The continued demands on brand owners to deliver short term results is resulting in a long, slow death spiral for many brands; but it’s the lack of understanding of what drives the success in the short term that’s the real cause.
The operating environment often forces a tradeoff between focusing on short term execution at the cost of longer-term brand building activities.
Now don’t get me wrong, if you don’t win at the bottom of the funnel then you don’t have a business. But there’s a bitter irony here, as it’s actually all of the previous years of investing in brand building that drives the success they’re now seeing at the bottom of the funnel.
The “in market” opportunity
Firstly, we need to understand the market opportunity for short-term execution i.e. the proportion of customers who are actively in market (buying) at that point.
For a “fast moving” category (e.g. a snacking product) it could be that <10% of category buyers are “in market” in any given week; in a services category the percentage of customers “in market” can be as low as <10% per year. It’s a minority of the category buyer base.
The short-term execution targets these “in market” customers giving them a strong shove in the direction of the brand at the critical point when they’re going to buy.
However, what this misses is the 90%+ of category buyers that weren’t in market at that time but will be at some undetermined point in the future. This is where the longer-term brand building activity works.
Working on autopilot
We know that people don’t think deeply about their daily decisions, the majority being made using the “system 1” autopilot as described by the Nobel Prize winning psychologist Daniel Kahneman.
If we thought hard about every decision (using “system 2”) we’d literally grind to a halt. This means that people typically only have a couple of brands in any given category on their mental shopping list and it’s disturbingly consistent whether someone is choosing a chocolate bar or their home loan…
It’s not category-specific, it’s just how our brains are wired.
Brand building works on this large “out of market” group, continually nudging the brand in their minds so it’s slightly more likely to be on their mental shopping list when they do become active buyers.
This is the irony I referred to earlier - much of the hard work in getting people to choose the brand, by getting it on their mental shopping list in the first place, has already been done.
There is solid empirical evidence to support this from single-source studies but these are very complicated and expensive to run and hence not done very often or widely shared by those that can afford to do so.
The brand death spiral
It also helps us understand why an increasing focus on short-term execution often leads to a long-term decline for brands.
Given our memory is so powerful the lack of brand building isn’t apparent immediately, but as the months go by and our brand gradually drops off the mental shopping list the response to short-term activity starts to weaken. This is when you start to hear phrases like “promotional fatigue” being bandied about.
The reflex is normally to increase the frequency of price promotions or to go a bit deeper on the price point. The operating environment makes it difficult to do anything else, after all the business still has to achieve its targets and has to cycle over the big sales spikes that it previously saw.
Retail channels also demand it, if you don’t deliver the growth you drove for them previously then there’s trouble ahead. The result is a band-aid until response weakens again. Then the cycle repeats.
So, what’s to be done? It’s not a case of short term execution vs brand building, the key is in understanding the how to make the two work most effectively together and the balance to strike between them.
Virtuous cycles where brand building and short-term execution work together to drive sustainable growth can be created but it takes understanding and time ...
By ex-ANZ head of marketing effectiveness turned-consultant, Rob Brittain.