Morgan’s Law

I recently came across an interesting expression of some old data. Morgan Anderson Consulting, a marketing consulting firm in New York, has coined their own law, using market share and media spend.

Morgan’s Law states that in order to improve sales results, you have to improve marketing investment strategy. An increase in the size of the marketing investment alone is not enough. In the stock market, even when conditions are favorable, if you put more money behind the same stocks, you will still get the same percentage return. You have to improve portfolio strategy to improve the percentage return. It’s all a matter of sound investment principles, but marketers don’t always follow them.

Strategic sameness

Oftentimes, brands in the same category tend to copy one another’s strategies. They especially like to copy the market leader or the new kid on the block who is kicking some butt and making inroads. Originality is not the strong suit of most advertisers. That trait is somewhat confined to the creative message, not necessarily in copy points, but rather in style. The industry trend toward consolidating media buys at one big media agency of record, while continuing to keep creative assignments at different shops indicated that on one hand, marketers are trying to reap the benefits of size and sameness in media, while trying to catch creative lightning in a bottle. Many of the nation’s largest categories like entertainment, automotive, pharmaceuticals; telecommunications are examples of strategic sameness.

Morgan’s Index

Morgan’s Index is derived from published figures that describe a brand’s share of sales, media spend or total marketing spend. The index relates (in the case of this example) media spend per share point and ranks brands in terms of that investment and share of business. When taken over time, this is an easy, shorthand way to track the margin of a marketer’s investment and their success or failure in the marketplace. Data in the table below compares Morgan’s Index for seven companies over a three-year period from 1998-2001, in the same business category. Companies have been coded A-G to protect their identity.

Several things are evident from the data.

First, the rank order of the seven companies in share of business remained the same, with the exception of the bottom two, which flip flopped.

Second, over three years companies uniformly increase their advertising investment. Company F, the only one that did not, got left behind.

Third, The two leaders lost some ground while nearly everyone else gained some. This is a very volatile category, so given product life-cycles, this is to be expected.

Next, Morgan’s Index indicates that companies like (F), who spend a ;lot per share point, do not always get the return they would like. Even though they spend more than everyone else, per share point, they have a low share and eventually wound up in the basement. Something else mattered more.

Then, while this does not show on the table, most of these companies use the same media strategy- a base of network TV, spot TV in roughly the top 50 markets and major market newspapers. The smaller guys can’t afford as much network TV, but they mimic the leaders as best they can. Without the strategy differences, these companies pretty much hold rank.

Finally, this simple table tells us that for any of these marketers to break through, they are going to have to perform a full situation analysis, rethink their strategies and then make some changes. While this particular exercise is confined to media spending, this same operation could have been done on a corporate basis, using marketing spend instead. In other words, not just media money, but data for PR, sales promotion, events etc. can be indexed as well.

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© Media Directors Ink : January 2003