Introduction to Marketing Effectiveness
Marketing activities are a significant investment for any organization. Marketers’ challenges are whether those investments should drive short-term sales or just long-term branding. Or can they fuel both?
In other words, are your marketing efforts building your brand?
How can you prove your marketing efforts create value for your brand?
Your marketing activities significantly impact your brand, but how can you prove that they create value?
Short-term sales goals often contradict long-term branding objectives. The problem of temporary price promotions – TPPs – and sampling products in store: TPPs are meant to recruit doubtful consumers by temporarily lowering prices. So that a portion of those will insert your products and brands in their bouquet of choice; however, TPPs tend to please marketers more by quickly stealing competitors’ volume and impacting market share. Think about the promotions that media and Telecom companies have created. They lure consumers with increadibly appealing offers, hoping they will stick beyond the initial length (a condition to generate any economic value for the company). Instead, customers keep switching from one player to another, from one offer to another.
The first step in proving the value of your marketing is determining what type of marketing activities are best for building your reputation and equity.
It is not rocket science, but these questions should help:
- Does it create economic value beyond the short-term push?
- Does it generate only awareness or also equity?
- Does it highlight an essential attribute/benefit of your brand previously unknown to the target users?
- Does it target a segment of consumers with the potential to be long-term users?
- Does it follow the logic “the competitors do it, so we should do it”?
- Does it follow the reason: “the trade wants it”?
- Does it only focus on price, trial, and sampling?
In our work with a D2C food brand, the client wanted to test the scalability of the brand by aggressively promoting only on price. The issue is that – by doing so – they engaged with a vast segment of the population who would not buy the brand in the long run. And two consequences emerged: first, these promotional users purchased the product and never returned to its shop because it was too expensive and out of reach for them. Second, they trashed the brand on social media for being costly and misunderstanding its benefits and ingredients. Not only did the brand invest promotional resources in a target group that would never come back for it, but also they managed to chip their reputation in the process.
Brand Building drives market share.
The stronger a brand, the more likely it is to grow in market share over time. This is due to several factors, including:
- Consumers tend to build a higher trust in the brand and thus are more likely to keep it in their consideration set.
- A strong reputation becomes viral, and users become advocates and talk and recommend your brand.
- Stronger brands are more salient and can become a proxy for the category (e.g., Google for search, Absolute for Vodka, Netflix for Streaming Services)
- “Naming the names” and “Being in the know” are critical benefits of the Connoisseurship trend, and having a good reputation becomes a key in the process of filtering brands by many young consumers (not actually in all categories but in most consumer electronics and many foods and beverages markets)
Brand Equity commands a Price premium.
Brands with a strong reputation often command higher prices – e.g., Apple products sell at a premium compared to other devices with similar functionality and features.
Many brands have brand equity and a reputation that allows them to charge more for their products. This is because customers are willing to pay more for a brand they trust, and if it’s unavailable from the competition, they will switch to other brands of the same category.
Brand Equity drives future growth.
Brand equity is the value of a brand or how much it is worth. It is the amount that customers would pay for one more unit of your product. Brand equity can be positive or negative and is typically determined by customer perceptions of your company and its products. Three factors influence brand equity:
- Brand awareness—How many consumers are aware that you exist?
- Brand Trust – how likely are you going to trust the brand? Nobody tries a brand they don’t count on in the first place
- Brand loyalty—How many consumers use only your products?
The strength of the associations with your brand (including those formed over time) is probably the best predictor of the future performance of the brand: they are in the realm of “mental availability” but also drive “physical availability.”
Understanding Marketing Effectiveness
Measuring marketing effectiveness is an essential and sometimes difficult task. But it’s something you need to do if you want to improve your marketing efforts, which should always be about enhancing your brand’s performance.
A good measurement process will provide insights into whether or not all of your marketing activities are contributing toward building your brand or if some are being wasted on activities that don’t help build the reputation of your product or service over time. This knowledge is critical as it can help ensure that any new activity adds value to your overall strategy while removing any activity that doesn’t add value.
Marketing Effectiveness: the problem with short terms goals.
The problem with short terms goals is that they tend to focus on market share or to expand reach beyond the natural target by recruiting deal seekers or consumers who will never accept your brand in their bouquet of choice.
This approach has two problems: firstly, it generates a lot of noise for a tiny gain (a slight increase in market share is often offset by a loss of real quality customers), and secondly, it can be expensive because you’re paying for advertising campaigns aimed at people who aren’t likely to buy from you anyway.
Rule of thumb, the longer the return of your promotional effort, the more brand-building the promotion is.
Not all promotional activities drive brand growth or contribute positively to brand building. There more the promotion is effective in the short term, the less equity it usually builds. The more the promotion is focused on temporary price reductions only, the more likely to dilute equity.