Moment 125: The Marketing Professor: The Biggest Business Mistake You’re Probably Making Without Realising It
This episode explores the common business pitfall of over-quantifying immediate results in marketing, often leading to underinvestment in long-term brand building. It advocates for a balanced "both-ism" approach, combining brand fame with performance marketing for optimal growth.
Deep Dive Analysis
6 Topic Outline
The Curse of Modern Business: Over-quantification
Balancing Brand and Performance Marketing
Prioritizing Bottom-of-Funnel Optimization
The Limitations of Big Data
Optimal Brand vs. Performance Marketing Ratio
Benefits of Strong Brand and Fame
4 Key Concepts
The Curse of Modern Business
Businesses tend to over-obsess about things that are immediately quantifiable, leading to under-investment in valuable but hard-to-measure aspects like customer engagement and loyalty. This often results in disproportionate spending on performance marketing over wider brand fame, simply because its effects are easier to prove.
Both-ism
A marketing philosophy that emphasizes the vital importance of both brand marketing and digital/performance marketing, rather than treating them as a false dichotomy where one must be chosen over the other. Both approaches are crucial and have a mutually beneficial relationship.
Bottom-of-Funnel Optimization Priority
The principle that the conversion and repeat purchase stages of the customer journey should be optimized first. There is no point in spending on advertising to attract new customers if the existing customer experience or conversion process is flawed, as it would only introduce more people to a disappointing experience.
Price Elasticity (in branding)
The extent to which a strong brand can command a premium price due to its reputation and perceived value. A powerful brand can make customers less price-sensitive, allowing for higher pricing, though this effect is difficult to measure precisely due to the lack of a counterfactual.
5 Questions Answered
The curse is that businesses tend to over-obsess about things that are immediately quantifiable, leading them to under-invest in valuable aspects like customer loyalty and engagement that are harder to measure.
While both are important, experts like Liz Burnett and Peter Field suggest a ratio around 60-40 in favor of brand mass media expenditure, as top-of-funnel brand building makes bottom-of-funnel performance marketing cheaper.
The bottom of the funnel, specifically repeat purchase and then conversion, should be optimized first. There's no point in spending on advertising if the customer experience or conversion process is flawed.
All big data is derived from past events, which limits its ability to accurately predict future trends, especially after major disruptive events like a pandemic.
A strong brand can lead to customer forgiveness for product flaws, reduced price sensitivity, and the ability to command a premium price, making it easier to operate in the market.
9 Actionable Insights
1. Prioritize Repeat Purchases First
Optimize repeat purchases before other marketing efforts, as retaining existing customers is the most fundamental step after acquisition and a key indicator of long-term success.
2. Optimize Conversion Before Brand
Ensure your product’s conversion process is flawless before investing heavily in advertising, as a bottleneck at the bottom of the funnel will only introduce more people to a disappointing experience, wasting money.
3. Balance Brand and Performance
Avoid a false dichotomy between brand building and performance marketing; both are crucial, with a suggested 60/40 budget split favoring mass media brand expenditure for long-term growth.
4. Invest in Broad Brand Building
Allocate resources to reach the 97% of potential customers not currently in the market, as this top-of-funnel investment makes bottom-of-funnel performance marketing efforts cheaper and more effective.
5. Build a Strong Brand for Advantage
Cultivate a powerful brand to gain benefits like customer forgiveness for mistakes, reduced price sensitivity, and the ability to command a premium, making business operations smoother and more resilient.
6. Measure Product Stickiness for Growth
Focus on whether customers return to old alternatives after using your product, as this indicates true conversion and predicts spectacular long-term growth for your offering.
7. Avoid Over-Quantification Bias
Resist the urge to solely focus on immediately quantifiable metrics; instead, invest in valuable but harder-to-measure aspects like engagement and loyalty, which drive long-term value.
8. Question Perfect Marketing Measurement
Recognize that striving for perfectly quantifiable marketing results is often a “false god” and can lead to neglecting valuable, harder-to-measure impacts that contribute significantly to brand success.
9. Limit Reliance on Past Data
Understand that big data, being historical, has limitations in predicting the future, especially after major disruptive events like a pandemic, requiring a more nuanced and forward-looking approach.
5 Key Quotes
people generally over obsess about things which are immediately quantifiable and under invest in things which are valuable, but hard to actually put a figure on.
Rory Sutherland
All big data comes from the same place, the past.
Rory Sutherland
you're not advertising to a standing army, you're advertising to a moving parade, people are coming in and out of market all the time.
David Ogilvy (quoted by Rory Sutherland)
Having a great brand means you get to play the game of capitalism in easy mode.
Matt Johnson (quoted by Rory Sutherland)
this quest for perfect measurement, to reduce marketing to a kind of Newtonian physics, is a bit of a false god.
Rory Sutherland
1 Protocols
Marketing Optimization Order
Rory Sutherland- Optimize repeat purchase.
- Optimize conversion.
- Work your way up the funnel (e.g., brand building).