Too many brands are taking a short-term view on effectiveness. That is the conclusion of a new report from the IPA released to coincide with its first Effectiveness Week.
The research, based on an analysis of around 500 case studies entered into the IPA’s Effectiveness Awards, was done after many questioned the results of its previous research, which found that the optimum campaigns have a 60:40 ratio of long-term brand building versus short-term sales activation. The critics claimed that while this may have been the case before, the changing media landscape meant that the ratio had changed.
Yet in their research, the report authors Peter Field and Les Binet, who is head of effectiveness at Adam&Eve DDB, did not find this to be the case. The optimum ratio is still the same. What has changed is the focus on short-term strategies.
On average, 47% of the comms budget is now spent on short-term activation strategies, up from 31% in 2014. And in terms of entries to the awards focused on short-term goals, that has “grown explosively” from around 7% in 2006 to more than a quarter in 2016, according to Field.
Of even more concern is the decline in effectiveness, defined as their ability to create brand fame and contribution to profit growth. According to the research that peaked in around 2009 but has since been falling. And even the long-term case studies have lost efficiency, with levels now below where they were a decade ago.
“There is something very wrong and something very broken in the world of marketing at the moment and to have any hope of getting the benefits of the changing media landscape we are going to have to understand what is going on here,” said Field, speaking at an event to unveil the research.
Yet this should not be the case because according to the study the new media landscape actually makes ‘traditional’ media more effective. Take TV for example. A campaign that includes TV increases effectiveness by 40%. But a campaign that includes both TV and online video will see an effectiveness boost of 54%. Online video on its own is just 25%.
“Digital media is making mass media work better and that potential effectiveness is much higher. But while potential effectiveness has increased. Actual effectiveness has not,” explained Binet.
Too much focus on marketing KPIs
A large part of the problem is a focus on short-term metrics and marketing KPIs. For example, return on marketing investment (ROMI) was the second most used measure of success in the case studies the report looked at, but it is a poor indicator of long-term brand building.
“Effectiveness is increasingly driven by ROMI,” said Field. “That sound sensible but it leads towards short-termism because it is about low-hanging fruit. If you are tightly targeted at known consumers then you don’t generate long-term profit growth.”
Travelex’s global marketing director Dominic Grounsell agrees. He says too often marketers cite video views, Facebook likes or brand awareness as key ways of measuring effectiveness, rather than commercial indicators.
“There is something very wrong and something very broken in the world of marketing at the moment.”
Peter Field, marketing consultant
“Everything should track back to the financial performance of the business. Whether it is video views or brand awareness, we seem to be obsessed with tracking marketing KPIs and then high-fiving ourselves,” he explains.
Yet marketing effectiveness is at the heart of how brands grow. And PepsiCo’s VP of insights and analytics Tim Warner says brands must start looking at it through that lens, not just how effective a particular media campaign or piece of comms is.
“This should not just be a marketing conversation, we should be having this conversation in the boardroom because it is about our effectiveness at building brands. That is not just media and comms, it is pricing, products, customer experience and our customer investments,” he explains.
Bringing back the long-term view
The report does not say that all short-term brand building is bad, just that the pendulum has “swung too far the wrong way”. And Warner believes that key to ensuring marketing is effective both long term and short term is seeing effectiveness as a “continuum”. That means that every year marketers should be getting smarter and building on their learning, rather than lurching from one format to another in search of a “silver bullet”.
Having the right team in place is also key. What works will depend on the brand in question, but it is important to ensure that those analysing effectiveness are given the resources and allowed to be independent.
“We need checks and balances in the marketing function. Anyone spending even modest sums of money should be employing analysts to help them understand their performance in the market. And those people do have to be separate to the campaign owner, otherwise you are marking your own homework,” adds Grounsell.
Binet concludes with a warning to marketers to remember that it is effectiveness, not efficiency, that matters. “The important thing is to grow brands. What matters is profit growth.”