Long-term vs short-term marketing campaigns

22 Feb 2018

  • Digital Marketing

By: Andrew Baxter, CEO, Publicis Australia

This article was originally published in the Australian.

Short-termism is one of the biggest traps CEOs and CMOs have fallen into in the digital age. It produces strategies that deliver results that satisfy the half-yearly reporting cycle rather than the long-term. The immediacy of digital activation campaigns has meant there’s an easy lever to pull for the many executives who have been under pressure to deliver in the short term.

Yet two studies released last year show that long-term strategies outperform a short-term approach.

McKinsey’s research covered more than 600 large and mid-sized publicly listed companies in the US over the preceding 15 years. It showed that firms with long-term strategies had 47 per cent more top-line growth than the other companies; 36 per cent higher earnings; and added average market capitalisation of $US7 billion ($8.67 billion).

Similarly, the UK study by the Institute of Practitioners in Advertising (IPA), which analysed 500 effectiveness case studies over 20 years, showed that long-term campaigns were three times more efficient than short-term campaigns, three times more likely to drive market-share improvement, and 60 per cent more likely to deliver profit improvement.

This was because short-term campaigns “decay away quickly”, producing a sales spike, not a sales build, whereas long-term campaigns have the opposite effect.

The IPA study also highlighted the fact that long-term brand-building campaigns and short-term activation campaigns worked best in synergy: strong brands had better results from their activation channels and strong activations in turn drove more sales for the brand. Famous and emotional audiovisual campaigns worked best for building brands, particularly when backed by a share of media voice that was bigger than the brand’s market share. And for activations, rational and targeted communications delivered more strongly.

The big challenge for CEOs and CMOs is to find the right balance between the two. How much to invest in the long-term versus the short-term? The IPA study found that “on average, effectiveness seems to be optimised when around 60 per cent of the communications budget is devoted to brand building, and around 40 per cent to activation”.

The fate of the Australian retail industry over the past 10 years brilliantly highlights both the McKinsey and IPA findings. The difference between the successful businesses that found the right balance between long-term and short-term marketing investment, and the less successful operators who couldn’t wean themselves off the short-termism drug, is evident. It’s about Bunnings, Officeworks, Specsavers and JB Hi-Fi as opposed to Myer, Beaurepaires and Target.

The sales figures of the department store category as a whole showcase the results of 10 years of activation-driven marketing – catalogues, direct marketing, sales promotions, search and online ads – at the expense of brand-building campaigns. It’s hard to recall a single long-term brand campaign in the past 10 years for any of the Australian department stores, or discount department stores. And the category has seen just 5.6 per cent growth in a decade, while CPI rose 27 per cent, and all Australian retail grew 46 per cent.

By contrast, in 2009 the UK department store John Lewis set out a longer-term marketing strategy to win over the hearts and wallets of consumers during the critical Christmas period. By 2014, its annual Christmas ad campaign had become one of the most anticipated in the world, and was delivering £8 of profit for every £1 invested in the campaign.

Similarly, Australian retailers such as Bunnings and Officeworks have maintained long-term strategies that include simple long-term brand-building campaigns balanced by short-term sales campaigns. In the last decade, Bunnings’ top-line revenue has grown 177 per cent and Officeworks’ by 145 per cent.

The fast-moving consumer goods category is another that underlines the differing outcomes for those that have invested in the long term versus the short term. Vitamin company Swisse set out on an aggressive long-term strategy after Radek Sali became CEO in 2008. Television, sponsorship and celebrity endorsement became the cornerstone of its marketing strategy, leading the business to the number-one position in the Australian market.

Similarly, Huggies has one of the longest running and well-known campaigns in this country. Like the John Lewis ads they have a strong emotional appeal. For almost 20 years Huggies has maintained a market share of more than 55 per cent, and seen off two attempts by US number one, Pampers, to enter the market, as well as Coles, Woolworths and Aldi launching cheaper own-brand products.

However, other packaged goods brands have diverted their brand investment to short-term trade marketing and activation, particularly those with a heavy distribution reliance on the big two supermarket chains.

Well-known, long-term household campaigns for brands in the instant coffee, biscuits, shampoo, breakfast cereal, pasta and frozen food categories were commonplace 20 years ago but are rare today. And the latest IBISWorld data shows many of the companies in these categories again had flat sales in 2017.

It seems that in many categories, either the rush to embrace the digital era and /or the lure of immediate ROI at the expense of enduring market share and profit metrics has seen an over-correction in the balance between long-term brand building and short-term activation strategies.

For CEOs and CMOs, the results of the McKinsey and IPA studies are clear. It’s not an either/or option, it’s the 60:40 ratio of brand to activation spend that is optimal. And those who have heeded these lessons have seen the results.

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