This is an exciting time to be in marketing. The digital revolution is transforming the sector, giving us new ways in which to communicate and interact with customers, sell and do research. Crucially, everything is measurable, in exquisite detail and in real time.
The latest research, however, suggests that there is a hidden threat in this brave new world. Real-time evaluation and planning could lead us to focus on the wrong metrics, and steer us toward activity that looks good in the short term, but actually destroys long-term profit.
The research, which I undertook with Peter Field, is based on the IPA Databank, which has been culled from nearly 1000 effectiveness cases. Covering more than 700 brands in 83 categories, it is one of the biggest data sources of its kind.
As in our 2007 study, "Marketing in the Era of Accountability", we used the databank to identify the factors most likely to correlate with marketing effectiveness and efficiency. This time, we focused on the differences between the short and long term.
Our key conclusion is that shortand long-term effects differ in ways that have big implications for measurement, evaluation and strategy.
The short-term effects of marketing are relatively easy to measure, especially in the digital space. Choose the right kind of marketing stimulus and you will be rewarded with an immediate surge in search volumes, web traffic and sales. But these effects tend to decay quickly, often within days.
The longer-term effects of marketing are more subtle. After the initial blip fades away, there may be a slight increase in base sales. This can be hard to detect in noisy short-term data, but it is incredibly valuable. Increases in the base tend to decay much more slowly than short-term blips, and they can build over time in a way in which short-term effects can't.
These long-term effects also tend to be associated with reductions in price elasticity, which allow brand-owners to increase margins. As a result, these subtle long-term effects tend to generate the biggest profits.
The problem is that the two effects demand different strategies.
If your aim is to secure a big sales spike, then your best bet is to go for highly targeted sales activation. Choose direct-response media, aim them at people close to the point of purchase, and bombard them with rational and persuasive messages about the product.
But if your aim is to maximise long-term profit, you need to build your brand. Choose media that reach everyone in the market and focus on creating emotional associations long before they actually buy. Adam & Eve's work for John Lewis is the paradigm here, using TV to ramp up sales and profit year after year.
Our research suggests that the optimum mix is about 60% brandbuilding and 40% sales activation.
Smart marketers balance these two kinds of activity. Our research suggests that the optimum mix is about 60% brandbuilding and 40% sales activation. (It is no coincidence that our highly profitable work for Volkswagen uses almost precisely this mix.)
The trouble is that market research is biased toward the short term. Most measurement is done over relatively short time periods. Attitudinal research focuses on the conscious, verbal, persuasion-related metrics that drive short-term sales. Behavioural data tends to focus on short-term responses - "likes", clicks and sales right now.
Until now, the implicit assumption has generally been that these short-term metrics are a good predictor of longer-term success. However, our research shows that this assumption is wrong. Short-term measurement techniques not only fail to predict long-term results, they actually tend to point in the wrong direction. They favour persuasion-based advertising, direct-response channels and price-based promotions, all of which underperform in the long term.
Moreover, the shift to real-time evaluation threatens to make things even worse, with an increasing focus on short-term effects at the expense of long-term brand-building.
So what's the solution? We're not suggesting that marketers put away their shiny new digital tools. Real-time measurement can be incredibly valuable as a way of improving short-term efficiency. These short-term metrics, however, need to be balanced with long-term measures of performance, so that the short-term tactics that they favour can be placed in their proper long-term strategic context.
That requires market research to move forward in two key areas. Those trying to understand the consumer mindset need to move beyond traditional questionnaire-based research and find ways of getting under the radar of consciousness. And econometricians need to focus less on short-term blips, and more on changes in base sales and price elasticity.
Without metrics such as these, big data may mean big danger for marketers.
"The Long and the Short of it - Balancing Short and Long-Term Marketing Strategies", by Les Binet and Peter Field, is published by the IPA.