Building bridges between short-term ROI and Desirability in turbulent times! - Ekimetrics
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Building bridges between short-term ROI and Desirability in turbulent times!

Building bridges between short-term ROI and Desirability in turbulent times!

In difficult economic times, brands need to maintain desirability among their customers and not stop their marketing efforts abruptly. By making use of their available data, they will reap the benefits when the economic situation improves.

Author : Thibault Labarre, Partner

Date : 29 January, 2024

Don’t skimp on consumer attention and keep your marketing investments constant. In short, this is the roadmap for brands as France enters a challenging economic phase, which is likely to get worse before it gets better.

Higher interest rates coupled with rising inflation and uncertainties over commodities prices have muddied the waters. Whereas abundance was supposed to be a given, we’re instead having to make trade-offs on essential purchases. This has been seen not only by French supermarkets, but also by retailers. Some households are having to think very hard before buying. The knock-on effect is that the economic downturn will inevitably spread, and company margins will decline.

However, there are several solutions to help you pass the turbulence and get back on track when the good times return. First, reducing working capital requirements by adjusting inventories and work-in-progress to actual or future demand is a recognized best practice.  At the same time, marketing efforts need to be adjusted, drawing on the dynamic lessons of marketing mix modeling (MMM).

The justifiable idea of sweeping all superfluous expenses under the carpet is certainly not a good practice. One of the prime targets of this is often marketing, as management questions why it should spend its limited resources on marketing initiatives designed to stimulate demand when demand is collapsing? This overlooks the fact that generating demand is only one facet of a brand’s marketing strategy, linked to the short and medium term, while actions to reinforce and measure desirability are part of a long-term approach. Implementing a marketing measurement and optimization strategy also ensures all teams share a common vision: what are the risks in the short, medium, and long term? What investments must be maintained at all costs?

And that’s not all. While natural demand for a brand’s products (the “baseline”) is a valuable foundation on which to build, it can deteriorate over time in the absence of ad hoc advertising investments. The recent example of the pandemic is a perfect illustration of this. Several studies show that suddenly interrupting advertising spending during the pandemic proved costly once things returned to normal. It required much more expensive advertising investments (around 50% more than traditional amounts) to turn the tide and return to pre-pandemic metrics. But building a baseline is a gradual process, strongly correlated with building brand image and awareness, then familiarity and consideration.

Communicating in times of crisis is certainly a balancing act between short-term profitability and long-term traction. However, the overlap between online and offline marketing efforts is such that many opportunities can be seized. For example, searching for information on the Internet (Online) and buying in-store (Offline) is a well-known phenomenon (ROPO: research online, purchase offline). And let’s not forget that the opposite can also occur – people discover items in store and buy online.  This is really interesting, and often more than 20% of online sales are directly generated by offline investments, led by TV and press advertising. In contrast, digital ROI often increases by more than 25% when we consider its impact on offline sales (beyond simple e-commerce sales).

So how should you direct your marketing efforts in tough economic times?
First, assess your brand’s desirability: find out what key topics customers are talking about online when they mention the brand; find out how often these customers positively mention the brand and its specific features. This involves a semantic analysis of discussions across multiple channels, as well as sentiment analysis.

Finally, ask yourself two questions. First, how can you best use offline channels, including television (long lead-time in serving the baseline), to drive online sales channels (short lead-time)? And how can online channels best serve physical distribution channels (same principle)? By playing with these combined effects and thinking more about cross-channel synergies, advertisers can build stronger bridges between the short and long term, and not only gain more than 20% on their short-term ROI, but also create a more sustainable long-term ROI. This is how to avoid brand damage in turbulent times, and to prepare for future opportunities when the economy recovers.

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