Turn a Growth Bump into a Boon
Bottom
Line: Traditional
marketing tends toward rigidity and long-range planning, but firms must break
out of this framework to exploit unexpected, one-off events.
After
Kate Middleton was photographed in a pair of nude high-heeled shoes, the Marks
& Spencer look-alikes flew
off the shelves, making them one of the company’s
best-selling products of all time. And when a video
clip of Barack Obama singing Al Green’s “Let’s Stay
Together” went viral, sales of the song skyrocketed.
In the social media era, when news spreads
quickly and opinions change with the swipe of the finger, all it takes is the
right product review or celebrity association to generate the kind of coveted
buzz that can boost sales. (Similarly, a high-profile pan can gain traction
quickly and damage a brand.) Yet this phenomenon presents a conflict for
marketing departments at established companies. Marketers are under constant
pressure to increase revenue. But there’s only so much sales growth that
big-name firms can squeeze out of a brand — at a certain point, spending more
on advertising becomes a case of diminishing returns, or at best defending one’s
turf.
This
makes the rare and unexpected sales bumps some of the best opportunities for
marketers to lock in benefits for their brand, according to a new study. But there’s a problem. What companies need to do to
take full advantage of these positive vibes — namely, be vigilant, flexible,
and opportunistic — stands in direct contrast with the long-standing conventional marketing wisdom that effectively promotes rigidity and prizes a
strict adherence to budgets based on long-term industry projections.
Marketers
already know that for brands in mature
markets, sales growth is not a gradual or consistent
phenomenon. It tends to evolve in short spurts followed by longer phases of
stagnation. Of course, some spurts are predictable. The toy industry knows it’s
going to see a surge in holiday sales, so a great deal of its marketing is
targeted for the end of the year, in harmony with the traditional framework.
But the other type of spurt — the one that
catches firms off guard — is triggered by an occurrence outside the
company’s control, and makes consumers rethink their opinion of a product. It’s
the rare opportunity marketers should learn to train their sights on, and be
prepared to take advantage of, according to the study’s authors.
The opportunistic tack requires managers to
be vigilant and flexible enough to quickly turn temporary sales boosts into
sustained gains — or to prevent slips from snowballing into prolonged slumps —
before the window of opportunity slams shut. As noted above, this is especially
important in the social media era.
Being
vigilant means ditching the rigidity that can result from marketing planning,
the study’s authors suggest. Managerial emphasis should shift from internal
cost monitoring to external scanning for the trends, tastemakers, and sudden
incidents that can influence the business environment. In turn, brands must
insert enough wiggle room into their marketing budgets to be able to strike
while the iron is hot, via short-term campaigns aimed at turning fleeting
moments into lasting impressions. “Thus, brand growth can be fueled at possibly
lower expense: instead of gradually increasing marketing budgets, the brand
augments (temporary) windows of growth opportunity with marketing investments
that alter the growth path of the brand,” the authors write.
The
authors analyzed the weekly sales, marketing expenditures, and positive product
reviews for the six leading brands in the U.S. digital-camera market from 2010
through 2012. In this otherwise mature and stationary sector, the authors
confirmed that positive product reviews of cameras created brief chances for
growth bursts that added significantly to a firm’s baseline sales. (For this
study, the authors elected to look on the bright side and limit their analysis
to positive appraisals, but we know that the effects of positive and negative word of
mouth are similarly intense in many advertising contexts. So it stands to
reason that keeping abreast of bad news requires the same vigilance and
flexible budgeting as does spreading good news.)
Interestingly, these opportunistic periods
cropped up much more often for smaller brands than for the industry dominators,
leading the authors to suggest that vigilance is more important for smaller
brands in gaining market share. The analysis also revealed that the tone of
reviews — whether they were lukewarm or glowing — was a far more important
predictor of unexpected short-term sales spikes than the pure number of reviews
a camera received in a given time frame.
Some brands took advantage of positive
reviews by slightly increasing their advertising spending to add fuel to the
fire, the authors found. But the majority did not. The authors posit that firms
ignore most fleeting growth opportunities because they fail to recognize the
impact of external events. Most companies in the study simply based marketing
spending allocations on past sales and advertising numbers, seasonality, and
the introduction of new products. That standard metric indicates their budgets
were all but set in stone, their media spots long since purchased, and their
campaigns planned well in advance.
If they instead implement the tactic of
exploiting spurts, marketers can take a brand to the next level — even if it’s
a relatively small step up in an already crowded field — without spending
ever-larger amounts on marketing, the authors suggest. But these transitory
moments can’t be formally anticipated or endlessly focus-grouped. Only by
keeping a close watch on external trends can managers identify when the moment
is ripe to escalate spending and keep the momentum going.
That vigilance wouldn’t have been so easy in
the old days, but the continuous influx of new data streams and analysis
methods gives managers the chance to act decisively when a window cracks open.
Not doing so, the authors suggest, would be a true missed opportunity.
Source: “Performance
Growth and Opportunistic Marketing Spending,” by
Dominique M. Hanssens (University of California–Los Angeles), Fang Wang
(Wilfrid Laurier University), and Xiao-Ping Zhang (Ryerson University), International
Journal of Research in Marketing, Dec. 2016, vol. 33, no. 4
Matt Palmquist
http://www.strategy-business.com/blog/Turn-a-Growth-Bump-into-a-Boon?gko=50505&utm_source=itw&utm_medium=20170228&utm_campaign=resp
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