I have a tee-shirt that says in a math equation, “be greater than average”. It’s fun to see people decipher the equation and then say, “I get it!”

Anyway, I am going to tell you how to NOT be greater than average. That is by inadvertently practicing “Templated marketing”…a recipe for being no better than average.

I see templated marketing in creative similarity. I see it in share of voice to share of market advertising budget setting. I see it in pricing and product strategy. I see it in the obsession to maximize reach among anyone with a mouth.

Superbowl advertising is increasingly based on big name celebrities. Numerous insurance advertisers have gravitated towards light hearted approaches.

I doubt competitors’ agencies independently discovered similar creative strategies.

Now let’s talk about ad budgets

Economics theory gives us a surprisingly simple condition for setting the optimal advertising budget:

Advertising / Sales = Gross Margin × Advertising Elasticity

Could direct competitors have similar margins? Sure. They operate in the same industry.

But what about having the same advertising elasticity? Does everyone’s MMM models produce the same ad elasticities? Does every experiment generate identical incremental ROAS? That’s much harder to believe.

Yet what has been reported is surprisingly similar advertising-to-sales ratios among direct competitors.

There is, however, an obvious explanation.

Marketers might be following a venerable marketing rule which says brands should maintain Share of Voice roughly in line with Share of Market to maintain share. Les Binet’s work has helped to popularize this framework. Byron Sharp uses different words that amount to something similar…” buy as much reach as you can afford.”

Although intuitive, share of voice-based budgeting is troublesome to economists and should be to marketers as well.

If advertising budgets stay in proportion to sales across competitors and over time, that amounts to the implicit equation:

Advertising / Sales ≈ Constant

But economics says:

Advertising / Sales = Margin × Advertising Elasticity

Those equations aren’t the same!

And choice theory gives us another reason they shouldn’t be.

As a brand’s market share increases, its advertising elasticity decreases. Under a logit choice model, advertising elasticity is approximately proportional to the surprisingly simple expression (1 − Market Share).

Consider two brands with identical 50% gross margins.

One has 5% market share, the other has 15%.

The expected economically optimal advertising-to-sales ratio for the 5%-share brand is likely to be 11.8% higher than for the 15%-share brand.

Important to note that these different elasticities and A/S ratios are the ONLY WAY to optimize spending to required marginal return; creative effectiveness aside, declining elasticity as a positive function of market share mathematically returns the SAME iROAS!!!

So if marketers are not budgeting optimally, is everyone looking at everyone else and/or just budgeting based on last year’s spend? 40 years ago the global head of research for one of the largest CPGs told me, “Here, sales drive ad spending, not the other way around.”

Templates can be useful starting points but maintaining an industry-average advertising-to-sales ratio isn’t optimization.

Break the template but not the brand

But I have one important warning…when you break the template don’t break the brand-consumer bond! Like Bud Light did, or messing with the pure Americana of my beloved Cracker Barrel.

Alternatively, you CAN break the template and stay on-brand!

Volkswagen’s “Think Small” broke the automotive advertising template of celebrating “bigger, more is better”, while being completely faithful to what made the Beetle distinctive.

Apple’s campaign “Think Different” approach, highlighted by the famous super bowl ad with humans being portrayed as lemmings in 1984 is another great example.

Great marketing comes from using category conventions as inputs, not answers. Understand the economics, consumer base and uniqueness of YOUR brand. Be willing to break the template and dare to be greater than average.