Brand managers in recent times have been accused of underplaying the importance of branding. Promotions and red tags have dominated the marketing calendar month after month.
A short-term conversion approach might just mean we are overtly looking at the undecided few at the end of the purchase funnel and completely missing out the bigger potential of those who are making choices under the influence of trust and relationship with the brand. Try giving a shopper an unlabelled can of milk for half the market price to realise how sub-conscious and long-term branding works on consumers.
Moreover, it is six to seven times more expensive to attract a new customer than to bring an old customer back; branding helps in building a relationship that goes beyond price and ensures consumers perceive value and are back for more. These repeat visits can actually lower cost per acquisition (CPA) way beyond any short-term promotional stunt.
Not that this is something new and unheard of. Then why is branding being pushed aside and short-termism continuous to take centre-stage in marketing agenda?
How is it that marketing teams do not see short-termism as a potential self-goal for the business? Probably they are fully aware, but not able to do much about the changes in business culture brought about by technology. Investor pressure too is driving short-termism as the only option for business leaders and CEOs.
It’s indeed ironical that the current state of short-termism is arguably because of technology and investors. Technology has empowered stakeholders to access financial information on a real-time basis, what we proudly call the era of live dashboarding.
While this access to information and measurability is an advancement, it has also put stakeholders in the driving seat in reacting to short-term gains or losses rather than keeping an eye on long-term business stability. Campaigns with a focus on daily conversions are a direct impact of this empowerment.
This has put immense pressure on brand owners to focus on short- or micro-term gains and ignore investments into future-proofing brands.
Another interesting shift in the business culture is that of investors’ ease of entry and exit from businesses and the added pressure on company directors to stay focused on not showing any decline in month-on-month business profitability. As a cascading affect, the CEOs’ key performance indicators are restricted to a focus on immediate revenue generation.
Various studies have shown a significant drop in CEO tenures in all major sectors, at 18 months on average due to this shortsightedness. CEOs therefore have no motivation to look beyond everyday numbers and maximise their earnings in a short term.
Whereas studies have shown a direct improvement in returns when CEO tenures are longer term, it is increasingly important to balance long-term plans with short-term thinking. Business leaders will need to invest time, effort and capital to future-proof business and prepare themselves to stay relevant.
The cost of short-term focus may therefore be significant and all possible actions must be aimed at addressing this issue.
For a long time, the UAE was seen as a tactical market by design because of the large — and fleeting — expatriate population. Thankfully, it is now accepted that the short-haul tendencies are more among the lower income groups and much less among professionals.
So, the shift needs to come from business owners and stakeholders to bring about any change in short-term, promotion-driven marketing focus. As part of a marketing team, we should also bring about some changes. For instance, we could aim for a balanced reporting that includes brand health metrics alongside the conversion numbers.
In showing the correlation, we get to address short- and long-term challenges.
Switching to long-term branding initiatives will not be easy; it’s a gradual change in mindset. It will need building up collateral and tracking customers in the entirety of their buying journey. It will also need more collaborative relationships between marketing and sales teams and developing reports that detail RoI on a longer timescale and show the impact of investment on branding.
Easier said than done, one thing is evident — if we don’t bring the balance in business sightedness, the beautiful stories of brand consumer relationships will get fewer in times to come.
Amit Raj is general manager of BPG Max.