Problem: Using Short-Term Measures to Determine Advertising Performance.
Marketing ROI calculations often measure activities such as sales, inquires, and clicks to gauge the effectiveness of a program. The strength is that these measure what someone actually does, as opposed to what he or she says they will do. However, activities, even ones as concrete as sales, are short-term behaviors; what someone does today is not always predictive of what he or she will do tomorrow. As a result, analyses that are based on activities tend to support programs that produce short-term effects at the expense of programs that also have material long-term benefits. For example, using sales data alone, couponing generally outperforms advertising, but this conclusion would not make for a sound marketing practice.
Solution: Make Advertising Decisions Based on Short- and Long-Term Effect.
So, what separates advertising from couponing? While couponing tends to produce dramatic short-term behaviors, it can have a significant negative consequence in the long-term when people become conditioned to expect discounts. Advertising, like couponing, can produce short-term sales, but it also can produce positive long-term business effects. In fact, according to IRI and Nielsen, when advertising works in the short-term, it can produce even larger long-term effects. Their study found that the long-term effects from television advertising, for example might be double or even triple the short-term returns. Technology makes short-term activity measures more accessible. However, that doesn’t lessen the value in long-term attitudinal and affect measures. Decisions about what copy to run, what media to use, and how resources should be allocated should not be based on short-term impact only. They should also account for the ability to reinforce loyalty, build advocacy, and deepen engagement. Research and ROI analyses that consistently consider activities over attitudes and affect will lessen long-run brand health and shareholder value.
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