"If we spend more on advertising, we should be able to sell more," "Customers won't choose us unless we lower our prices." I often encounter these kinds of concerns when talking to business owners and marketing managers. However, in reality, I have seen many cases where relying on short-term measures such as advertising costs and price reductions leads to a situation where "they won't choose us without them." Today, I would like to talk about how we perceive "brands," using a symbolic example as a starting point.
What I learned from "2 billion yen in advertising expenses, profit margin of 2-31 TP3T"
In 2002, Kozo Takaoka (later president of Nestlé Japan), who was in charge of marketing for Kit Kat, made the decision to completely discontinue television commercials. At the time, despite spending over 2 billion yen annually on advertising for Kit Kat, the profit margin was only 2-31 TP3T. Takaoka hypothesized that "if we eliminate advertising, profits might actually improve."
What they focused on was the "special meaning" that had already emerged among consumers. In Kyushu, the sound of Kit Kat is similar to the local dialect phrase "Kitto katsu to" (meaning "You'll definitely win"), so a movement naturally arose among students taking exams to view Kit Kat as a kind of good luck charm. Nestlé seized on this phenomenon and expanded its meaning as a brand that supports students taking exams. Instead of unilaterally delivering a message in front of the television, the brand became integrated into the context of students' lives, specifically their exam preparation. It wasn't an advertisement waiting in front of the TV, but a mechanism that entered the context of daily life and generated natural word-of-mouth. As a result, Kit Kat has built a unique position as a "brand that supports students taking exams" rather than just being a chocolate, and it is said that its sales have increased fivefold and its profits tenfold.
As a company whose business is branding, when we heard this story, we couldn't simply dismiss it as a "good success story." That's because we believe the essence of this decision lies not in "the courage to stop advertising," but in "intentionally creating a situation where the brand would be chosen without relying on advertising."
The secret to "selling without relying on advertising" is actually "the strength of the brand."”
It's a common observation in marketing circles that companies with weaker brands tend to rely more on short-term measures like price reductions and campaigns. Conversely, strong brands can avoid price competition altogether and create a situation where they are chosen based on value. Advertising is fundamentally just one means of communicating that value. I've seen many companies where the amount of advertising spent, which should be a means to an end, has inadvertently become the main factor determining whether or not they sell.
We define a brand as "something special to a specific person." And we see branding as the process of intentionally building an impression that leads to that state. From this definition, "products that sell without relying on advertising" are not a special phenomenon, but rather "a state in which customers have accumulated reasons to choose this brand, even without constantly creating reasons for them to choose it through advertising." In the case of Kit Kat, it can be interpreted that the brand spread without relying solely on mass advertising because it came to have a special meaning for students taking exams, like a good luck charm that means "you will surely win."
In other words, "branding without relying on advertising" is not a technique for eliminating advertising altogether.First, define the "special meaning" for the customer, and then focus resources only on touchpoints where that meaning can be effectively communicated.It's a matter of order. Instead of adjusting advertising costs or discounts first, you must first define "what kind of special existence it is for whom." We believe that getting this order right, while it may seem like a roundabout way, is the most reproducible approach.
The difference between companies that offer discounts and those that don't.
The problem of "not being chosen unless you offer discounts" is structurally very similar to reliance on advertising. Discounts are often effective in the short term, and once you use them, there's a temptation to use them repeatedly. However, the more you offer discounts, the stronger the perception becomes in customers' minds that "this company is chosen for its price," and as a result, there's a risk that you'll be less likely to be chosen without discounts. This is a negative spiral that I have repeatedly witnessed, both as a business owner and from my experience observing the companies I've supported.
On the other hand, companies that continue to be chosen without relying on price reductions have something in common. That is, they have customers who clearly have criteria for judgment other than price. Being chosen not because "it's cheap" but because "I want to entrust it to them" or "I resonate with this company's philosophy" is not something that happens by chance. The first thing we do in our daily projects is precisely to work with our customers to articulate these "criteria for judgment other than price."
In the cases we have actually seen, there are specialty stores that maintain top-class sales in their region while adhering to a policy of not offering discounts, while in other cases, carelessly expanding their brand into the lower price range has created a discrepancy with the brand image they had built up until then. There are many examples where the "choice not to offer discounts" has ultimately strengthened the brand. What they have in common is that instead of discounts, they have continued to refine values that cannot be measured in price, such as the "quality of customer service" and the "quality of the experience." I believe that this is a strategy that can be fully replicated by medium-sized and small businesses, even without the advertising budgets of large corporations.
Why is a proposal decided by "one option" more powerful than advertising?
For about 20 years, since I started working as a designer, there's something that has puzzled me. Often, a single proposal was adopted without having to present multiple options like Option A and Option B. Later, when I analyzed the reason for this in my business school graduation thesis, I found that the deciding factor wasn't technical design skills, but the "quality of the interviews." If you accurately understand the objective and the current situation, the problems that need to be solved will naturally emerge, and the solutions will naturally follow. This is the starting point of the framework we call the "LH Method."
This structure mirrors the decision-making process Mr. Takaoka undertook with KitKat. Instead of blindly increasing advertising volume, he accurately assessed the current situation—"why profit margins weren't increasing"—and arrived at the hypothesis that "profits should improve if advertising is eliminated." Instead of scattering multiple measures in parallel, he focused resources on one sound hypothesis. I believe that the variable that determines the outcome is not the size of the advertising budget or the number of proposals, but rather the "resolution of understanding the current situation."
We often encounter similar situations in our own work. Sometimes, during a project, the client's requirements change, and they try to cut elements that were initially defined as important due to budget constraints. In such cases, we always ask ourselves, "Does this change align with the objective we initially envisioned?" If we determine that it is essential to achieving the objective, we will not hesitate to send it back, even if it increases the workload. As a result, we are often told, "We're glad we didn't change it after all." Every time we have these exchanges, we realize that returning to the "objective" that was initially defined, no matter how many times it takes, is actually the shortest path, even though it may seem like a roundabout way, rather than increasing the amount of advertising or the number of proposals.
One question that business leaders should ask themselves right now.
If you're struggling with questions like "How much should we increase our advertising budget?" or "How far should we go with discounts?", there's a question I'd like you to stop and reconsider: "What kind of special presence is our company to whom?" Companies that have a concrete answer to this question don't need to compete on the playing field of price or advertising volume. Conversely, if you continue to adjust advertising budgets and discounts without answering this question, no matter what measures you take, the fundamental situation will not change.
When we start a branding project, the first thing we do isn't to make a proposal, but to conduct interviews to address this very question. We visualize "what we want to be" and "who we are now," and then structurally organize the gap between them. We believe that everything begins with finding the real question that needs to be answered, the one that lies beneath the surface issues.
summary
Increasing advertising spending or offering discounts are both quick fixes that provide immediate relief. However, I believe that what fundamentally determines sales and profits is the presence or absence of a more essential asset: "whether or not you can become something special to a specific person." The reason Kit Kat increased its sales fivefold after stopping advertising was not due to flashy strategies, but rather to a painstaking process of hypothesis testing that carefully identified the "special meaning" for customers.
If you're struggling with your advertising costs or discount options, first ask yourself, "What special role do we play for whom?" If you can't answer immediately, that's the real challenge you should address first. This is the single point we arrived at after 20 years of interviews with business owners and key personnel. We are convinced that this seemingly roundabout question actually leads to the shortest path to the answer. That's why, for every project, we begin with a "dialogue to confirm our current position" before making any proposals.
