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In-depth: Excessive focus on performance marketing – Are brands missing out on long-term customer loyalty?

Most of the brands today want ROI on every penny spent and the focus on building long term brand value is decreasing. Is an excessive focus on performance marketing helping or hurting brands in the long run? explores

Marketing spends are being minutely tracked by the brands as there is data available for every action that an ad viewer takes in the digital ecosystem. On the other hand, traditional advertising is also being directly linked with the sales output.

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In other words, every penny spent by a brand is increasingly being attributed to performance marketing. A case in point here is that brands are hiring agencies to achieve growth that may go up to 5x or even 10x.

This trend, especially amongst the new age brands, some say is the result of the reduced budgets amid the pandemic and dire need of marketers to build online channels of distribution and use performance marketing to drive brand sales.

Tarun Abhichandani

Increasingly, there is more emphasis on short-term results than a long-term objective of brand building, said Tarun Abhichandani, Head of Products and Solutions at Zirca Digital Solutions.

Ironically, what is being ignored is that brand building and awareness activities will eventually provide strong leverage in increasing revenues since loyalty has been anchored in consumers’ minds.

“Even if marketers want to continue to maintain conversion, leads or actions as their measuring scale; brand-building will still result in higher returns. If concerted efforts are made in building brands, the companies can increase their prices (with improved services or enhanced offerings) in the medium to long term. Brands seem to have forgotten the results that long-term communication brings – it helps build a sustainable story. Demonstrating immediate results is important but not sufficient,” he said.

For a brand manager to ensure that consumers have their brands as an immediate recall, he said that they need to establish stories that consumers associate with. Creating such stories is only possible when a thorough brand-building program is created and followed through.

Asheesh Sharma

Asheesh Sharma, VP Marketing, Agro Tech Foods that owns brands such as Sundrop and Act II, agreed that with the ever-changing ROI metrics of the digital ecosystem and chase for performance, a lot of marketers are under the pressure of getting the right ROI versus the brand building.

“The best ROI any brand can reap is the brand building. There is a difference between being a businessman and a marketer. A marketer will always have a business objective and a marketing objective too to meet. While they are responsible for brand building, they also need to deliver the near term or long term objectives and it is not either-or. Marketers running after short term tactics and ignoring the long term objective is an issue. But if the short term tactic is an aid to the long term strategy, it will always work in the favour of the brand,” said Sharma.

Driving ROI is a key objective for marketers and performance strategies are focused on capturing the in-market audience in the short-term or current demand.

Sulina Menon

This needs to be balanced with the long-term objective of creating future demand and brand building has a vital role to play in it, said Sulina Menon, Chief Client Officer, OMD India. Brand building is crucial to creating future demand - by attracting new consumers, building awareness and driving them to brand consideration that ultimately fuels performance or conversion.

Khundmir Syed

However, Khundmir Syed, Marketing Lead, IBM, does not think brands are forgetting the long term objectives.

“If you notice the recent ads of Cred, or Cadbury, agencies and brands are creating a lot of good pieces of content and they are not looking at performance in a big way only. I feel brand and performance go hand in hand because if you are only looking at performance, you are concentrating on the bottom line, not really looking at sustaining the brand for the long term. Even the new age D2C brands like Dunzo, Licious have come up with some excellent campaigns and I don’t think they are based only on performance. A good mix of marketing including performance is the right way for any new-age brands to go,” he added.

However, according to Syed, the biggest threat for performance marketing is that one looks at it from a very microlens, for the short term.

OMD’s Menon said that the demand funnel needs to grow and replenish to create scalable demand. This is only possible when companies invest in brand building - to foster relationships with customers and win the trust and loyalty of consumers - both in-market and future.

Unfortunately, communicating care and service is the long-term communication which is missing since the brands and marketers seem obsessed with the immediate performance metrics, said Abhichandani of Zirca.

IBM’s Syed said that at times, not being from the brand background results in such short-sightedness and this can be fixed when C level executives have an understanding of both digital and the brand.

“A good mix of both will actually bring a good view to the brand and that person will take the brand ahead with both performance and long term building. Another way to correct this is to not just look at the definite numbers but also invest in different kinds of research studies to measure the brand equity,” he said.

OMD’s Menon, however, thinks that it is the pandemic that has accelerated the trend of performance marketing and most budget cuts have been seen on brand-building efforts. Given the lockdowns and market closures, brands have had to build online channels of distribution and use performance marketing to drive brand sales and build outcomes on reduced budgets.

Spends, of any kind, invariably will attract close examination from individuals who are responsible for the company's finances.

One of the primary reasons that marketing spends are being micromanaged is due to the innovation in media and ad measurement - there is data available for every action that an ad viewer takes, said Abhichandani of Zirca.

Just because there is data related to actions post viewing the ads, CFOs or digital marketers will always look for the performance metrics data.

He added that the brand manager’s role here is to maintain communication with these stakeholders in a way where there is balance in the long-term objective of brand building and short-term result-oriented actions of the consumers. They, increasingly, need to highlight the conversations that the brand has with their consumers. These conversations should not be limited to the benefits that their product or services provide. The brand managers need to extend the boundaries by highlighting how society, communities, and professionals view their brands.

Premjeet Sodhi

Premjeet Sodhi, Chief Strategy Officer, Wavemaker India, said that the industry globally has debated for decades about the short-term and long-term effects of advertising and its’ not about an either-or. Both, are important and both are linked. One need to get the balance right so that we are not over-doing one of them so much that the other is ignored and harmed.

He said, “Every marketer wants results on every penny they spend. The issue is only that each one defines ‘result’ differently.  Typically, the performance practice revels in identifying and reaching people who are close to purchase or may anyways have bought often and not providing for the advantage delivered by “other variables” beyond the digital=performance-spend. Overall, each brand needs to be clear what is “stopping the consumer from choosing/ buying them” and basis that, the brands need to focus on what are the barriers to purchase. It is not about what is better, we need to do a proper brand health diagnosis and accordingly prescribe the way forward.”

Most of the experts spoke to believe that it is vital for brands to spend on content creation and maximise spending on media for the long term.

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