How do you balance Brand strength vs profit margin?
Brand strength matters, but investment against it needs to be profitable! This requires analytical rigor to evaluate the spends ROI.
McKinsey's "Brand strength or margin" report notes:
"In uncertain times, strong brands offer consumers security and protect companies from creeping loss of market share."
Often Brand investment is a longer term pay off and results are not immediately seen, so can seem to compromise profitability. As a result, Marketing may be considered a "cost center" vs driving profits. This is important to manage as ongoing brand building is critical to the health of the business in the longer term. Smart organizations are leaning in to Marketing to drive profits too.
McKinsey recommends a mix of Analytical approaches to optimize strategic and tactical budget allocation for higher ROI:
◊ “Marketing Mix Models” (MMM) - These need more intensified and refined use while managing for their limitations [e.g.., MMMs often fail to adequately reflect short-term changes (and are mostly used just 1X a year); lack accuracy or granularity of impact measurement and can over/under-estimate effectiveness of certain marketing tools]
◊ “A/B tests” can supplement and validate MMMs if conducted regularly throughout the purchase process. They better capture short-term changes and can derive causal relationships between expenditure and advertising impact.
◊ “Multitouch attribution models” can determine contribution of individual touchpoints to purchase decisions. These should be partnered with "survey-based analyses" of the brand’s performance in the purchase process, or funnel to help get to "why?"
◊ “Driver models” using key metrics such as customer-acquisition cost per channel can help manage investment allocations. They can also show that even the best performance marketing cannot compensate for the brand’s weaknesses in important purchasing factors such as quality.
What are your thoughts / other recommended approaches?