A gathering storm of brand-building intent
Lena Roland Managing Editor – WARC Knowledge, WARC
The fall from grace of Kraft Heinz was one of 2019’s landmark stories. In February last year it announced a $15 billion write down, in part due to under-investment in its brands. By the end of the year it was espousing a return to brand-building, with increased media investment behind its flagship products.
The story resonated because it’s not a one-off. Over the past year a growing number of marketers have publicly announced they are reviewing their approach to long-term brand-building, amid claims the industry has become too focused on the short term.
WARC’s Marketer’s Toolkit survey found plenty of evidence that 2020 will be a year when marketers re-invest in their brands: 70% of respondents agreed that brands have over-invested in performance marketing. Importantly, 40% predict increased brand investments in 2020 versus 32% who see higher performance budgets.
01 The industry is catching up with the research
The efforts of researchers such as Les Binet and Peter Field to refocus brands on the long term are bearing fruit. Their ‘The Long and the Short of It’ paper set out a theory that marketing worked in two ways: long-term ‘brand-building’ and short-term ‘sales activation’ or ‘performance marketing’.
A rough rule of thumb established in that work was that 60% of budgets should be spent on building brands – particularly through creative, mass-reach, fame-building communications.
In a digital age, most brands are way off spending that sort of money on brand-building; today it's all about performance marketing. And it has taken until now for the issues this causes – weakening brands, lower creative effectiveness, and a greater dependence on promotional activity – to become apparent.
02 Digital-first businesses are brand-building to scale up
Much has been said about the need for established companies to learn from the new wave of ‘digital-first’ or ‘direct-to-consumer’ businesses disrupting their categories.
But digital-first brands, as they grow beyond their early adopter audience, are now discovering the same rules of sustainable long-term growth apply to them as to traditional business models. In the US, the Video Advertising Bureau noted a 60% increase in TV spend by direct-to-consumer brands.
03 Marketers are struggling to put their money where their mouths are
Although respondents are clearly worried about the impact of short-term strategies on their brands, WARC’s data reveals the gap between intention and action. The Marketer’s Toolkit survey showed that brands will raise investment in marketing channels best suited to performance marketing or short-term impact (for example, search and online display).
A shift back to brand-building does not necessarily mean a shift back to ‘traditional’ media. Brands appear to view online video as key for brand-building in 2020, with more than 80% of respondents anticipating greater spend on that channel.
04 Brand-building in 2020 is all about experience
The role of experience – all interactions between brand and consumer, not just the communications – is now a key concern for many marketers. In an interview conducted as part of WARC’s Marketer’s Toolkit, Steve Challouma, formerly CMO and now General Manager UK of Birds Eye, pointed to areas like packaging and product formulation as key elements of a brand that are often ignored.
05 Culture, skills and metrics are key barriers
There are several challenges facing marketers looking to increase investment in brand-building. Respondents to the Marketer’s Toolkit identified the general business culture of short-termism and a squeeze on budgets as particularly significant.
Another issue is a loss of confidence among modern marketers as to their ability to build brands. An IPA/ Financial Times study released mid-2019 found that almost one in three senior marketers rated their ability to build brands as average to poor.
Metrics are a big issue here – specifically, the need for better signals that brand-focused work is having an impact, presented in a business language other members of the C-suite can understand.
For example, insurance company Direct Line Group found a way to show that brand-building helped deliver a price premium on price comparison websites. Companies such as eBay and the AA have used measures of organic traffic to their platforms as indicators of brand strength, while Birds Eye uses the percentage of sales at full price as a performance indicator.
Marketers should take note of an experiment by Australian insurance giant IAG. Over the next two tears, it will be able to assess the benefits of long-term brand investment by spending 80% of its budget on brand-building activities in a targeted part of Australia. Test-and-learn of this nature will be crucial if marketers are to successfully get back to brand.
Building a brand used to be about creating awareness and demonstrating a differentiator for your product and company. But now, in the age of constant change, that is no longer enough and what is needed for a brand, more than ever, is trust. Our business is shifting from storytelling to trust-building through meaningful actions - with heart.”
Founding Partner, I&CO