Brand equity, part 1: Echos from the airport bookshop

Marketing practice has emphatically embraced balancing the short-run and long-run aims of brand communication. The “60:40” mantra and its kin have had a palpable impact, but not without casualties. In this series, I’ll be looking at what marketing practitioners in businesses and in agencies are talking about with regards to effective brand building, and seeing how that stacks up against the academic discourse.

Best-selling advice for marketers

The few years in the marketing business have seen people get particularly enthusiastic about understanding the short term and long term effects of marketing and advertising. This has gotten a lot of new organizations on board with more quantitative and data-driven ideas for managing marketing performance, and can be seen as an antithesis for the illusorily high measurability of digital advertising. Companies like Adidas have publicly changed course as problems with one-sided, short-run measurement have begun to surface.

Many brand building consultants and advertising gurus have certainly intended it as such – a long-welcome evidence-based justification for what they’ve been telling and selling all along. Despite some methodological wrinkles in the source material, this is most definitely a good thing.

Input to complement the academic mainstream

The better part of the development has been driven by the mainstream traction on the agency and practitioner side from two main sources: work by the Ehrenberg-Bass Institute in Adelaide, particularly Byron Sharp’s 2010 book “How Brands Grow”, and reports from UK’s IPA by Peter Fields and Les Binet, most recently “Effectiveness in Context” (2018). They have managed to reach a broad managerial audience with particularly well-communicated arguments based on practical evidence, even if they haven’t been exposed to the rigors peer review.

There is curiously little direct connection between these streams of research and the “proper” academic marketing performance discourse, that is to say, publications and authors in the top-ranked journals. The IPA work doesn’t seem to have aimed at scientific validity, but the Ehrenberg-Bass work explicitly does so. However, the formal publications they have are from the academic periphery. That is not necessarily a judgement on their validity, given the cliquey nature of the marketing discourse, but nevertheless highlights the insularity of the Australian material.

The messages that sunk in

Based on conversations with marketing executives and agency directors, the main takeaways from this stream of thought for the wider audience are these:

1. Customer loyalty is better explained by brand penetration than consumer attachment to a brand. The key practical implication for many is that reach media (e.g. linear TV) are superior to more targeted channels. More than a few marketing directors have taken to heart that this automatically provides them with a superior media strategy, irrespective of brand or category.
2. There should be a 60:40 balance between long-term brand communication and short-term sales activation messages. Binet and Field’s analysis seems credible and does go both into more detail about context and industry, as well as specific caveats about the nature of the brand that should be taken into account - they rarely are.
3. Emotional appeals matter most for long-term brand building. Brand campaigns that use rational product appeals for messaging act as activation that drives short-run sales performance rather than brand power.

These have been a valuable contribution to marketing practice, if for no other reason than to ground discussion on case evidence from successful brand building and promotion – or just bringing some appreciation of quantitative evidence into the discussion long dominated by hunches. Aiming for a specific proportion of brand messages vs direct sales arguments instead of freewheeling it is, for many marketers, a dramatic improvement. A quantitative, brand-specific study of return on marketing would give the best basis for decision-making, but due to various reasons, including resource and data constraints, this is not always feasible.

Media strategy based on breakfast seminar

The problem that has coincided with the flow of ”quantitative evidence based” seminar material into the marketing practice mainstream is this: some managers consumer it at headline level and rush to implement broad media strategies in line with their fresh prejudice.

“A warning on the dangers of management by hype.”

Not long ago, a major international company I worked with wanted to shift nearly their entire budget to branding messages on liner television – despite the fact that they were operating in an industry where both distribution and message content are heavily regulated. No quantitative research (such as media mix modeling) or testing with parts of the brand portfolio had been carried out to support the proposition - the only justification was ”penetration”. I saw this as a warning on the dangers of management by hype.

So what is brand equity again?

Let's take a step back to the underlying idea behind these thoughts. Marketing has immediate effects – like sales – and others that build over time. The brand equity concept was introduced in the 80s to characterize these more persistent effects. In essence, it is the mental storage vat for goodwill and attraction.

Conscious and subconscious impressions intertwine in consumers’ minds to support or hold back marketing actions like advertising and sales. We can assume it’s there, and observe it in action whenever memories or feelings are evoked: someone recognizes the brand, talks about it, or chooses it over alternatives.

It measures the immaterial strength that a brand has. Brand equity is the amount of the extra push that a specific set of mental associations gives to business performance, through increased consumer demand, the ability to sell more and charge better prices, easier recruitment of new employees, and higher stock price, among others.

“The ways that brand equity can support and influence decisions are notoriously complex and mangled.”

If I were to choose one concept to be more broadly understood, brand equity would be it. That said, the absolute value is rather difficult to pin down, as the ways that brand equity can support and influence decisions are notoriously complex and mangled.

How you view the effect mechanics of marketing activities and consumer responses, and what phenomena you can distinguish has a direct impact on your reasoning. A concept like brand equity is useful as a managerial tool when it improves the quality of decisions. This happens when you’re able to identify it, measure it and manage it in a predictable and controllable manner.

The long and the short is not necessarily a trade-off

The more equity you build with activities that , the more potential you’ll have for good performance in the future. Conversely, the more you focus on making sales happen right away, the less future potential you’ll accrue – so the general story of the “long and the short” goes. As a basic dynamic, this distinction is important; the practical evidence of a general relationship between the two is what the IPA research sets out to prove.

However, the reality on the level of an individual brand and campaign will be much more nuanced. There is no trade-off mandated by a natural law, where short-run sales results automatically detract from building immaterial value for your brand.

“You can have effect both now and in the future, just as it’s possible to fail in both regards.”

It is not uncommon for sales attribution models to show branding activities that equal or even surpass “activation” campaigns in terms of immediate sales results. It’s a question of finding the appropriate combination of creative, audience, and opportunities to buy. You can have effect both now and in the future, just as it’s possible to fail in both regards.

Issues with the universal message ratio

Key criticisms of the 60:40 approach have been twofold.

Firstly, it’s been pointed out that the data set of campaigns submitted to IPA competitions, on which Binet and Field carry out their analysis, is heavily biased towards publicly successful marketing campaigns, as these are the ones that would have been submitted for awards consideration. Secondly, as a result of this, the core tenet of recommended message balance is communicated as a blanket rule, ostensibly applicable for any business out there.

In a response to this critique, Les Binet acknowledges the methodological problems with the data set, and describes how the most recent iteration of the work has aimed at “ruling out spurious correlations”.

It is commendable that the discussion has pushed the relationship between short and long term effects to center stage. As the title implies “Effectiveness in Context” sets out to describe how contextual factors such as category, market position, and pricing influence the location of the branding vs. activation “sweet spot”.

“Too often, it’s the “scientific” justification for a for a heart-string-tugging branding campaign.”

The problem lies not so much with the research itself, but in the way that people have embraced it. Too often, it’s the “scientific” justification for a for a heart-string-tugging branding campaign. Using research appropriately matters as with any work. The IPA material is a valuable contribution that has had a direct impact on how people approach advertising performance.

The bigger picture, of course, takes much more unpacking than aiming messaging ratio. As a general approach, it is challenging to surpass the average if averages are what you’re reaching for. Marketing performance is deeply contextual. That is, the best possible solutions for your organization will be unlike those for another brand. You need to form an analytical picture of what works for you, not what works for someone else, or for companies on average.

Going beyond the 60:40

The academic material is less accessible by far and more demanding for the reader, who might even have glossed over critical detail in the IPA handbooks. That’s why I think a look into some research from the past years could flesh out how brand equity works beyond just advertising, on the level of the entire marketing mix and marketing measurement infrastructure.

In the next part of this series, I’ll be looking at what the quantitative approaches to brand equity are and what types of data you’d need to make use of them in the real world.