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Marketing Strategist: It’s Time To Get Off The No-Growth Hamster Wheel

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Marketing Strategistby Tim Moran, Editor In Chief, CMO.com 

As many well-intentioned marketers are charged with driving more growth faster, they’re scrambling for faster insights, faster innovations, faster sales, and faster proof of performance. But they’ve little hope of achieving much growth unless they first realize what they’re inadvertently doing to foster the slow to no-growth situation from which they suffer. Then they must replace the unproductive strategies with best practices newly proven to actually get them somewhere.

That’s according to the soon-to-be-published study “Surprising revelations on how to improve short-term results while also driving YOY increases in sales and margins.” (To be notified when it is available, email [email protected]). It’s the result of a 10-month effort by Lindsay, Stone & Briggs, an ad agency that says it specializes in the relaunch of stalled brands, and the long-time curator of Brandworks University.

CMO.com recently caught up with the author of the analysis, Marsha Lindsay, LSB’s chief strategist for growth, brand, and innovation, to find out exactly what she thinks is going on in the marketing universe.

CMO.com: For each of the past 26 years, you and your firm have undertaken an annual study—a “meta-analysis,” in your words—to identify a single, critical issue on the horizon that marketers will soon face but few, if any, see coming. What megatrend has your analysis found this year?

Lindsay: It’s an outgrowth of the Great Recession that is limiting the growth and sustainability of many brands. We all remember 2008 and the years following: Self-preservation was job one, and the leading strategies were cost cutting and driving short-term volume. However, our research found that, in many companies, those strategies have been assimilated to the point that they are actually inhibiting recovery.

Having incentivized short-term sales for so long with low pricing and deals, brands have trained their customers to buy only when the company cannot make any money on the sale. This continues the company’s desperation for short-term sales at least for cash flow. So they continue to demand of their marketing team even more short-term volume, which prompts them to lower prices and do more deals.

The result is a catch 22: Without margins to invest in new offerings and market their value (as opposed to a low price), there is no way to break the vicious cycle. So many companies who’ve persevered through years of slow to no growth are going to find it is too late to recover.

CMO.com: So you’re saying that companies are inadvertently using strategies that perpetuate no-growth and then using the same strategies to mitigate their disappointing results?

Lindsay: Precisely. It creates a sort of hamster wheel on which many executives race to try and get ahead but find they never get anywhere. One successful short-term volume-driving campaign after another is well-proven not to result in profitable growth.

Also well-proven is that continuous cost cutting and sales promotions do not constitute a growth strategy.

CMO.com: What can break the cycle?

Lindsay: We did further research and vetted a framework of recommended best practices to deal with the issue. What’s great about the findings is that, if they are properly used and used consistently, not only do they drive year-over-year increases in sales, share, margin, profit, and brand strength, they also lift the performance of short-term volume-driving efforts.

The net is, the use of these best practices will make all your marketing efforts more effective and efficient.

CMO.com: What were some of the sources of research you reviewed and analyzed to come to these conclusions?

Lindsay: Our meta-analysis covered many different independent sets of longitudinal and evidence-based research—across many categories—in both B2C and B2B. It covered pre- and post-recession studies, large brands and small, and traditional as well as digital, social, and mobile marketing. To cite just a few sources, we reviewed research on how brands grow originating from the Ehrenberg Bass Institute for Marketing Science and publications from the Institute for Advertising Practitioners—in particular, “The Long and Short of It” and “Marketing In the Age of Accountability.” We studied the science of human decision-making detailed by Daniel Kahneman [“Thinking Fast and Slow”] and Dan Ariely [“Predictably Irrational and The Upside of Irrationality”]. We tapped into the global library of WARC and recent findings from the likes of MarketShare.

CMO.com: Is there a main finding as to how any company can best drive profitable growth?

Lindsay: The evidence is clear that the leading driver of growth and profit is, first, determining and framing the emotional value that an offering can play in the lives of its targeted customer—and then becoming famous for it.

By “emotional value” I don’t mean an offering’s features or functionality but, rather, how it helps the user be more of who they are or aspire to be. Our brains are hard-wired to notice, prefer, and remember offerings with this degree of hyper-relevance. So if you get it right and communicate it to the point you are well-known for it, you’ll not only create demand but make a decent margin.

In other words, the key to year-over-year increases in sales, share, and profitability is not more discounting to drive short-term volume but, rather, a value proposition so resonant that it allows you to charge a bit more.

The research is very clear: Price increases will boost profit far faster than increasing volume. Increasing unit volume by 1% yields a 3.33% increase in operating profit, whereas increasing price by 1% yields an 11.1% increase in operating profit.

CMO.com: You’re saying that efforts to desensitize people to price will have three to four times the effect on profitability as will efforts to increase volume?

Lindsay: Absolutely. The evidence also makes clear that desensitizing people to price does not happen by making a rational case for why your product’s features or functionality is different or better than competitors.’

It turns out that when it comes time to persuade people to buy, rational arguments are not very persuasive at all. Instead, the research found that campaigns that evoked strong emotions in people produced more “hard business results.” There is a great deal of case-based evidence and data.

There is also extensive evidence that emotional campaigns that reached the level of “fame” were found, time and again, to also desensitize people to price. In fact, they were 50% more likely to affect positively all kinds of growth and financial metrics.

CMO.com: I’m hearing a marketing best practice: Become famous for the emotional benefit of your product or service.

Lindsay: Yes, and we should all embrace creativity. The evidence clearly shows that, when it comes to driving hard business results, campaigns deemed as the “most creative” in award competitions outperform noncreative campaigns in every dimension.

For example, one dimension is media efficiency. When equalized for share of voice and media spend, the more creative a piece of communication, the more it outperformed those that were less creative.

CMO.com: So a marketer should not only demand original ideas but also must support these ideas with a healthy media spend?

Lindsay: Right. That share of voice matters is not a new orthodoxy, but it has been reaffirmed. Overindexing share of voice is still practically guaranteed to fuel growth.

Also reconfirmed is the degree to which media mix also matters. New ARF research found that, today, 60% of campaigns rely on only one or two mediums. However, by increasing from one media platform to two, brands on average can increase ROI 19%. With each additional platform added to the mix, ROI continued to improve. This maxed out at five media platforms, which improved ROI by 35% over using just one medium for a campaign.

Related to media mix is the all-important allocation of budget between building perceptions of the emotional value of one’s offering versus activating short-term volume. Case-based evidence shows that the budget ratio that produces the highest rate of success is when 60% is allocated to awareness building and emotional priming—what we’d call brand-building—with the other 40% aimed at activating sales in the short term.

The research shows this ratio might vary a tiny bit from category to category, but the added business effects of spending much more than 40% on activation are not much. Most important, optimum growth and profitability are achieved when these brand-building and brand-activation efforts are used in combination, year after year.

The evidence shows it actually takes about three years to see the maximum impact of awareness building and priming of a brand’s emotional benefit. In other words, the typical short-term metrics on which investors, bosses, and marketers so often judge marketing performance are not a reliable guide by which to base what will drive year-over-year increases in sales, share, margin, and profitability.

CMO.com: What conclusion from your study surprised you the most?

Lindsay: When all the findings are compared to each other, it’s clear that what really drives marketing results and efficiency is not price or technology. Rather, whether using traditional media or digital, social, and mobile, what is most effective is leveraging how people naturally process information in the first place—that which plays to the predominantly implicit way people take in information about an offering, process it subconsciously, and again, subconsciously weigh its value emotionally, even irrationally. What is deemed relevant by the subconscious gets stored in memory as a short-cut to future decision-making.

We call that shortcut a stereotype or a brand. And in a marketplace where people are increasingly time-starved and harder to engage, where media usage is so fragmented, investing in brand building is proved to be all the more critical. Essentially, it is what drives year-over-year increases in sales, share, and margin.

CMO.com: With its impact falling in the future, I expect it’s easy for marketers to rationalize that brand-building can wait. But isn’t it your point that a big reason so many marketers are experiencing slow to no growth is because they’ve put off building perceptions of their brands’ value for too long?

Lindsay: That is exactly the point. Being famous for an emotional benefit so compelling it gives you price elasticity is such a game changer for a company’s profitable growth. But the research shows that even doing it consistently, it takes two to three years to actually kick in. So every C-suite should appreciate the criticality of investing in it every year.

Marketers wanting to get off the hamster wheel in two to three years should engage in these best practices starting today—and even with that, hope that they are not too late.

This article originally appeared at CMO.com

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