The tragic horizon: Resisting marketing’s drift towards the business of value destruction
Two women looking out over Verdun during WWI
“Our society has reorientated itself to the present moment.” writes the cultural observer Douglas Rushkoff . “Everything is live, real time, and always-on. It’s not a mere speeding up… It’s more of a diminishment of anything that isn’t happening right now. So much so that we are beginning to dismiss anything that is not happening right now – and the onslaught of everything that supposedly is.”
Marketing is no exception. Our collective eyes too, have apparently refocused on the Right Now at the expense of almost everything else. It doesn’t take much to diagnose what’s going on. To the already heady, toxic brew of bad advice, institutionalized impatience, the strictures of quarterly reporting, and the crack cocaine of real-time data has been added the pressure on client businesses to deliver growth - in a low/no-growth economy.
The data from the IPA’s latest report ‘The Crisis in Creative Effectiveness’ tells a stark story. Marketing is now increasingly characterised by growing campaign short-termism, budget reductions that make effectiveness impossible, and creative juries rewarding work that does not work.
As a result we have, as the report concludes, “arrived in an era where award-winning creativity typically brings little or no effectiveness advantage”.
And so as marketing has come to reorientate itself to the present moment at the expense of long-term, we can now see the emergent future. It is one that's dominated by in-house client mediocrity factories, lowest-cost content bullshit artists, automated intent fracking, and business portfolios increasingly populated by the withered corpses of once vibrant and profitable brands. While the reputation of creativity as a business’s greatest source of unfair advantage lies rotting on the sidelines.
Mark Carney the Governor of the Bank of England and Chair of the Financial Stability Board has said that:
“Climate change is the Tragedy of the Horizon... the horizon for monetary policy extends out to two to three years. For financial stability it is typically a bit longer, but typically only to the outer boundaries of the credit cycle - about a decade. In other words, once climate change becomes a defining issue for financial stability, it may already be too late”.
The prospect of competing in a world of comparison and aggregation platforms, consumer search, consumer reviews, rapidly growing private label brands, direct to consumer business models, and in which Amazon sells everything - and doing that without a brand at one’s disposal should be surely be enough to send a chill down the back of any marketer’s spine.
But the neglecting of brands is just part of that same all-too-human unwillingness or inability to think long. And just as with climate change, once rebuilding brand equity becomes a defining issue for marketing departments, it may already be too late.
It's important to note that the power of creativity per se has not weakened at all. The report is at pains to stress that the apparent weakening of creativity is due to growing campaign short-termism and budget reductions in roughly equal measure,both of which undermine measured effectiveness. And to creative juries in turn rewarding that work.
But as the report stresses:
”For those who have resisted - the dwindling group of long-term creatively awarded campaigns - the effectiveness picture is still relatively healthy. Looking at awarded campaigns since the effectiveness decline began in 2008, we can see that long-term campaigns dramatically outpunch short-term ones across key brand and business metrics”.
The report barely caused so much as a minor ripple of conversation in Cannes, it didn't even warrant a passing mention this week in AdAge’s 'Five Takeaways from This Year Cannes Lions, and no mention of it was made by any of the industry heavy-hitters asked for their ‘take’ on Cannes by Campaign.
Yet it demands our urgent and pretty fucking undivided attention because until now we could point to the series of analyses published by the IPA (of which this is the latest) as providing probably the most robust and authoritative evidence for the link between creativity and business results. Indeed, there's probably not a planner in business that hasn't at some point cited this source in a presentation to clients.
However, with the arrival of this latest report, being able to make the link between creativity and business results is now deeply problematic. And it provides clients who don't believe in creativity or long-term brand-building with (in their eyes at least) good evidence that they're right. So if you’ve recently picked up on some vast, disturbing tremor in the universe, well that’s the sound of a thousand planners deleting those until now useful slides, muttering “well fuck that then”.
At this point a note on the source is worth making. The report is based on merging the data from the IPA Effectiveness Awards and the Gunn Report creative awards databanks in order to compare business results achieved by IPA entries which were also creatively awarded (at a high level) to those which were not.
The IPA Databank records over thirty years of data associated with the entries to the IPA Effectiveness Awards competition, allowing analysis to explore the link between inputs (e.g. strategy, media and budgets) and outputs (e.g. long and short term business effects and brand metrics). The Gunn Report dataset records creative award wins at the top 46 creative shows around the world, providing the most objective measure of creativity available.
The Gunn Report data commences in 1996, meaning that the full, fused data set commences then and consists of 479 cases, of which 92 were creatively awarded campaigns.
And five key findings are worth highlighting:
Creatively awarded campaigns are now less effective than they have ever been in the entire 24-year run of data.
And they are now no more effective than non-awarded campaigns.This collapse in effectiveness can be explained largely by the shift to short-term activation-focused creativity and the strategic and media trends this has promoted.
We have known for many years that creativity delivers very little of its full potential over short time frames [and that long-term campaigns work very differently and have very different effects from short-term campaigns], yet the trend to short-term, disposable and, ultimately, inefficient creativity continues.
The rise of short-term thinking is evidenced by the proportion of IPA effectiveness submissions featuring campaigns that ran and were evaluated over periods of less than six months.
Increasingly, even longer-running campaigns are being focused on strategies and media choices geared to short-term sales effects rather than long-term growth.
The decline in effectiveness is therefore not being driven simply by a shift to ‘disposable’ campaign ideas that are in market for short periods of time and are therefore focused on driving immediate effects.It's being driven by the changing nature of the type of advertising we are generally exposed to. As the report puts it "instead of emotionally engaging human stories that seek to charm and captivate, we are seeing more didactic, literal presentations that seek to prompt us into action".
There is a considerable budget under-allocation to brand building
Successive analyses by the IPA have shown that sustained growth demands an optimal budget allocation to brand-building of 75%.
The percentage of budget allocation to long-term brand-building amongst creatively-awarded campaigns has fallen to just under 66% over the last four years, so around 10 percentage points below optimal.
This under-allocation is a central reason why effectiveness levels have been falling: we are allowing brands to weaken and, with that, we are losing the valuable choice-priming benefits of brand building. For effectiveness, this is very destructive behaviour.
Probably the chief culprit for the declining effectiveness of creatively-awarded campaigns is the growing trend by creative awards judges to favour short-term creativity.
Creative awards judges are increasingly rewarding short-term ideas, many of which are relatively low-budget campaigns.
Short-term creatively-awarded campaigns are around 50% less effective than long-term awarded campaigns.
Because creativity doesn’t sell in the short-term the preference of creative judges for favouring short-termism inevitably results in declining average effectiveness levels amongst awarded campaigns, with short-term creatively-awarded case studies turning out to be almost 25% less effective than non-awarded campaigns.
Indeed creatively awarded campaigns are now less effective than they have ever been in the entire 24-year run of data. “If we don’t change” warn Binet and Field, “then soon we will no longer be able to show any strong link between creativity and effectiveness. And that will mean that investment in creativity will rightly be seen as ‘non-working’ budget; it will simply be cut."
The report really should be read in full. But when we insist that marketing marketing’s priority is not the longer-term health of a brand and business but the short-term, we are in the business not of value creation but value destruction.
It’s value-destruction because:
With the exception of direct response advertising, most advertising simply does not pay back in the short term
The creation of what Binet and Field call “associations”, Sharp calls “memory structures” and Williamson calls “empires of the mind” takes time. And it’s these memories that sustain salience and preference.
Most people aren’t “in the market” for anything most of the time (Sharp).
These memories work by supporting prices not just by driving volumes or share. And as Binet and Field have demonstrated, pricing effects are slower to crystallise than volume effects.
Half of advertising’s effects will crystallise more than a year later (ebquity).
As Andy Farr has noted, “investors will pay a premium for companies with strong brands. They are not paying for past earnings: what they are paying for is the promise of future profits leading to dividend and share-price growth.”
We must have sympathy for clients under pressure to deliver growth in in a slow- or no-growth environment. When the C-suite and shareholders are breathing down your neck the pressure to show results of any kind is formidable.
But that notwithstanding, the implication is clear. Client organisations and their agencies need to start treating advertising expenditure as an investment. Not a cost to minimized.
And to that end (and without wanting to underestimate the formidable challenges and obstacles to making any of this happen) there is, happily, a wealth of good evidence and advice:
Build two-speed brand plans that “cross the chasm between short- and long-term horizons, between mass-marketing and target segments, between [zero-based budgeting] and brand building” (Ritson).
Work to ensure that activity is evaluated on the right KPIs, and that they are measured across the right time frames.
Agree the evaluation and measurement framework before, not after, the work runs.
Resisting brand-building activity being evaluated over periods of less than six months - doing so understates its long-term potential and discourages full commercial exploitation of the idea (Field).
When it comes to brand-building, develop ideas that are expressly designed to work over the long term, i.e. longer than six months (Field).
Develop creative briefs that are clear about what this activity will do for the brand (Field).
Treat a highly creative campaign (especially cross-channel) as a good commercial case for increased media investment. This will maximise its long-term return on investment, which is likely to be considerable (Field).
Keep making the (evidenced) case that positive share of voice (ESOV) remains vital to extract commercial benefit from creativity (Binet & Field)
Fight negative ESOV (i.e. where share of voice is smaller than share of market) - it eliminates the benefits of creativity (Field)
Profit maximisation is the corporation’s goal. So resist the slavish pursuit of ROI. It’s a measure of efficiency, not effectiveness. As such it often declines as advertising gets more effective. And conversely, it’s usually highest when sales and budget are close to zero. Chasing ROI maximisation can be a fast route to destroying a brand (Binet).
Start talking more about profit not just sales, share or revenue. Again,. profit maximisation is the corporation’s goal. (Binet).
Recognise that what investors are paying for is the promise of future profits leading to dividend and share-price growth. And that the promise of future profit is precisely why brands are so valuable (Farr).
Move towards the mindset of an investor managing an asset for the long term. That means focussing on demonstrating how investment today will create future profit (Farr).
Consider the other ways in which marketing investment creates advantage, e.g. reducing costs, creating options, changing market expectations, reducing the cost of capital (Binet).
Reform creative awards shows or avoid them. They’re now actively undermining the credibility of creativity as the single most important tool we can harness to boost effectiveness. Worse, they begin to suggest (or fan the existing suspicion) that the interests and instincts of creative agencies are diametrically opposed to the interests of the brands and business that creativity is ostensibly meant to serve. The solution is simple. As the IPA report recommends, creative award shows should have separate classes of awards for short and long-term creativity, to incentivise a rebalancing of creative endeavour in favour of long-term results. If that doesn’t happen the creative industry should refuse to conspire in excavating what professional integrity it still has and cease to participate and submit work.
Two parting thoughts.
It’s a now well-documented (and much debated) phenomenon that businesses are hoarding trillions. Collectively, American businesses alone currently have $1.9 trillion in cash, just sitting around.
Whether that’s because the markets are rewarding corporations for holding onto their cash, or corporations are amassing cash mountains to reduce their tax bill, or are building them to fend off competing offers in acquisition bids, or to mask poor decision-making, or because there’s just not anything worth investing in, is not the point here. There’s a mountain of cash out there and we should be building much more compelling cases for marketing as a worthwhile investment.
And that means taking a far more robust and persuasive case for value of long-term brand-building to the C-Suite.
Investors value for-profit companies on their ability to generate free cash flow in the future.
Strong brands help generate future cashflows by sustaining customer preference (i.e. they keep coming back), reducing price elasticity (i.e. people are willing to pay more), creating retailer preference (i.e securing distribution), creating new option spaces (i.e opening up new sources of future value), etc.
And yet while 73% of business leaders cite business resilience as a business priority - only 55% of business leaders believe that a strong brand impacts business resilience. And while 71% of business leaders cite future cashflow as a business priority - only 49% of business leaders believe that a strong brand impacts future cashflow.
There is work to be done.
Not least of all because 33% of marketers are not confident in their brand building know-how.
So…
Addiction says Dr. Chris Johnstone, “is a pathological attachment to something attractive in the short term, but destructive over time. Recovery is about looking where we’re going and choosing a path that can last.” Of course more often than not it takes some kind of a crisis to prompt the addict to make that choice.
One hopes that we don’t wait until the total hollowing out of brand equity and the relegation of creativity to an indulgent, fringe activity before we choose a path that can last.
***
Sources
Tim Ambler, ‘ROI is dead: now bury it’
Les Binet, ‘Payback calculations - how to make sure you get your sums right’
Les Binet & Peter Field, 'Marketing in the Era of Accountability’
Les Binet & Peter Field, ‘The Long and the Short of it: Balancing Short and Long-Term Marketing Strategies’
Mark Carney: ‘Breaking the tragedy of the horizon – climate change and financial stability’
ebiquity and Gain Theory, ‘Profit Ability: The business Case for Advertising’
Peter Field, ‘The Crisis in Creative Effectiveness’
Andy Farr, ‘Managing advertising as an investment’
IPA, ‘Measuring Marketing Payback: A Best Practice Guide’
IPA, ‘The Board-Brand Rift’
Mark Ritson, ‘We need a new ‘third way’ to set marketing budgets’, Marketing Week, 14 August 2019