Over the past few years, growth has become the leading priority for CMOs and senior marketing executives. In response to this, CMO roles are being recrafted, with marketing integrating more with the business. While core CMO functions remain critical, enlightened CMOs are engaging in a broader set of strategic concerns beyond brand and advertising and grounding their drive for growth in both customer and employee experience as well as innovation, technology, operations, product and pricing.
The impacts of COVID-19 add a layer of complexity to this growth charge, with shrinking marketing budgets as well as shifting consumer needs and buying behaviors. A nagging question remains. How do you best deliver on short-term results without losing sight of long-term growth requirements in an environment that requires incredible agility? With the disruptions caused by the virus fueling a new normal, combined with the short tenure of CMOs, there is not much time to impress the C-suite, board and shareholders. This can lead to a disproportionate focus on short-term objectives and overinvesting in performance marketing at the expense of the brand.
Today’s savvy senior marketing executive knows that as a result of the pandemic, consumer mindsets about evaluating brands have shifted. Further, they know that performance marketing vs. brand marketing is not a choice that needs to be considered because the ability to drive growth is dependent on having brand and performance marketing work in tandem to succeed both today and tomorrow.
This article is the first of a two-part series exploring the importance of both marketing effectiveness and efficiency, and the role senior marketing executives play in the transition from performance marketing to more comprehensive strategies that drive consistent growth.
The trap of “short-termism”
It is easy to fall into the trap of “short-termism,” with performance marketing delivering on C-suite, board and shareholder demands. Quarterly earnings become the myopic focus. But what about optimizing the customer experience, delivering on innovation, expanding product lines, perfecting an agile marketing agenda or uncovering alternative communications platforms?
The June 2020 CMO Survey asked U.S. marketing leaders, “How much time do you spend managing the present versus preparing for the future of marketing in your company?” The survey revealed that 63.5% of their time is spent on “managing the present” and only 36.5% of their time on “preparing for the future.” This finding is troubling given the significant risks of “short-termism,” including relying too much on promotions and creative price sensitivity—“training” the consumer to only buy your brand on discount—and focusing too heavily on attribution and making decisions based on what may be easy to track and not on what is really driving the business.
Prior to the pandemic, CNBC noted that big brands such as Gap, Adidas and Booking Holdings had each directed spending back to brand marketing. The companies realized they were spending too much in areas such as performance marketing, and it was compromising long-term results. Further, a Marketing Week report noted that Adidas was changing its marketing focus from efficiency to effectiveness after the company realized it had lost sight of brand building by focusing too narrowly on performance and digital marketing.
More recently, D2C brands have encountered challenges because they built their businesses through performance marketing and are struggling to keep the momentum up as they mature. A recent MarTech Series article shared that 98% of D2C brands have relied heavily on performance marketing. However, with the immense growth in D2C competition over the last several years, there has also been a considerable increase in customer acquisition costs to a level that is simply not sustainable anymore for most brands. As a result, D2C brands are looking more and more at brand-building strategies and tactics, shifting budgets away from their increasingly expensive performance marketing efforts.
While companies have signaled a return to brand building after falling into the short-termism trap, uncovering the optimal blend of brand and performance marketing is not easy. During the pandemic, the June 2020 CMO Survey reported that senior marketers recognized the importance of brand by shifting their focus to brand building (33%) and retaining customers (32.6%). As this new year begins, it is important to recognize that uncovering the optimal blend is as much art as it is science. Stay tuned for part two of this series, which will highlight key steps CMOs can take to better achieve this balance.
After all, everything a brand does must drive the business and deliver results
The new world of marketing requires that all your efforts, including branding, need to be measurable and seamlessly tracked to growth. According to Kantar Millward Brown’s 5th Annual Getting Media Right Study, 85% of marketers believe that accurate marketing ROI measurement involves a short-term and long-term focus, but only 52% are using an approach to measure both dimensions.
In addition, while just 8% feel that the most important measure of ROI is short-term sales, five times more (40%) use that as their primary approach to measurement. There is no doubt that the greater ease of measuring short-term versus long-term results is driving this. Unfortunately, failure to showcase the impact of marketing on long-term growth has serious consequences as senior marketing executives seek to get C-suite funding approvals.
At Pace, one of our first steps on every project is to determine the metrics that are tied to brand, lead and revenue performance. We work with our clients to improve performance in the metrics that we have proven yield additional brand awareness and equity, and to increase the activities (leads, sales, transactions, etc.) that increase revenue. We do not frequently use the term “data driven,” as our programs are more fully data integrated—meaning that our analytics frameworks become symbiotic with downstream performance.
Conclusion: “Short-termism” as a direct result of the data usability crisis
At a time when access to data and analytics tools is overwhelmingly easy, it is hard to fathom that CMOs are struggling to showcase the value and impact of their marketing departments. But the data usability crisis is real, experienced by departments across the board and not just in our industry. These limitations have led many to believe in the superiority of performance marketing over other marketing strategies that focus on building long-term brand loyalty and success. However, we are beginning to turn the corner with major brands like Adidas and Gap leading the way in this transition from performance-only marketing to a dual approach that involves brand building and performance.
While this article focuses heavily on exploring the importance of both performance and brand marketing and the role CMOs play in striking the right balance between the two within their organizations, part two of this series will provide a more detailed guide for marketing executives to follow this year.
As you stay tuned for the second part of our Marketing Effectiveness vs. Efficiency series, I invite you to check out Pace’s Understanding Omnichannel Performance: Solving the Data Usability Crisis white paper and the Building Measurement Frameworks section of our website to learn more about data usability and how to build measurement frameworks.