Is your brand too reliant on short-term sales?

by Nigel Hollis

The other day Satya Menon, Senior VP of Client Solutions and Consulting, and I were reviewing the topline results from a set of market mix models. While qualitative in nature, the assessment suggests that brands may be increasingly reliant on driving short-term sales to maintain overall volume trends. If this finding proves more widely applicable then it has some scary implications.

Our review was limited to 27 models, mostly for packaged goods brands, and can in no way be considered representative. However, there was one noteworthy finding, base sales – the long term component of sales not explained by short-term causal variables – were declining as a percentage of overall sales in 15 of the cases, often at odds with the overall trend in base sales.

In only one case did overall base sales increase in absolute and as a proportion of total sales.

What might this finding be telling us? Why is the long-term sales component more likely to shrink as a proportion of the total rather than grow or remain stable? One hypothesis would be that marketing is increasingly focused on driving short-term sales through media weight, activation and price promotion and not focused on building longer-term predisposition.

If so, this means brands are increasingly buying sales by direct investment. To continue to grow overall sales they will have to invest more and more money in marketing and promotion over time. If true, that conclusion would sit very uncomfortably in a world where marketers are constantly being told to do more with less (something which empirical evidence suggests is unlikely anyway).

Could this be a fluke finding? Yes. But that said, there is evidence from other sources to suggest that the power of brands and advertising is in decline. The 2011 IPA Gunn Report which found that while efficiency had improved for creatively-awarded campaigns, for the more representative non-awarded campaigns it had declined. There is evidence to suggest that brand equity is weakening over time. Analysis of the Kantar Millward Brown tracking database finds that the average total unaided awareness declined by over 10 percent for a consistent set of brands between 2010 and 2015.

So what do you think of these findings? Random chance or is there something bigger going on? Do you have data you can add? If so please get in touch but meanwhile please share your thoughts.