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Amitava Chattopadhyay


Amitava Chattopadhyay
Emerging Market Multinationals - Amitava Chattopadhyay


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When Advertising is Just a Waste of Money

Watching the recent cricket test match between India and England on TV in India, I was staggered at the level of advertising repetition I experienced. During one hour, I decided to keep track of the commercials aired. The brands and the number of times they advertised during the hour period are below.

As one can see, 17 different brands advertised during the hour. These brands covered a broad range of categories across products (e.g., Blenders Pride, CEAT and Panasonic) and services (e.g., Amazon and McDonald’s), as well as domestic (e.g., Idea, Fogg and Kent) and global (Axe, Google and Suzuki) brands. Of the 17 brands that advertised, 11, or a whopping 65 percent, aired their ads three times or more, with Gionee, the Chinese mobile phone maker showing the exact same “creative” a mind-numbing seven times during the hour!

Advertising Repetition Levels in India are Off the Charts! How Much Money is Being Wasted?

Watching the test match between India and England on TV in India I was staggered at the level of advertising repetition that I experienced. During one hour, I decided to keep track of the commercials aired. The brands and the number of times they advertised during the hour period are below. As one can see, 17 different brands advertised during the hour. These brands covered a broad range of categories across products (e.g., Blenders Pride, Ceat, and Panasonic) and services (e.g., Amazon and McDonald’s), as well as domestic (e.g., Idea, Fogg, and Kent) and global (Axe, Google, and Suzuki) brands. Of the 17 brands that advertised, 11, or a whopping 65%, aired their ads three times or more, with Gionee, the Chinese mobile phone maker showing the exact same creative a mind numbing 7 times during the hour!

repetition

This brings me to the main point of this blog.  Why so much repetition?  Theory has it that consumer response to repetition follows an inverted-U shape.  That is, initially, consumer response increases with repetition, as consumers learn about the brand, but then declines, as repeatedly watching a brand’s advertising becomes boring and irritating.  The point at which additional exposures has a negative impact depends on the complexity of the advertising, the amount of attention consumers pay to advertising, and the like.  Most lab studies, which show participants ads embedded in a TV program during a viewing episode of less than one hour find that optimal impact is reached with three exposures, declining thereafter. According to Siddarth and Chattopadhyay (1998)[1], field studies find that incremental repetitions starts to have a negative impact on consumer responses somewhere between 12 to 15 exposures over a two-month period.  Indeed, Siddarth and Chattopadhyay (1998), show that, across product categories, consumers are likely to channel switch while watching TV, if they see a given commercial more than 14.5 times, and also show that channel switching negatively impacts purchase behavior. Importantly, these results were obtained using a dataset spanning two years!

To those of you who don’t know about cricket, a day of test cricket spans three, two-hour sessions.  The ads above were repeated throughout the day. Thus, 65% of the brands above would have been seen 18 times or more while viewing a single day’s play; for Gionee, the most advertised brand, there would have been 42 exposures. Across the five days of a cricket test match, and ardent follower of the game would have seen 65% of the ads a nauseating 90 times or more and even the lightly advertised brands, well above the 15 exposure threshold. Gionee’s advertisement would have been seen 210 times!  However, one slices the data, there is cause for concern.  Are these brands overexposing themselves to their detriment?

The research data on repetition effects I refer to above are from American consumers.  So one question to ask is, are Indian consumers different?  My intuition suggests that they cannot be that different.  Seeing an Amazon ad 90 times, an Axe ad 120 times, a Raymond ad 150 times, and a Gionee ad 210 times cannot reasonably be expected to not turn off a consumer through over exposure. Repetition beyond a reasonable level is annoying and turns consumers off a brand, be they American or Indian. Thus, I would submit that there is a significant degree of over-advertising in the Indian marketplace, which is not doing the sponsoring brands any good, and most likely hurting them. I’d like readers to weigh in with data from Indian consumers in support or otherwise.

[1] Siddarth, S. and Amitava Chattopadhyay (1998), “To Zap or Not to Zap: A Study of the Determinants of Channel Switching During Commercials,” Marketing Science, 17 (2), 124-138.

Looking at MNC’s, the top ranked companies are originating from the United States or are present in the United States. What enhances the success of these firms in the United States market and not other markets?

Does the market’s response to Lenovo’s acquisition of Motorola make sense?

Lenovo’s acquisition of Motorola from Google for $2.9 billion seems to have gone down badly among investors, with Lenovo stocks losing over 16% of their value since the announcement. The press suggests that the deal was not good for Lenovo because Google retained the majority of the patents that had been owned by Motorola. What’s not clear to me is why is the fact that Lenovo did not get the patents a concern for Lenovo?

Lenovo Motorola Future

Looking at pure numbers, Google paid $12.5 billion to acquire Motorola and it has been reported that the patents owned by Motorola are valued at around $5 billion. Additionally, for its acquisition price, Google gained access to $3 billion in cash that was with Motorola, and was able to sell Motorola’s set-top box business for another $2.35 billion. Google also has absorbed roughly $2 billion in losses since the acquisition, again according to reports. Given these number, it does not seem unreasonable for Lenovo to have paid $2.9 billion for Motorola, an acquisition which could prove transformative for Lenovo in the long run. Why do I think this?

Lenovo’s current business is dominated by PCs. Lenovo is the #1 player in this business, but being #1 in a shrinking category is cold comfort. Lenovo is the #4 smartphone player in the world, a position driven primarily by its #2 position in China, a market where growth is slowing, which is likely to force Lenovo to look overseas for growth. The Lenovo brand is just beginning to establish itself in the US and other developed markets, and it is hardly ready for an extension in to smartphones in most markets outside China.

The Motorola brand could be just the thing Lenovo needed to rapidly catapult itself in to the global smartphone business. First, in the US and around the world, the Motorola brand has presence in consumers’ minds a presence that is not only the result of Motorola’s pioneering efforts in the mobile phone industry but also due to its access to consumers through its numerous links with the carriers. For Lenovo, the sheer ubiquity of the Motorola brand both in terms of access and in consumers’ minds is very significant. Without the acquisition, it would have taken Lenovo years and vast sums of money to create the presence that Motorola offers instantly.

Second, the Motorola brand has relevance. Motorola is relevant in the mobile phone category, where it has had a long presence, making it both credible and trusted by consumers. Lenovo on the other hand has no relevance in the mobile phone or smartphone category outside of China, as it currently sells its smartphones primarily in China, with a small presence in a few other countries. As such, the Motorola brand gives Lenovo the opportunity to leap in to this category worldwide, instantly and with credibility.

Finally, Motorola is a storied brand with a history dating back to 1928. Thus, the brand provides an opportunity for Lenovo to differentiate itself in a highly competitive category. This differentiation is not only in comparison with the myriad of Chinese smartphone players that are flooding in to the market, but also in comparison to globally dominant players like Samsung and Apple. Whether Lenovo will be successfully able to leverage the Motorola brand’s heritage remains to be seen. But, given how adroitly Lenovo leveraged the ThinkPad brand it acquired from IBM a decade ago, there is no reason to count Lenovo out in this regard. Indeed, the markets were equally pessimistic when other EMNCs acquired storied MNCs like Motorola–e.g., Jaguar and Land Rover by Tata Motors in 2008, but the markets were wrong!

Only time will tell if the Motorola acquisition will be a game changer for Lenovo, but I am much more optimistic than either the market or the many pundits who have expressed concerns!


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