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Exciting day; Marketing efficiency gurus Les Binet and Peter Field came to visit Stockholm and Dentsu today. They are arguably best known for their 2013 book “The Long and the Short of it”, where they look at long term campaign data to assess what drives marketing performance. The key finding is one of the tortoise over the hare; focusing on short term ROI will make you lose out in the long run.
While focusing on brand building efforts take time to show effect, it is clear that over a long run they are more efficient than activation driven efforts. The main reason is that branding, while not showing as high short-term ROI, has stickiness in the minds of consumers and therefore accumulates in effect over time. The problem is that the scale tips over in favour of branding first after 6 months, meaning that in an economy focused on quarterly reports, we tend to bet on the hare and miss out on the tortoise.
Les and Peter started on this model as it is central to their work. They then went on to speak on the new learnings from the latest book Media in Focus, where data has been updated to take into account more of the digital era implications.
| Sales Activation | Brand Building |
| Short term | Long term |
| Rational | Emotional |
| “Timely and relevant offers | Associations and stories |
Les talked about how the insights into the value of brand building have decreased lately as people who come from a business or digital background rather than a marketing one have moved into the industry. People today are to an increasing extent using new media landscape or industry disruption examples to point to new ways of generating growth, but the data is clear; Brand building is the most effective way to generate business results. The tension is between two sides; Sales Activation and Brand Building
Brand association (stories) are continuously built, and decays very slowly. “Timely and relevant offers” drives spikes efficiently, but decays as quickly. The ideal mix, their research has shown, is that bout 60% of marketing investment should go to branding, and 40% to sales activation. There is some variation, but most products and markets end up in the 50-70% range.
So given that their latest book is 4 years old, and that we are now in the era of the AI driven, social media driven, Big Data informed disruption economy; Are the rules changing?
The short answer is no.
One main reason for the model still holding is something many people in marketing are overlooking; Profits are not only driven by sales volume, they are also very directly influenced by price premium. If brand love allows you to charge 20% more for your products than the competitor, that means a lot for profits.
To my mind, Les and Peter are touching on something very relevant here. To my mind, the main reason price sensitivity is not mentioned in discussions on marketing is that the people involved in marketing decisions have limited insight into pricing strategies. In my 10 years in the industry as a consultant on strategic matters, talking to media managers, brand managers and marketing directors, not once has the matter of pricing come up. Thar is always considered to be someone else’s responsibility. A consequence of this type od sub-optimisation is that people focus on what they can track, affect and be measured on: metrics such as ROI, sales volume, conversion rates etc.
Reducing price sensitivity can only be attained through branding – sales activation activities are generally just destructive when it comes to trying to price structure. And the new media innovations in digital are – probably – mainly linked to sales activation and pricing. No one will ever pay more for a brand because of their beautiful SEM strategy.
New innovative products and Online industries (Uber, Amazon, Spotify etc) are generally focusing on market share initially. They can use innovative marketing techniques (and suffer losses) in the short run. But in the long run, these companies will want to generate a profit, to raise prices, and to build an even stronger brand. Even Snapchat – if they survive – will some day run TVCs.
When it comes to generating growth, there are two main ways – acquisition or loyalty. Here, the message is very clear: loyalty is never the right thing to do primarily. Penetration is always the way to. 1 – more clients. 2 – more value from existing clients. Loyalty is only good for short term activation work, not branding. Reach explains 91% of effectiveness.
When it comes to media strategy, here is a short video of Les explaining that digital media can serve different purpouses, and if we want to use them for branding, we need to hold on to the overall principles for branding communications of reach and emotional communication.
If reach should be the guiding light in media strategy, how has the media landscape been disrupted over the past few years. Once again, not so much. When looking at daily reach and time spent on different media channels (UK data) it is clear that broadcast TV and OOH still stand strong. Social networking and VoD are there, but not close to TV and out of home. Also, when it comes to formats it was clear that research shows video to be the best format, be it in TV, OOH or digital.
So in the world of data informed messaging – should we move away from emotional communication and into more rational and factual communication. Once again, the answer is no. Emotionally led communication is most efficient – especially for brand building and especially in the long term. Factual USP:s and product info is largely irrelevant. Emotions, feelings, music etc is more relevant than USP:s. Fame (people talking about your ads, comedians including your brand name in their work because everyone knows it) are even more efficient – fame is like emotional communication on steroids. And – this is also true for rational categories.
After talking about what brands should be doing, the speakers went on to comment on reality. And they painted a pretty bleak picture:
- People are being over-confident in Data Driven real time marketing – it works for short sales activation – NOT long term branding growth. And there is a potential problem with holding brand consistency with data driven variations.
- ROI (trying to measure the effect of investment within the same quarter) drives us towards short term focus. And “short termism” is increasing. At time of financial crisis – and digital/social explosion – we started getting to tactical..
- Branding budgets are falling. Money has been moved to activations. Search is a big part of this, and search is almost an entirely activation focused channel
To my mind, one reason for the move to activation budgets is digital and social media blurring the lines in budgets. Money has been re-distributed within marketing budgets towards digital. The digital efforts were perhaps relevant – but they were not always marketing efforts per se. Look at search – while search budgets are not motivated from a marketing perspective, they can be so from a distribution or IT budget. Investments from marketing budgets have been used to cover thins in social media that should have some from CRM and customer service budgets. But because digital is new and exciting and potentially creative, we’ll let marketing handle it.
In summary, I see 5 really strong and interesting take aways
- Around 60% of marketing should go towards branding – that share has decreased in recent years
- New digital disruption has not affected this rule of thumb
- There is generally a problem with short term focus and looking at the wring KPI:s
- Digitalisation and organisational sub-optimisation have escalated these problems
- Price elasticity is generally overlooked as a KPI in marketing efforts
It was a great session and a lot of great insights. Direct things that I take into everyday work includes challenging clients on whether they see efforts as brand building or sales activation, and see how well we can connect work we are doing to long term gains such as price elasticity.