Why Marketers Should Stop Analyzing The Past
I used to produce the Interbrand Top 100 Brands Report. It was a global review of the value of brands using a proprietary methodology. We would cull nearly 3000 brands down to the top 100 by answering these questions: How strong was the brand? What changes are affecting them? What does the financial community think about their prospect? The rankings would come out and there would be quite a bit of pride and frustration when CMO’s found out their position. After nearly a decade of producing the report, I realized that while understanding the past was insightful it was not very useful. Here is why.
A Strong Brand Doesn’t Equal Strong Sales
Most brands today measure a variety of dimensions on their brands. Metrics like awareness, consideration, perceptions, net promoter and many others are common measures of the brand. Often times these measurements are repeated throughout the year. The trend line of responses is mapped and the ups and downs are considered brand health. Brand health then triggers feedback into the organization that causes different groups to try and improve. Call centers may change their scripts. Product features and service offerings may change. Ads and copy are shifted. The effectiveness of these decisions is reflected in the next brand health scores.
This loop is a closed feedback system that does not necessarily tie brand changes to desired outcomes. How many times do brand health change and sales results move in the opposite direction? Closed loops do not connect how all things interact and as a result reduces the credibility of marketing and marketers by not demonstrating a correlation to business success or impact.
Competitive Analysis Doesn’t Tell You What To Plan For
Most brand trackers or health studies also track the performance of key competitors. The competitor performance is also mapped and the trends and lines multiply accordingly. As BI tools have emerged, other metrics of past performance have surfaced such as word-of-mouth, sentiment, impressions, GRPs, and other activity metrics. They all have one thing in common – they look to the past as a way of finding things that are affecting performance. The dashboard has more insights than ever but its usefulness may be lower than ever. Who wins by looking backward? Almost no one who strives for advantage can use past performance to find opportunities in the future.
Using past performance fails because it isolates each brand as individual entities. It deepens the insights on any particular actor in a market but it fails to consider how the actors interact. History does not anticipate what competitors are likely to do. Compounding this gap between what is and what may be is that there is little training or support for alternative methods. Marketing is not forecasting what is likely to occur. In a recent study we fielded, nearly 90% of respondents indicated that forecasting was critical to their success. Yet only 13% said they had mastered the problem.
Forecasting Is the Companion Needed For Analytics
Understanding history is important so it doesn’t repeat itself, but how do you account for new events that haven’t happened yet? How do you demonstrate that spending budget in a new way will create a new result?
While marketers are spending the majority of their time and budgets analyzing the past and optimizing previous activity, finance is forecasting the future business performance in order to decide how much budget to allocate to marketing. Marketing and finance are speaking two different languages. Marketers are talking about what they did, while finance wants to know what you are going to deliver. If marketers want to increase their budgets, they need to start speaking the same language as finance.
What if marketers were able to go to finance and show them how investing in specific marketing activities and specific messages would increase their forecast? This is exactly the type of conversation we are helping our customers have by evaluating the past and forecasting various scenarios in order to make the best decision for the future.
Read our case studies to see how our customers are using forecasting to make smarter decisions.