Two questions today… why did Caterpillar start building sandcastles? And what works to sustainably grow your business? Answers later
If we looked at what B2B businesses are doing now, you’d think short term activation is the best way to grow their business.
Short-term, thats probably right… get the sale. But recent in-depth research by Binet & Field has shown ( see here and here) short-termism is doesn’t sustain that growth. It may actually reduce the quality and underlying demand for a business by training buyers just to focus on short-term inducements. Research links together this focus on short-term activation and the ineffectiveness of brand building.
How can we build our businesses sustainably; through a judicious MIX of brand building AND activation. Successful businesses need to know how to do both and in appropriate proportions.
Binet and Field have conclusively demonstrated that long term emotional brand building dominates the stimulation of long-term growth and involves the creation of sustained memory structures that cause buyers to want to choose the brand. This causal effect also improves pricing power and so, over time, has a strong impact on growing profitability.
Whilst short-term sales activation stimulates short-term sales uplifts and involves behavioural stimulation that push buyers to want to buy now; promotional messages, seasonal or other occasion-related prompts and minor new product news are the main messages used. These messages are focused on an immediate behavioural response, such as clicking a web link. Such actions have little long-term effect on growth and pricing power. Their impact is not sustained and upticks in profitability are modest at best, but they can certainly produce powerful short-term sales spikes.
The key message is that both image building and activation stimulation work in synergy, each enhancing the other. Brand communications create enduring memory structures that increase the base level of demand and reduce price sensitivity while sales activation triggers these memories and converts them efficiently to immediate sales. The net result is a sustainable revenue stream with high margins and high marketing investment returns.
One could surmise that activation worked harder in rational categories, while image advertising worked harder in emotional ones and so intuitively, you may expect that the balance of spend should tilt towards short-term activation as things get more rational.
And that is quite a common approach… as we see online and even in legacy media.
But in fact that drift to short-term activation is not the best strategy. Here’s an example from Caterpillar. You would imagine that heavy machinery was the ultimate rational focus. Caterpillar thought that and in the late 200s and eary 2010 consistently lost share to Komatsu and Sany.
to effectively counteract this price based threat Caterpillar developed their image based connection… “Built for It”… see the fantastic sandcastle advert here. This purely imaged based approach positively impacted Caterpillars sales in a significant way.
Regardless of your category, you need both a strong image and efficient activation. So when image building is hard, you need to spend more of your budget on image. And when activation is less responsive, you need to spend more your budget on activation.
In general, the optimum budget split is:
- Offline brands: 60% image, 40% activation
- Online brands: 74% image, 26% activation (because the online space is already attuned to activation, you don’t need to press this button so hard).
Online brand business building mimics offline brands. The best brands avoid the growing online fallacy: the belief that because buyers are choosing and buying online then advertising messages are best served to them purely online, usually as activation messages. This simply doesn’t follow as is shown by research of the actual behaviour of key online businesses;
In not-for-profit sectors where there are relatively high consideration levels already and relatively strong emotional decision-making involved this makes image effects relatively easy to achieve. The optimum balance therefore shifts to 44:56 towards activating “buying”.
In newly launched brands, activation spend should be relatively heavy 35:65 early on to stimulate actual trial of the brand and consequent buyer-led PR. But once the initial launch phase is over, the brand:activation split should be normalised back to 60;40 or 74;26.
For big brands, activation is relatively easy and so they don’t need to devote such a high proportion of their budget to this. As market share increases, the optimum balance shifts slightly away from activation and in favour of image building to grow underlying demand long term by attracting new buyers.
Finally, when the category goes into decline, there should be a bigger shift towards activation—there is less value in image building at this stage, though it still helps boost activation and so does still play a role in getting the most out of declining budgets.