Leonard M. Lodish and Carl F. Mela wrote an article for the July–August 2007 Issue of Harvard Business Review titled If Brands Are Built over Years, Why Are They Managed over Quarters? The article includes some insights from Vlasic, Nike, Victoria’s Secret, and Clorox.
« Vlasic used a short-term sales strategy, focusing on a single, large channel partner and discounting its product to attract consumers. In addition, the company reduced advertising by 40% between 1995 and 1998. Nike, on the other hand, positioned itself for the long term. It maintained strong relationships with a variety of retailers and invested in brand equity, allocating $1.2 billion annually to its advertising budget. By setting its sights on a distant horizon, Nike continued to own its customers—and its brand—while Vlasic ceded both to the channel. »
« Studies by Lodish and colleagues found that advertising has a small short-term effect on sales compared with the effect of a price promotion—but a TV advertising campaign that does generate significant sales increases during the first year will continue to do so for two more years, even if the ads are no longer being aired… Equally important, if a TV campaign does not have a significant impact during the first year, it will have no long-term impact (and roughly half of all TV ads generate no lift in sales, according to some recent research). »
« According to Jill Beraud, chief marketing officer of Limited Brands, the parent company of Victoria’s Secret, the brand’s TV ads do not generally increase short-term sales enough to justify the cost. However, Victoria’s Secret has linked increases in TV advertising to its ability to charge higher prices over the long term. The investment in TV advertising helps build the overall strength of the brand and decrease customers’ price sensitivity. »
« …the tenure of a brand manager—which is typically quite brief, often less than a year… A Long-View Dashboard… Given the relatively short tenure of brand managers and the significant reallocation of resources that changes in long-term marketing strategy entail, someone higher up in the firm must track these measures. »
« It is hard to see how companies can attain any insights into brand building with just 52 weeks of data, yet many firms have only that. »
« the Clorox bleach product line was in a seemingly endless cycle of discounting. Almost once a month, the price of a 96-ounce bottle of regular Clorox bleach was reduced to $0.99 at retail—even cheaper than most bottled waters. The company had also reduced its advertising spending. From a short-term perspective, the promotions appeared to be quite profitable. Yet consumers learned to lie in wait for these deals, which increased short-term sales but decreased baseline sales… Garry initiated an effort to reverse this trend by reducing discounting and increasing television advertising… »
« As a result of the policy change, baseline sales increased dramatically and lift over baseline decreased. Consumers were no longer buying from promotion to promotion but were instead purchasing more volume at full price. These changes had a positive long-term effect on the company’s revenues and profits by increasing the brand’s quantity and price premiums. »
Leonard Lodish is co-author of Marketing That Works: How Entrepreneurial Marketing Can Add Sustainable Value to Any Sized Company.
Thanks for Les Binet for recommending this article.