It's common practice nowadays for marketing activity to focus primarily on achieving "soft" intermediate consumer objectives, such as brand or campaign awareness. Each are easy to measure and can provide a simple Key Performance Indicator. And if the marketing department and its agencies are incentivized based on this KPI, then it can become an all-consuming passion.
So when we set out to write "Brand Immortality," we wanted to explore the setting of business objectives and how they influence success. Our analysis of 880 IPA DataBank case studies reveals an inconvenient truth when it comes to setting marketing objectives: The failure to set clear (ideally quantified) business objectives (such as a profit target or share growth) is bad for brands. Unsettling news, both for those marketing and procurement people who set soft objectives, as well as for the CEOs and CFOs who agree to them.
The finding has deeper implications, given that brand campaign objectives should, of course, have a fundamental influence on communications strategy. For example, if the objective is to enable the brand to raise its prices (or in the current climate, to hold them) without suffering crippling sales declines -- in other words, to reduce the brand's price sensitivity -- then the resulting communications will be rather different from those arising from an objective to build volume through trial. The lack of hard business objectives can thus compromise the entire strategic-development process and reduce the effectiveness of the campaign.
The IPA Effectiveness Awards cases teach us that not all business goals are equally likely to lead to success. For example, the most important objectives to set are for profit gain and reducing price sensitivity.
It's also better to target market-share growth rather than sales growth, and going for value share is better than going for volume share. In a growing market a brand pulling its weight in marketing terms should be able to take growth as a given. So a sales-growth objective (unless it's a very aggressive one) is unlikely to be particularly challenging, nor will it encourage the finest thinking from marketers and their agencies.
On the other hand, a share-growth target strips out the given, sales growth, and places a requirement on marketing to beat this. Targeting market-share growth also has a sharpening effect on strategic thinking, because it focuses the team on where that share is going to come from and how: Who's the victim? What's the weapon?
|Pringle and Field|
Third in a series
It is also obvious that targeting value-share gain is more likely to result in increased revenue than setting volume-share gain as the goal: If a brand cuts its price, it is likely to sell greater volume, but not necessarily earn greater value. This is especially the case with promotional price cuts, once "brought-forward" sales are taken into account. Critically, the effect on profitability of cutting prices may more than negate the marginal contribution of the extra product sold.
Profitability and market share
It has been long-established by PIMS (Profit Impact of Market Strategy) analyses that company profitability correlates strongly with its market share. However, Scott Armstrong and Kesten Green in the International Journal of Business showed that companies that had set pricing to increase market share to the exclusion of all else were consistently less profitable than those that had set pricing to ensure high profitability. The implication is clear: Buying market share through aggressive pricing is not generally a good way to keep the CFO happy.
For maximum profitability, market-share growth must be achieved by creating desire for the brand through emotional affinity, perceptions of quality, etc. The best way to build value share is likely a combination of reducing price sensitivity and increasing penetration. Reducing sensitivity in turn requires marketing to work to increase the perceived relative quality of the brand.
|ABOUT THE AUTHORS|
Hamish Pringle is director general of the IPA and author. He joined Ogilvy, Benson & Mather in 1973 and has worked at McCormick Richards, Boase Massimi Pollitt, McCormick Intermarco-Farner/Publicis and Abbott Mead Vickers. He also formed agency Madell Wilmot Pringle.
Peter Field is a marketing consultant and author. He started his career in 1982 at Boase Massimi Pollitt and has worked for Abbott Mead Vickers BBDO, Bates and Grey London. In 1997, Mr. Field left advertising to pursue a consultancy role supporting clients and agencies.
The hugely successful U.K. launch of telephone directory-assistance provider The Number 118 118 (a division of U.S. company KGB), is a great example of how setting hard business objectives drives better communications strategy and delivers results. Experience of deregulation in other countries indicated that only two brands would survive, so market share became the primary objective for The Number 118 118, with consumer mindshare the key secondary objective. The brand invested heavily in a pre-emptive marketing communications strike that maximized first-mover advantage and then consolidated its position once the competition entered the fray.
This case study demonstrates that it is perfectly sensible to set and monitor secondary, intermediate objectives, especially if a marketer can be confident that they are moving in the right direction in terms of desired business outcomes.
The hard truth is that the pursuit of single, intermediate objectives generally reduces effectiveness, and those campaigns with a tight focus on a single, soft objective tend to be the least effective of all. Not such a great basis for KPIs and bonuses after all.