How can marketers balance short- and long-term ROI goals?
The delicate balance between short- and long-term ROI is a constant battle, often fought across marketing disciplines. We have to take a long-term outlook on our brands to fully develop them. But without sales in the short term, our brands won’t be around long enough for the long-term outlook to matter.
Watching this battle play out in the shopper marketing space has been especially interesting, as the discipline has emerged from traditional trade, sales, and consumer promotions functions. Simplified, the challenge is now balancing brand-building activities with driving sales. In consumer packaged goods categories, we’re typically working with multiple, smaller purchases where there’s a relatively low barrier to switch. As a result, discounting has long been the staple method of securing the sale. But this leaves us chasing transaction after transaction with our primary weapon potentially devaluing the brand. We’re chasing short-term ROI while trying to also focus on long-term gain.
So where do we start?
As simple as it sounds, the first step is to establish both short- and long-term brand objectives. This requires us to set a long-term vision for our brands and map out the short-term steps that get us there. To get that right, we have to develop insights that address both the current state and future trends. It’s imperative that we brief our creative teams with this dual vision from the beginning. Keep in mind that any long-term marketing strategy that we put in place is going to need to evolve over time. And the only way to do that intelligently is to measure as we go. So we have to choose the right metrics from the beginning and collect the appropriate data as we go.
Integration, alignment and diversification
This brings us to the marketing plan. A fully integrated marketing plan is the only way to address both short- and long-term ROI simultaneously. The channels and tactics we choose must be integrated and aligned. We need to determine the appropriate channels and tactics for each step along the path to purchase and beyond. This early planning will ensure that our tactics work together to coax the consumer to and beyond the purchase. This also allows us to deliver a consistent message across all channels, making the most effective use of all our marketing assets.
And because we know that all tactics are not created equally, it is important to diversify the tactics we choose. This allows us to execute some that drive long-term goals forward and some that address our short-term needs. We have to test, learn, and iterate to constantly evolve new tactics and find the right mix.
Building relationships instead of chasing transactions
This is not new. But if we think for a second about the linkage between brand-building and sales-driving activities, it’s about relationships. And that starts to get interesting. CRM has been around for years. But the proposition doesn’t fully work in CPG. The ROI is simply not there when you consider the cost of typical CRM activities and the short-term payout of small ticket CPG items. Loyalty programs have been the CPG staple, but that has primarily focused on trading loyalty for discounts and premiums. And that leaves us calculating ROI as the incremental value of short-term sales divided by the cost of the discounts and premiums we give in exchange. This is a difficult balance to maintain for brands, especially when the loyalty program exists separate from other marketing activities.
But when we focus on building relationships, every encounter with the brand, every touchpoint, becomes an opportunity to meet a need and provide value. That value might still be a discount or premium, but it might also be exclusive content, behind-the-scenes access, a unique experience, excellent customer service, and so on. These are things the consumer remembers. Every touchpoint becomes a potential brand-building activity and a potential point of activation.
And with digital, especially mobile, the whole process is accelerated; a consumer is always just a screen tap from becoming a shopper, anytime, anywhere. And this changes how we view and calculate ROI. The relationship becomes the linkage across marketing disciplines and channels. We’re focusing on the consumer or shopper with a longer-term brand vision while still capturing sales transactions in the short term. Instead of chasing individual transactions, we build relationships with a view on capturing all the transactions.
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Ken Madden, JWT/OgilvyAction
Ken Madden, EVP and head of digital, North America at Ogilvy is most comfortable when he’s uncomfortable, whether he’s figuring out how to apply and integrate new digital technologies, aggregating new data sets, or coming up with his next improv comedy line. As a technology consultant, he developed an analytical tool for a small agency, changing its data strategies. That agency was acquired by Ogilvy and, after a short hiatus, he returned to work there. At his current job, he tries to predict what people want and how they’ll react to a wide range of overlapping and ongoing stimuli. At home, with his wife, five-year-old son, and six-month-old daughter, Madden fi nds himself reacting to a wide range of overlapping and ongoing stimuli. Madden has a passion for electronic music, often experimenting on his tablet, which “puts a studio in my lap,” he says.
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