There’s an impending brand value crisis lurking behind the facade of ever-improving marketing campaign performance metrics.
At face value, marketing communications have been transformed into a highly measurable performance-driven discipline. In many cases, marketers can track the customer’s journey from bought media, onto owned channels, and through to purchase completion – with the ability to optimize each step in real-time. Advertising can be optimized daily to strengthen calls to action and test the power of different promotions in driving sales. Messages and customer journeys can be tweaked to drive conversion rates and we can even re-target those who look at our products but don’t get around to buying, with ads that nudge them over the line.
You would think we’re in a golden age, where marketing effectiveness is increasing exponentially and brand managers have become corporate heroes. And yet, the Institute of Practitioners in Advertising (IPA) ‘Media in Focus’ report shows a rapid and sustained decline in the effectiveness of promotional marketing campaigns.
How can there be a crisis of marketing effectiveness in today’s performance-driven environment?
Never have marketing and brand teams had more data, more channels, and a greater ability to make instant changes to improve the impact on sales of their promotional campaigns. Ironically, it’s this obsession with (and increased ability to create and measure) immediate sales impact that’s slowly cashing in on the underlying value of many brands. For example, if we switched all of Rolex’s marketing spend over to a promotion offering watches at a 75% discount then sales volume would skyrocket – as would a host of metrics, like ad click-through rate, brand engagement, and sales conversion rate. Purely based on the sales numbers the marketing team would all be immediately promoted.
However, if we left the promotion running then the value people place on the Rolex brand would erode and sales would rapidly decline. We’d have cashed in the brand’s equity, built over many years, to achieve a spectacular short-term sales spike. Long-term, the likely result would be a total collapse of the brand’s value and the slow death of an icon.
You may think that’s an exaggerated example, but it highlights the reality of what’s happening in a subtler way. The IPA reports a 30% increase in sales activation campaigns with a corresponding decline in brand-building campaigns. It’s that change in focus that the IPA highlights as the core reason for the rapid decline in overall effectiveness. And it makes sense when you consider that over 3-year time periods successful brand-building supports:
- 14% price premiums (data for 2,400 consumers shows that shoppers paid more for the 25% of brands they found most different and meaningful);
- 28% higher brand value;
- Higher profitability.
Why the switch to short-term sales activation?
Given how desirable price premiums, brand value, and profitability are to brands and their owners, why would marketers exchange brand-building for short-term sales win? Going back to our Rolex example, continuing with a heavy focus on brand-building is unlikely to give the marketing team, or the company, that much crow about – at best slow improvements that are hard to measure. On the other hand, our rather radical sales promotion campaign will drive a spectacular and rapid increase in sales. Of the two, which is more likely to get the marketing team promoted, especially given all the data showing how each step of the sales funnel was optimized?
This very human motivation for pursuing the short-term win is amplified by many companies’ obsession with quarterly results, the growing trend for fixed-term contracts, and an increase in moving marketing people into new roles every 18 months. If you needed to prove yourself quickly, what would you do? Borrowing a bit of brand equity to get you off to a good start would be an understandable, perhaps vital, tactic.
How can we avoid a collapse in long-term brand value?
Much greater use of sales activation is underpinned by several trends:
- The shortening time people spend working on a single brand and the increase in short-term performance data available;
- The increased ability of marketers to deliver rapid, measurable, and attributable sales success via activation campaigns;
- The quarterly, results-driven cultures in many companies.
These are powerful forces so it’s critical to ensure there are some checks and balances in place to maintain long-term brand equity. For example, implementing a range of annual brand value measures that could include brand relevance, preference, and price premium, will help ensure benchmarks are in place and protect the brand for the long-term.
Today, in a world where everyone wants immediate results, marketers need to be careful not to lose sight of the long-term. Brand value makes up as much as 17% of many companies’ overall value. However, if the current trend for short-termism lives on and brand equity continues to be relentlessly cashed in, the value of brands will fall and with it the value of the marketing profession itself.
Image source: Revolt