NIELSEN | "Marketers have always been pressured to deliver measurable returns on their efforts, but the demand for growth has sharpened as the world looks toward a post-pandemic future. And to deliver, marketers should focus on balanced strategies that re-elevate upper-funnel, brand-building efforts that work in tandem with conversion-focused efforts.
There is no short-selling the importance of sales-driven marketing, but long-term business vitality requires more than short-term activations. Holistic marketing requires balance, and that’s something that an array of multinational companies realised after relying too heavily on sales-driven activations—even before the pandemic hit. Brands like Gap Inc., Adidas and Tripadvisor all made public statements in late 2019 about their need to do more to create and maintain long-term brand equity.
Compared with the alluring, immediate results of conversion-oriented marketing, brand building is slower to generate tangible returns. The returns, however, are meaningful—and measurable. In terms of actual sales, Nielsen’s experience base shows that on average, a 1-point gain in brand metrics such as awareness and consideration drives a 1% increase in sales. While it might be easy to dismiss a single percent as immaterial, a 1% return on sales of $1 billion equates to $10 million, which is far from immaterial.
Upper-funnel marketing efforts also generate an array of ancillary benefits that can drive the efficiency of sales activations. For example, Nielsen recently measured how effective a financial services company’s marketing efforts were at driving sales across approximately 20 markets. At the onset, brand awareness and consideration for the brand varied across the different markets. At the end of the study, Nielsen found that the correlation between the upper funnel brand metrics and marketing efficiency was exceptionally strong (0.73). Accordingly, brands may find it worthwhile to build equity not only for the direct benefits to sales, but also for the indirect benefit coming from improving the efficiency of activation efforts.
In addition to the established benefits of brand building, long-term marketing efforts are growing increasingly important as traditional sources of brand equity are eroding. It’s easy to forget, for example, that visibility on a store shelf or on a physical sign provides a notable amount of brand equity. Brand owners may take these for granted, but that becomes a risky proposition when we consider that fewer people are shopping in physical stores and traveling past them. So when it comes down to it, staying top-of-mind with consumers could be the difference maker when a sale is at stake. In fact, Nielsen data shows that marketing accounts for 10%-35% of a brand’s equity.
The impact of equity loss is reflected in the differences in brand retention and the trial rates across traditional and digital channels. For example, in the U.S. consumer packaged goods (CPG) market, consumers say that 4.3% of their brick-and-mortar purchases involve a brand they had not purchased before, according to Nielsen Commspoint. For online purchases, the metric jumps to 12.1%. The increased rate of new brand purchase is entirely at the expense of brands that consumers use regularly.
This increased pressure on non-marketing sources of equity elevates the importance of marketing in preserving a brand’s health.
There is never a good time to stop advertising, but the need to drive awareness has never been more important for brands. Conversion-oriented marketing is appealing because it drives sales in this quarter, and the immediate gratification carries weight. But long-term business success requires more than repeat business among existing customers. And that’s why marketers should focus their efforts to ensure they insert a balanced share of voice in both their upper- and lower-funnel messaging."
For additional insights, download our recent Nielsen Brand Resonance white paper.