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The continuing trend is seeing growing numbers of companies diverting a greater percentage of their marketing budget spend away from traditional and towards other forms of advertising
In 1995 Esteé Lauder went public and in 1998 acquired the make-up-artist driven brand M.A.C. Cosmetics; a niche grassroots company with a big reputation, relying heavily on word of mouth marketing efforts that developed the brand into a global authority.
When Esteé Lauder acquired the brand in 1998, company president, John Demsey made a bold decision in his marketing strategy. He didn’t opt to invest in traditional print media, instead, he focused on building an ever-increasing number of direct-to-consumer retail stores to help establish the brands presence. The approach has seen M.A.C.’s distribution jump to 120 countries and contribute a significant proportion of the $11.82 billion total net sales achieved by Esteé Lauder in 2017.
Further acquisitions followed and by 2014 Demsey, now group president, started to nurture a whole portfolio of brands, among them Tom Ford and Bobbi Brown, neither of which widely use traditional marketing or advertising. Demsey’s approach to marketing has been labeled the social-advocacy model, which translates as content which isn’t created by marketing executives, but develops a life of its own.
Over the years greater numbers of brands have been influenced by Demsey’s pragmatic approach to advertising and have gone down the digital route by using sponsored content or influencer generated content.
It’s looks at this point, that the shift away from traditional advertising is one that will not be reversed, due to a great extent to the cost-effectiveness and return on investment offered by digital marketing.
Many brands have been reducing their marketing budget in recent years including Procter & Gamble Co. who announced plans to further reduce agency spending by $400 million through the fiscal year ending June 30, 2021. That comes after a combined $750 million in such savings over the past three fiscal years. As marketing spend diminishes, brands are looking for more effective ways to achieve results with less resources.
No matter how subtle the shift, the reduction in budget is forcing massive change in the advertising industry. Whilst brands are reducing their marketing bills, they are also causing agencies to consolidate. More innovative advertisers are now a one-stop-shop, where brands can see all their marketing needs addressed by one entity. Whilst companies across all sectors have felt the shift in focus, the last number of years has seen the beauty sector experience the greatest impact.
In the digital age, industries thrive when influential social media users are willing to give recommendations to their peers and followers. These followers are acting as unpaid promoters. An ever increasing number of younger customers no longer have the time to read a magazine from cover to cover or to tear out ads and take them to their local beauty retailer; micro media is king. Platforms such as Instagram display beauty products in the best light and provide perfect bite-size snippets of information that can be absorbed by a generation on the move.
Whereas fine jewelry and luxury accessories brands still put great emphasis on traditional print media to spread their brand message and sell their high-value items, beauty products, given their relative affordability, are much more likely to achieve higher conversions to sales if the products are based at a low enough price point and only one click away.
This approach works for both niche and legacy brands who have discovered that product reviews by bloggers or vloggers which compel other customers to engage with the editorial content on digital platforms, often provide the highest ROI when it comes to marketing and driving sales. Brands no longer have to rely on their own media; word of mouth still reigns king in marketing for cosmetic companies.
Smart phones have changed the conversation since M.A.C. Cosmetics first used the tactic in 1998. At a time when a group of friends can share a blog about a beauty product and experiment with beauty looks online while sitting with friends in a restaurant or having drinks in a bar, it makes print advertising look like a throwback to the middle ages. Brands like Sephora have bought into this model. The ‘Sephora Virtual Artist’ provides an interactive, fun and easy-to-use tool that allows the consumer to virtually try different products using a laptop or smartphone. The brand has reported that social media posting, reviews and interactions now account for up to 90 percent of their sales conversions.
Consumers are no longer willing to accept the smoke and mirrors approach of traditional advertising, they require proof that a product works, relying on testimonials from other customers. In 2015, Sephora reported a 4.6 percent increase in sales conversions if a product on their website had 50 or more product reviews which gives a community approach to their advertising. However, recommendations by influencers have proven to be even more powerful. Popular YouTube Beauty vlogger Zoella, now has over 12 million subscribers to her YouTube channel; celebrity status bloggers now act as a direct line to the customer.
Whilst bigger brands are cashing in on the sales, courtesy of influencers, none have felt the impact of social media influence more than smaller emerging beauty brands who don’t have the capital to run national ads. If used correctly, smaller players are finding that digital advertising is the perfect way to build their brands for minimal investment.