What is Excess Share of Voice (eSOV)?
Excess share of voice is arguably one of the most important, yet least understood concepts in the world of marketing effectiveness. In a Harvard Business Review, Jones discovered a correlation between a businesses market share and their share of voice, which is the proportion of advertising that it contributes to the category. He discovered that when examining the relationship between the two, they shared an almost straight-line relationship; if you have a 20% market share, you have a 20% share of voice.
Jones continued to observe the dynamics of the equilibrium and identified that if a brand underspent, meaning they had a higher share of market, yet a lower share of voice, it is almost inevitable for their market share to eventually drop to the same level as its share of voice.
Contrastingly, if a brand overspent, meaning they had a higher share of voice in comparison to their share of market, in many cases, eventually its total market share would also increase. This positive difference between increased share of voice and increased share of market is called excess share of voice, otherwise abbreviated to eSOV. With a 40% share of voice and a 20% market share, a business will hold an excess share of voice of +20.
Small Brand, More Work
Something interesting that Jones found from his data analysis was that when studying smaller brands, for example a business with a 5% market share, that brand needed to overspend and hold a positive excess share of voice in order to maintain their 5% market share.
Contrastingly, when Jones studied larger brands, for example a business with a 20% market share, could manage to have a lower share of voice of around 15% and still maintain their share of the market.
Why is this the case, you might ask? Why do smaller brands have to work harder for their market position? The answer is simple; global marketing effectiveness consultancy, data2decisions, shared the two factors that guarantee the best marketing effectiveness are creative execution and brand size and share. Essentially, if a brand is already well established, every penny that is spent on advertising immediately results in a substantially positive response.
Maintaining Share of Voice in a Recession
As we enter into what is looking like a recession in the UK, it’s important to review your business and understand the best tactics to implement into your marketing efforts in the most profitable way. Some brands maintain or even increase their expenditure, while others cut theirs; the businesses who either choose to, or are forced, to cut their marketing costs could present a key opportunity to acquire market share in a time where other key players are out of the game.
Acquiring or maintaining an excess share of voice is vital for businesses throughout a recession, in order to stay front of mind amongst consumers and to position their brand for the highest chance of recovery after a recession.
In a deep recession, ad spend volumes are likely to decline significantly, which presents a key opportunity for businesses to maintain their share of voice with a lower budget than usual. However, data from PIMS has demonstrated that market share performance is significantly improved for businesses that have invested in their marketing efforts throughout a recession.
With that in mind, the main question to consider is what is the impact on those businesses who cut their marketing costs, compared to those who maintain or increase theirs? It’s almost inevitable that businesses who cut their marketing spend relative to their competitors are at a much greater risk of share loss. However, the level of risk is more prominent in some categories than others. Businesses which operate in categories that are more price-based and offer less consumer choice, such as fuel and water suppliers, are more susceptible to loss of share when cutting marketing spend. However, businesses which operate in less price-driven categories and carry more importance to consumer choice, such as cars and fragrances, are more likely to be resilient to loss of share.
Consumer goods corporation, Procter & Gamble, have announced their commitment to ramping up their marketing spend amid the increased demand due to coronavirus. P&G stated that they must retain the mental availability of their offerings throughout a time when their physical availability may be lacking.
In 2003, Dutch grocery retailer, Albert Heijn, learned the hard way that cutting prices is not an effective marketing strategy. After the company announced that they were committed to narrowing the price gap that existed between themselves and their competitors, the competition reacted by matching the initial price decreases. Food prices in the Netherlands dropped by 1%, resulting in Albert Heijn losing their share to the hard discounters.
Some important insights to consider relating to maintaining share of voice in a recession is that cutting marketing spend will help to protect profits, yet only in the very short term. Ultimately, the business will emerge from the recession in a much weaker state and be less profitable.
It is best to maintain a share of voice or adopt an excess share of voice (having a larger voice than market share) during a time of recession. If other businesses are slashing their spend, the longer-term benefit of maintaining or increasing spend will be even more beneficial.
For smaller brands that have the aspirations to accelerate their sales and grow their share in the market, it is absolutely essential that a sustainable and effective marketing strategy is in place with the key objectives at the forefront of everything they do. Aspirations, target audience, positioning and barriers must be identified to achieve this.
If you would like to adopt an all-encompassing marketing strategy, we can look at your business with fresh eyes, combining the latest industry research and insight with your business objectives and marketing KPIs seamlessly.
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