Ming's popularity has inevitably declined in the past two years. More than 60% of NBA stars go bankrupt within 5 years after retirement. This is certainly related to their lifestyle and financial management ideas, but it also shows from one side how great the decline in commercial value is due to the decline in exposure.

For any product, its advertising audience can be divided into high-frequency consumers, low-frequency consumers, and non-consumers. The advertising mechanism for these three types of people is different. According to classic advertising theory, the logic of advertising comes from four aspects - informing, persuading, reminding, and reinforcing.

1) For non-consumers, the role of advertising is to cultivate awareness, that is, the "information and reminder" of the role of advertising .

"We have a new flavor!", "We have a new spokesperson", "We have a new packaging", "We have a new marketing theme"... These all need to be informed to consumers through advertising.

I didn’t have the habit of drinking Coke before 2014. I was a non-consumer of Coca-Cola. But one noon in the summer of 2014, I came out of the Haidian Swimming Pool after swimming, feeling thirsty and hungry. There was a promotion of Coca-Cola bottles with lyrics at the newsstand next to me. I picked and chose the one with the lyrics “The original dream will definitely be achieved”. After drinking it, I felt extremely thirst-quenched and very comfortable. After that, I became a light consumer of Coca-Cola.

Non-consumers like me who seem to be converted "accidentally" are actually inevitable in the eyes of Coca-Cola advertisers. Every day, tens of millions of non-consumers are converted into low-frequency or even high-frequency consumers, and this "accidental" conversion is actually the inevitable result of long-term advertising infection.

In the summer of 2013, Coca-Cola's nickname bottle advertisement increased its sales by 20% year-on-year. This conversion is very important. Even in the United States, a major cola consumer country , 45% of households still do not consume Coca-Cola . As long as the advertisement can reduce this proportion by one percentage point, it will be extremely successful for Coca-Cola.

2). For light consumers, the role of advertising is to cultivate a good reputation, which is the “persuasion” part of advertising.

One of the characteristics of light consumers is that they often do not have a stable pursuit of a specific brand, that is, they may drink Pepsi or Coca-Cola; they may eat McDonald's or KFC ; they may wear Nike or Adidas.

However, they are very important. As consumers have many choices, although light consumers are the long tail of brand consumption, they actually account for a very high proportion of brand sales . It is like no one eats McDonald's every day, people always eat McDonald's occasionally, and it is these enough consumers who eat McDonald's occasionally that support McDonald's popularity. The role of McDonald's advertising is to ensure that it is within your range of choices when you think of eating at a random restaurant.

When I just graduated, I met a young editor born in the 1990s. Every time I had a meal with her, she would choose Pepsi when choosing Coke. Even if the waiter gave her Coca-Cola, she would change it to Pepsi. I asked her why? She said: "Because Pepsi hired Wu Mochou as its spokesperson, I like her. I also know that many people don't like my Mochou, but Pepsi still hired her, and I became a lifelong fan of Pepsi! " Consumers are like this, they have many reasons to like a brand, so advertising companies must come up with different advertising strategies to influence these diverse consumers.

3) For heavy consumers, the role of advertising is to cultivate loyalty, which is the "reinforcement" of advertising.

At this time, the role of advertising becomes to strengthen the pride of loyal consumers . For example, if you are already a loyal consumer of Pepsi, your refrigerator is full of Pepsi of different specifications, and you drink Pepsi every time you have a party with friends, then if Pepsi sponsors the World Cup , or invites Leonardo to be its spokesperson, or releases a viral video that gets great reviews, you will definitely think: Well, this is the Pepsi that I love!

My cousin bought a Xiaomi mobile phone in 2015. Xiaomi sponsored the Spring Festival Gala advertisement that year. My cousin was very excited when he saw the Xiaomi advertisement on New Year's Eve. This excitement came from the fact that he believed that his choice was finally recognized by more people and became mainstream. This is actually the sense of pride that advertising brings to loyal customers.

Making loyal consumers proud is also one of the important missions of advertising.

The market where Coca-Cola operates is a fast-moving consumer goods market, which means a higher frequency of purchases. At the same time, unlike shampoo, cosmetics and other products that emphasize functionality, there is little differentiation between Coca-Cola and Pepsi in terms of product function and taste.

In 1970, Americans conducted an experiment and found that less than 10% of people could tell the difference between the two types of colas. This means that brand is an important way to maintain a bridge between purchases, and advertising is one of the most important ways to build a brand (one of the most important ways is because there are exceptions. For example, Lao Gan Ma uses its unique taste to build its brand, and Haidilao uses its superior service to build its brand. Neither of them advertises).

Competition in the beverage market is extremely fierce, and using advertising to maintain scale is very important for Coca-Cola. For a company of Coca-Cola's size, a simple rule is that in the short term (that is, when fixed costs remain unchanged), scale determines profit margins , because marginal costs are bound to decline in the short term. Let's take a simplified model -

If the fixed input cost of Coca-Cola is 100 yuan (including costs such as factory buildings and R&D that do not change with sales), and it produces 200 bottles of Coke each year, and the variable cost of each bottle of Coke is 1.5 yuan (that is, the material cost of a bottle of beverage), then its total cost is 100+200 1.5=400, and the average cost is 400/200=2 yuan. If each bottle is sold for 2.5 yuan, it can make a profit of 0.5. At this time, the advertising stops, and the sales volume drops from 200 bottles to 100 bottles. The fixed cost remains unchanged, and the total cost becomes 100+100 1.5=250, and the average cost becomes 250/100=2.5. If 2.5 are still sold, no profit will be made, and the profit margin becomes 0. This is the significance of scale in the short term.

Of course, the reality is 1,000 times more complicated than this model, but in any case, for an industry, scale and share mean bargaining power . When you are small in scale and share, your bargaining power with upstream suppliers and downstream distributors is very small. In this case, it will be very difficult to make a profit.

If you don't advertise, others will, and their scale will crush you. Unless you change your model and ensure profitability even on a small scale, maintaining scale through advertising is an inevitable choice.