Do we need generic advertising?

In South Africa, the major generic adverting programmes are run with very low budgets and the benefits probably exceed the cost of these campaigns, says Dr Koos Coetzee.

Do we need generic advertising?
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Farmers frequently query the effectiveness of generic advertising campaigns. What is meant by generic advertising?

In their book Advertising, Wright, Warner, Winter and Zeigler explain that the role of advertising is to inform consumers about goods that he or she would not otherwise know about, to tell the consumer where specific products are available, and what the purchase terms are.

Out of total advertising spend, the portion spent to inform the consumer is very small. The bulk of advertising spend is to shift the consumer from buying one product rather than another product.

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Generic advertising differs from product promotion by manufacturers. Brand advertising tries to increase a specific brand’s slice of the pie, whereas the goal of generic advertising is to increase the size of the pie.

Generic advertising can increase the demand for agricultural products, because they are not easily differentiated.

Attempting to sway consumers 
Generic advertising attempts to shift the demand curve so that consumers are prepared to buy more at the same price, or buy the same quantity at higher prices.

Voluntary generic advertising campaigns are usually not sustainable as those who do not contribute to the programmes still enjoy the benefits. Growing resentment amongst the contributors to the programmes then leads to the demise of the campaigns.

Producers who successfully branded their product frequently feel that the generic campaigns that equally promote all products detract from the perceived benefits associated with their specific product.

The producers of ‘Karoo lamb’ may feel that the promotion of lamb may detract from the perceived benefits they are trying to sell to the public.

According to the National Agricultural Marketing Council, agricultural industries in South Africa spent R61 million of statutory levy income in the 2001/02 year on promotion and consumer education (6,8% of total levy income).

Exporting industries spent R81 million on promotion and market development. The dairy, olive, pork, potato, red meat and egg industries spent a major part of levy income on consumer education and local promotions.

The dairy industry spent more than 40% of levy income on consumer education and promotion.

There are specific requirements for successful generic advertising campaigns. The product must be homogeneous in terms of the aspects on which the advertising focuses.

The product should not lose its identity in the supply chain; it must still be recognisable at consumer level.

The product must comply with clear standards that ensure consistent quality. Products must be available to the consumer, have an increased consumption potential, and have an information potential (the consumer should not already have all the information about the product).

Mandatory levies in the us
Various studies have show that well-run generic advertising campaigns do increase demand. In the US, generic advertising campaigns are funded by producers.

The mandatory levies are collected at first point of sale and managed by industry organisations.

US legislation requires that the effectiveness of generic campaigns are evaluated annually. Generally, these studies show a positive cost benefit ratio for money spent on generic advertising.

Restricted budgets
The consumer is bombarded with various advertising messages on a continual basis. In order to be heard, generic advertising campaigns must raise above this noise level.

This is very difficult to do with the small budgets available for generic advertising in South Africa. In spite of this, the various campaigns do well with their restricted budgets.

In 2022, generic advertising campaign funding amounted to 0,042% of total gross value of sales. For the dairy industry, it amounted to 0,008c/ℓ of milk.

The cost of the South African generic advertising campaigns is very low, and even a marginal increase in prices or demand will be beneficial to farmers.

However, the future of these campaigns depend on continuous industry support, and a cost-benefit study of the major campaigns can confirm to industry that these programmes are indeed needed.

Dr Koos Coetzee is an independent agricultural economist.