Performance advertising is not the same as promotion; it’s simply holding media accountable for KPIs on a shorter timescale.
by Corinne Casagrande, November 18, 2020
Anyone with influence over an ad budget has been warned: Don’t cut your budget in a downturn, think long-term. Plenty of studies show that branding spend during a recession yields market share advantages for years to come.
But it’s now 2020, when there’s room for a little short-termism.
A bad model for “good brand” behavior
We’re using the word “unprecedented” a lot to describe our current situation, and then pointing to past recessions and recovery as “precedent.”
The 2008 recession didn’t fundamentally change the way consumers buy things. For both a decade before and after the recession, people mostly bought things in a predictable season and store.
In 2009, the percentage of retail sales taking place online moved to 4% (from 3.6%). In a few months in 2020, ecommerce accelerated two years ahead of forecast, to about 15% of total retail sales, according to eMarketer.
Seasonality is out the window. Outside of retail, industries like travel and entertainment see entirely new consumption patterns from both artificially suppressed demand and newly learned consumer needs and behaviors.
Before and after the ’90-’91 recession, over 80% of the population paid for linear TV. That number didn’t change much in 2009, either. Yet this year, in three months, we’ve taught consumers different ways to watch video, with traditional pay TV viewers dropping 5% to just 62% and OTT subscriptions up 13%, according to eMarketer.
Investing in the long term is tough with so much uncertainty. Amid changing media diets and tumultuous market conditions, badgering brands to build long-term memory structures is a big ask when they might not exist next year.
In defense of cannibals
Performance advertising is accused of cannibalizing sales, or simply bringing sales forward in time. As marketers, we expect to see a sales hangover from the quick hit of promotional pricing. But performance advertising is not the same as promotion; it’s simply holding media accountable for KPIs on a shorter timescale. And by being really targeted and precise, sometimes it gobbles up latent demand. But are more sales, quicker, such a bad thing?
Here are some other ways your brand can benefit from bringing sales forward:
1. Improving your look-a-like models. With more conversions, you have a bigger pool of what the people who converted look like. This helps you make decisions on how to get more of these people.
2. Increasing customer lifetime value. When you get a customer in your flow faster, they can buy more, faster. Even when they don’t buy, identifying who the low-value customers are helps improve media decisions around inventory and targeting.
More sales, faster leads to more sales
Thinking short-term can mean you are prioritizing volume over value. But in the CPG arena, we know growth comes from trial. For services or higher ticket items, growth can also come from trial — someone else’s trial.
A widely cited study from Northwestern University and Engagement Labs found that 19% of next week’s sales for a brand are driven from word of mouth.
More sales = more interaction with the product or service = increased opportunity for WOM sales. Performance media kickstarts this equation.
It’s a hard and often thankless job to build the long-term, consistent memory structures we call brands. It takes a little science, a lot of faith and a ton of craft. But most of all, it takes money. It’s 2020. If you have lots of extra marketing budget, I’d like to hear about it. Otherwise, don’t feel bad about digging into performance.