Feeling frayed by the tug-of-war between future and instant targets?

The demands of the City for quarterly results can put pressure on businesses to focus on short-term gains rather than long-term staying power. Lucy Handley looks at what this battle between the long and short view means for marketers.

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“Amazon is all about the long-term and if you are focused on really short-term options, then maybe Amazon is not the stock for you to invest in,” said the online retailer’s vice-president and chief technology officer Werner Vogels at the Festival of Media Global last month.

Vogels was echoing Amazon founder Jeff Bezos’ principles, which he set out in his first letter to shareholders in 1997.

Unilever chief executive Paul Polman has been similarly forthright when talking about the battle between long and short-term business goals. While Unilever is obliged to state its results on a quarterly basis, it does not do extensive reporting, and Polman does not speak to analysts or journalists about them. Last week, Polman talked about this at the anniversary of its sustainable living plan launch.

“We have abolished quarterly reports,” he said. “So I won’t even participate in quarter one results. I couldn’t care less if it has been a bad month for ice cream. I won’t talk about the business on the basis of 90 days.”

Instead, he wants to focus on long-term sustainability goals. “Next year, we will have one combined report about [financial] results and the Sustainable Living report. It would be a tragedy to have people say we’re neglecting results by doing the right thing.”

Kelloggs
Kellogg will use digital for long-term brand building.

But with many public companies beholden to short-term quarterly reporting, what hope is there for marketers who want to work with their chief executives, finance directors and shareholders to put long-term plans in place to grow the business?

For David Roman, chief marketing officer at global PC manufacturer Lenovo, getting the balance of the two is what will produce results. Roman has the challenging task of managing regional heads of marketing reporting to him as well as to regional general managers. These general managers are working towards short-term financial goals set by the business.

He says that this can lead to conflict at times. “Sometimes there can be a certain tension. At the worldwide level, you tend to be more focused on where a company will be in a year or two years’ time. Then the regions, by definition, tend to be more focused on the short term – they have to be because they have quarterly goals to achieve.”

In an attempt to get the most out of the company structure, Lenovo, which is listed on the Hong Kong stock exchange, encourages its international teams to network with each other and has a ‘polycentric’ structure, with lots of headquarters around the world, so that decisions can be taken at regional level. This means that there is no central office approval necessary and short-term decisions can be made quickly.

We have abolished quarterly reports. I couldn’t care less if it had been a bad month for ice cream. I won’t talk about the business on a 90-day basis

Marketers have to be able to negotiate the tricky balance between achieving immediate goals with future ones, argues Patrick Barwise, emeritus professor of management and marketing at the London Business School. He says: “The job of marketing is the generation of short-term cash flow and the building up of intangible assets that lead to long-term cash flow.” (See viewpoint, below)

UK company Millie’s Cookies, part of private-equity-owned international firm SSP, is working towards long-term marketing goals, with a brand repositioning that will see it focus on gifting rather than impulse-buying.

Marketing director Justine Noades says she must be very clear in her reasoning to the board when presenting her objectives, especially if she won’t see returns in the same financial year (see Q&A below).

“A lot of the work I have been doing over the past year is brand building, investing in things that aren’t immediately obvious in terms of sales, for example, changing the packaging or changing to a positioning that is more about gifting.

The job of marketing is the generation of short-term cash flow while building up intangible assets that lead to lead to long-term cash flow

“With some of these things, you can’t see the [financial] benefit in the short-term. But once you start communicating [your positioning] to a broader audience, then you start to see the benefit.”

Noades says that marketers must be clear with their teams and management about when results might be expected.

“You don’t always get the benefit in the financial year that you spend the money, and that can be quite a big issue. [You have to work out] how much you spend in the financial year that you will see the benefit and how much you spend when you don’t get the benefit for another year,” she says.

Similarly, Nestlé global head of digital and social media Pete Blackshaw says he encourages brands in the company to think about the long-term digital goals, referring to himself as an internal ‘consultant’ to the marketers who are in charge of each product (see The long-term aims of big brand owners, below).

“I coach brands constantly. I try to look at best practice across Nestlé and bring the best available data to [them to show] how they should be thinking about digital. With social media I definitely encourage them to take more of a long-term approach.”

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Solero
Unilever no longer reports quarterly to benefit its brands

But Nestlé hasn’t always had this long-term vision when it comes to social media. It resorted to panic when it tried to police negative comments posted on its Facebook page in 2010. After Nestlé threatened legal action to remove a Greenpeace video on YouTube criticising the confectionery brand’s policies on sourcing palm oil, protestors turned to the company’s Facebook page. In response, Nestlé initially tried to stop the flow of conversation and removed comments where people had changed their profile picture to a doctored image of the company’s logo.

At first, Nestlé was bullish, saying things such as: “It’s our page, we set the rules.”

Blackshaw, who joined Nestlé subsequently, says diplomatically: “Like any smart company in the digital and social space, you learn from everything. We have since built a model based on three pillars: listening, engaging and inspiring.

“The companies and the brands that put real discipline on listening to the consumer, whether it is how they interact on your website, how they search or talk online, will be in a much better position to make the right choices and to satisfy unmet needs.”

He adds that Nestlé is monitoring and having conversations with people online for both short and long-term aims.

“Social media allows you to play on both fronts, because it is so inherently sense and response oriented – in that consumers quickly respond. It can be very short-term focused in terms of promotions or product launches. When it comes to the bigger opportunities – [to change people’s opinions of the brand] – inherent in social media, it is about managing relationships in a more impactful way.”

Kellogg is also moving towards using digital and social media in a long-term, brand-building way, something which Aaron Fetters, its associate director for global digital analytics was hired to do.

Fetters admits that before he joined, the effectiveness of digital advertising wasn’t being measured in the same way by each brand, with some campaigns reaching just 19% of their target audiences.

Speaking at The Festival of Media Global, he said: “In the past 12 months we have set clear objectives that are brand-building rather than direct marketing. We also have key performance indicators showing what success is. Then we will develop a framework to share it.”

Once the KPIs are in place, Kellogg will be able to see which marketing activities led to long-term growth.

But marketers must be prepared to stick their necks out and clearly explain why they are aiming for the long-term and not the immediate future, especially as the UK has officially fallen back into recession – latest GDP results show an overall GDP fall of 0.5% in the last two quarters.

When returns on investment may not be felt in the same financial year as those cash injections were made, Noades at Millie’s Cookies says marketers have to be “tough, clear and focused” to get their long-term brand plans past the boardroom.

The long-term aims of big brand owners at the Festival of Media Global

Pete Blackshaw

Pete Blackshaw
Global head of digital and social media, Nestlé

When it comes to long-term annuity from a well-managed consumer relationship, I think about the extent that relationship translates into ‘earned media’ [where your consumers are speaking positively about your brand without a paid-for media placement]. I typically set a very broad horizon to the brands I consult with on a daily basis and encourage them to take that long-term view.

Social media can be long-term brand-building

We need to think about different types of media measurement models to encourage people down that long-term path. Together with our agencies and media planners, we think through whether, if earned media is the big prize, to approach it from a short-term or long-term perspective and how to align incentives.

I don’t have all the answers yet but it is top of our agenda in terms of how we ultimately get success from both digital and social media.

Christoph SCA

Christoph Michalski
President of global hygiene, SCA

Short versus long-term objectives should not be a contradiction. Generally, they only occur when short-term profit targets put pressure on long-term investment needs. At SCA, we try to manage this by asking about priorities and timings.

Corporate branding will help us grow for the long-term

We have started a major drive to make SCA [more] known. We’re in a similar position to the one that Unilever was in, in that people know our product brands [Velvet, Plenty and Bodyform, etc] but they don’t know our company.

Size matters for investors, they clearly realise that if you have one big global brand, that becomes an efficient, sellable property and has a different value equation to a brand with a portfolio of fragmented businesses. In emerging markets such as China it is also important that people know that you come from a reputable multinational.

Salmin Armin

Salman Amin
Chief marketing officer, PepsiCo

Despite the many digital innovations, we are still so enamoured with TV. It is all about the content and it’s always been that way. Great content equals great storytelling, and
nowhere is that better reflected than in TV.

The future of TV in this age of digital transformation belongs to those brand marketers and creatives who can tell the most compelling, engaging and the most resonant stories in the market today.

TV is the focus for the long term

It is important when considering TV to think about what digital innovation has brought to the market that will entrench storytellings’ place for years and years to come.

The need for great storytelling will never go away. And because that is the mainstay of television, TV will continue to be a driver of success. Keep everything in perspective in this age of media disruption.

Aaron Fetters

Aaron Fetters
Associate director – global digital strategy and analytics, Kellogg

I was hired to lead Kellogg’s digital effectiveness measurement. When I started, digital was being measured but there were no aligned methods of measurement across divisions.

So I have been bringing in a single set of methods and suppliers so that over time we can continue to get smarter and longitudinally track [our digital activity].

We are looking at our longer-term data management plan

I am working with the head of digital marketing IT on a longer-term data management plan. We’re looking at what data we want to own and house internally and what we want our agencies to have. One of the big questions of the future is how brands use data.

I’m not looking at digital for the sake of having something flashy or new. I am looking at it as a key component in helping to build my brand.

Q&A

Justine Noades
Marketing director
Millie’s Cookies

Millies Cookies

Marketing Week (MW): Why do some companies focus on the short term?

Justine Noades (JN):

Some brands are beholden to the stock market and quarterly reporting. I think it is so much easier for companies that are private to be able to focus on the longer term and make big strategic changes to their business because they are not going to be criticised for affecting a short-term share price. The City is very powerful and vocal and you will get negative press [when reporting quarterly results].

MW: How do you get the balance between short and long term in a retail business?

JN: Any retail business is incredibly tactical. When I was at M&S [as head of marketing for M&S Home] we looked at weekly trading figures and performance to see whether we were on target. At the same time, you have to be thinking about where you want the brand to go in the longer term.

It’s a juggling act for the marketing director – you can’t be one or the other.

Cookie

MW: What kinds of conflict can there be between short and long-term aims?

JN: There is always conflict around the use of resources, in terms of where you allocate your time and money. It is a balance. For example, it can come down to something as simple as how much money you choose to spend on tactical activity like vouchers and promotions versus spending money on brand-building.

MW: How do you get the balance right with your team at Millie’s?

JN: I set the strategic marketing direction and allocate budget. A business will always allocate the budget according to where its priorities are, so that is the easiest way of managing it.

[Parent company] SSP has lots of brands, including Upper Crust and Delice de France. Millie’s has its own budget and sales targets, and these contribute to the bigger company targets, so we are aimed to hit those figures.

It isn’t just about keeping our current customers happy, it is also about trying to get new customers in. That’s particularly a short-term/long-term issue that marketers face.

Millies Cookies

MW: How do you explain to people that investing money now won’t always see returns until the following financial year or beyond?

JN: You have to be pretty clear in what you are trying to achieve and why so that you can plan and allocate resource for both the short and long term.

When I joined the company [in April 2011] we spent quite a bit of money on customer research, looking at where the brand is in customers’ minds and the overall market. We are now putting those two things together, realising we could do things to help the brand to grow.

Viewpoint

Patrick Barwise

Patrick Barwise
Emeritus professor of management and marketing
London Business School

There is always a tension between delivering short-term financial performance and building brand equity. That includes investment in people, training and research and development, not just brand communications.

The stereotype in the marketing community is that finance people are sort of stupid and don’t understand anything beyond quarterly earnings. But that’s not the reality. Ultimately it is the chief executive, chairman and board who are accountable to the shareholders – all of whom understand that you reduce the value of the business if you make certain decisions purely in order to generate short-term numbers.

The onus is on marketers, new product development people and HR people or anyone who is asking for investment and a longer-term view to provide a convincing argument and some evidence.

The same is true when the chairman is facing institutional investors. He is trying to convince them that there is a strategy and that it is the right thing to do, even if it means short-term profits aren’t going to go up perhaps as much as the City would like.

The risk of focusing too much on the short-term is you underinvest on ‘hard’ and ‘soft’ assets and that includes brands. The job of marketing is the generation of short-term cash flow and the building up of intangible assets that lead to long-term cash flow.

There will always be a balancing act between those two.

The main drivers of brand equity in the long term are not marketing communications. For example, Apple is a great brand – it is brilliant at design and communications. But that is not why it is the most valuable company in the world – it is the products and customer experience, and that involves consistency of investment.

Those marketers and chief executives who want to invest in the business and take a long-term view of financial performance [will find that] the financial markets and the chief financial officer are willing to listen – but you’d better have a pretty good argument and have some evidence to support it.

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