A message from September 2020 ***Now for a metric not yet in our Marketing Metrics book. (A book due for release this month — click here to pre-order). I’m hoping that writing this means reading this blog post plus buying our book will give you every metric you could ever need. The metric I’m looking at here is excess share of voice.
Excess Share Of Voice
Today’s metric is Excess Share of Voice (ESOV). Proponents claim it is a crucial metric in understanding ad budgeting. (I haven’t studied it enough to make a meaningful comment either way). The idea is pretty simple. One would expect firms with high market share to be spending more on advertising than their lower market share peers. If everything were perfectly orderly, not saying this would be good for anyone apart from people who like orderly things, we might expect everyone to have a share of voice equal to their market share. (Share of voice is the brand’s avertising spend divided by the market’s advertising spend. You can think of share of voice as share of ad spend. See page 325 of the 4th edition of Marketing Metrics).
Spending More Than Fair Share
Obviously some advertisers spend more than their ‘fair share’. Excess share of voice evaluates this. It can be calcuated as share of voice minus share of market. The argument is that spending less on advertising than your share would imply is initial evidence of a lack of investment in the brand (and vice versa). Thus when you have negative ESOV (i.e. Share of Voice<Share of Market) “you should expect your market share to decline” (Field, 2019). With negative ESOV you are, in effect, spending below the level required to keep the market in equilibirum. (Clearly things are much more complex than that).
The market is complex, and the correlation between ad spend and sales imperfect. Still, the logic of ESOV is simple and clear. Peter Field uses ESOV to comment on the commitment of resources to creatively awarded versus non-creatively awarded campaigns. He is worried about a crisis in the effectiveness of creative advertising but that is for another day. Today I’ll stick to introducing a metric, meet ESOV.
For more on advertising budgeting see here.
Read: Peter Field (2019) The Crisis in Creative Effectiveness, IPA and Peter Field Consulting.