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Long-Term Business Vitality Should Outweigh Short-Term Sales Gains
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Long-Term Business Vitality Should Outweigh Short-Term Sales Gains

Our always-online lifestyles have undoubtedly paved the way for highly digitized marketing experiences, which offer brands the benefit of securing sales quickly when an online shop is only a few clicks away. When the pandemic arrived and e-commerce exploded, it only accelerated trends that would have otherwise taken years to reach ubiquity. The significant disruption across businesses over the past 15 months, however, has highlighted a notable shortcoming of marketing efforts that are overly focused on driving short-term sales: they do little to grow a business over the long term.

Conversion-oriented marketing didn’t arrive exclusively as a result of the pandemic; it’s been a hot topic for a few years now. But when brands around the globe paused their broader advertising efforts last year to preserve budgets and profits, sales-driven marketing really took the spotlight. At face value, this sounds like a logical move. After all, what’s more important for a brand than sales?

The answer to that question is actually pretty simple: long-term business vitality. Yes, all businesses need sales to operate, but continually engaging with existing customers is not all it takes to grow a business. As evidence, Nielsen’s Annual Marketing Report found that customer acquisition is the top marketing objective across businesses of all sizes. And yet, many marketers are still prioritizing securing quick sales at the expense of other brand-building initiatives.

It’s easy to see the appeal of conversion-driven marketing when budgets are tight and the need for quick ROI is heightened. The shortening of CMO tenures and reporting cycles exacerbate the appeal, as the ability to get quick, measured results fosters a desire to double down on these dependable initiatives.

Short-term evidence aside, any marketing strategy that focuses solely on quick sales wins is myopic in nature. Notably, conversion-dominated strategies stand in opposition to numerous academic studies that argue that upper-funnel marketing is the best path to growth. When it comes to customer acquisition, the Ehrenberg-Bass Institute argues that building awareness is the best way to attract new customers—the primary ingredient in long-term viability. The Institute of Practitioners in Advertising (IPA) even goes so far as to support a key formula from Les Binet and Peter Field: that the optimal balance between long- and short-term efforts is 60-40.

Putting aside the IPA’s prescribed ratio, the key point is that balance in marketing is paramount. Spend too little on brand building and activation marketing will be in vain because there was no nurturing of the consumer. Spend too little on activation marketing and marketers aren’t nudging fans of their brand over the final hurdle.

It’s also critical for brands to be able to see the tangible, long-term effects of brand-building and awareness efforts. Notably, the marketers we surveyed for this year’s Nielsen Annual Marketing Report consider brand awareness measurement the most important measurement capability. Even with more than three-quarters of marketers expressing the importance of this metric, brands continuously underutilize it and instead focus heavily on short-term sales. It’s great to be focused on sales, but marketers must employ more well-rounded approaches to their marketing efforts to maintain long-term brand building impact while still driving short-term sales.

Nielsen research shows that a 1-point gain in brand metrics (e.g., awareness and consideration) drives a 1% increase in sales. Importantly, upper-funnel efforts also generate an array of ancillary benefits that can drive more effective sales activations—and not just for consumables. For example, Nielsen recently measured how effective a financial services company’s marketing efforts were at driving sales across approximately 20 markets and found that the correlation between the upper funnel brand metrics and marketing efficiency was exceptionally strong (0.73).

There is no short-selling the importance of being able to engage in meaningful, targeted ways with core customers, but effective marketing needs more than mid- and lower-funnel activations—even in uncertain times like those during the pandemic. So as the world acclimates to new realities, marketers need to think about using both brand and growth marketing tactics instead of doubling down on one for a quick win.

For additional insight, download our Brand Resonance white paper.