Tuesday, October 2, 2012

losing scale in advertising: making of smaller brands


Why are there few winners and multiple losers in brand creation? There are three toothpaste brands or mobile phone brands etc? The reason is the advantages of scale in reducing cost. Reduced cost help create few winners and more losers as consolidation is the key. So if there is reduction in economies of scale, we would see smaller brands being created in future. One of the places where economies of scale work is branding cost. There are brands which are created on BTL but all bigger brands are created on TV. TV advertising has a reduction in cost on scale of revenue and has a big play for economies of scale. One development in field of advertising is distributed media in form of internet. Though online advertising is a small part of full advertising budget but media is going to certainly change from broadcast to peer to peer even for TV like what hulu is doing. In the one to one media, better targeting can be done by marketers with increase in CPC rate and more of a linear advertising cost. The linear rate would allow small brands to be created through TV. The economies of scale in production though remains. Economies of scale in supply chain would possibly also reduce due to ecommerce but that is for another post.