One Key Trend for 2018

One Key Trend for 2018

The year ahead offers a plethora of trends to be mindful of.  Most have evolved from technology: AI & Machine Learning, Augmented Reality, Blockchains, or content format and delivery.  In some cases, what seem to be trends are simply the realization of what was inevitable, such as the next generation of consumers and employees.  And there are trends driven by social ebbs and flows such as workplace behavior and corporate social responsibility.  But one key business trend missing from most 2018 lists is Accountability. It seems to be ignored or buried under a cascade of sexier subjects.

The 2017 Edelman Trust Barometer discovered “…a staggering lack of confidence in leadership: 71% of survey respondents said government officials are not at all or somewhat credible, and 63% said the same about CEOs. The credibility of CEOs fell by 12 points this year, to 37% globally. By comparison, 60% of respondents trusted ‘a person like yourself’ — on a par with trust in a technical expert or an academic”.

These statistics are no surprise given that 2017 saw blunders like the response from United Airlines CEO Oscar Munoz’s blaming the passenger, or Equifax CEO Richard Smith’s condemnation of one of his own employees.

Accountability is critical for success.  Technology has brought about one of the most powerful, yet least informed or engaged dissenter groups, the Armchair Activists or Slacktivists.  A simple click can magnify an insignificant comment, product failure or unintentional action into a cultural movement.  On the positive side, this has led to some reactive industry regulatory changes, and immediate amendments to corporate policy or leadership.  On the negative side, a stock’s price could plummet or a reputation could be damaged irreparably.

So why does a Brand Economist care about Accountability?  Well, because it all comes back to Brand—corporate, governmental or personal.  Brand includes your mission, encapsulates the values you hold dear, and promises benefits to those who interact with you.  It is your Jiminy Cricket.  And, just as with Pinocchio, negative sales, negative social media, and negative investor sentiment are signs your nose is growing.  A Brand Economist cares about this because, without both proactive and reactive Accountability, there is a longer-term financial impact to your Brand’s ability to generate revenue.  Customers vote with their dollars.

There are two paths to Accountability. Hold yourself accountable, or be held accountable by the situation.  That is the missing trend for 2018, and beyond.

Update:  For a wonderfully sardonic read, Mark Ritson has a fantastic post on 2018 trends.

Strata Insights a Keynote Speaker at iconvienna 2018

On April 19, Edgar Baum, Chief Brand Economist & CEO, will be a keynote speaker at The European Business & Investment Forum iconvienna Brand Global Summit 2018, sharing insights on how brands create economic value.

Edgar will also be participating on the panel immediately after discussing why and how investments create economic growth with notable experts: Chien-Hao Hsu, CEO of Zeevan GmbH, Gerhard Schuller, CEO of ELK Fertighaus GmbH, and Alois Steinbichler, CEO of Kommunalkredit Austria AG.

The European Business & Investment Forum iconvienna Brand Global Summit 2018 is an exclusive Business & Networking Event presented by the European Brand Institute, promoting business contacts between Austrian and international companies and encouraging project and investment business.

Top-level national and international decision makers from politics and economy, international experts and representatives of regions will be there to share their perspective on this year’s theme: Innovation Needs Branding and Branding Needs Innovation.

A Recovering Marketer’s Application of Brand Economics

Yes, I am a recovering marketer.  For years, I was addicted to data that wasn’t always the healthiest. Brand tracking, U&A studies, focus groups, sales figures, industry reports, customer service stats; I couldn’t get enough.  And, like all responsible marketers, I consolidated them and used them as the statistical basis to support strategic recommendations for brand investment.  Despite this effort, and years empirical evidence, it was an uphill battle to convince boards or leadership teams to invest.  What was missing was their math.  The math used in Brand Economics.

The beauty of Brand Economics lies in its ability to link disparate data to financial performance in an incontrovertible way.   It applies the same types of math that have calculated lunar landings and the complex trajectory for a safe return to Earth.  This discipline allows marketers to answer meaning-of-life Brand questions in a quantifiable way that make sense to CEOs and CFOs.  Questions like:

  • How long will it take for Brand investments to impact financial results?

  • What is the financial benefit or risk of reducing, maintaining, or increasing Brand investment?

  • What is the financial upside or downside of another division’s decisions, short-term and long-term?

  • How much is Brand’s financial impact dependent on marketing investment vs. other organizational investments?

  • What is the maximum attainable market share and why?

  • Which Brand drivers will significantly change behaviors that impact financial results?

Here are a few examples of what Brand Economics has done for others.

1.  Calculate Time for Brand Investments to Payback

A company increased their Brand investment significantly and wanted to understand how to measure payback.  The Brand Economics model analyzed category lifecycle, sales cycle, customer lifecycle, CLV, cost-per-acquisition, revenue, profit and churn along with the 3 other Brand Economics pillars (see earlier article by Mark Radhakrishnan).  Using several branches of mathematics that would take pages to describe here, the model determined that payback started after 23 months.

With this information, the company was able to more accurately forecast revenue and manage investor earning expectations.  And the CMO could be set up for more realistic KPIs.

Brand investment, usually financed through Marketing, is an expense that should be treated as CAPEX when you consider the definition: “the useful life of the asset”.  Current financial reporting expects Brand/Marketing activities to pay back within the calendar year of its execution. Major IT upgrades or factory equipment purchases have financial principles that account for build time, training, lost productivity, maintenance time and cost, and longevity.   Why not Brand?  It is a life-long corporate asset.

2.  Substantiate Brand Investment Over Other Organizational Investments

A B2B company was looking to double their business organically in 5 years while maintaining profitability objectives. Brand Economics was used to calculate the financial contributions of the various divisions including Sales, Marketing, Client Service and Operations.

The analysis revealed that incremental Marketing investment in Brand had a greater impact on purchase than Sales, despite Sales spending three times more. Based on these findings, the CEO and CFO approved a significant budget increase for Brand Marketing and a reduction in Sales.  This resulted in the company achieving their Year 1 growth target.

Brand investment should not be the first priority.  It also shouldn’t be the sacrificial lamb when budgets are tight or when performance may not meet analyst projections.  Brand should be considered along with all other major strategic decisions and investments, and weighed according to its overall financial contribution.  A short-term cut today could do far more damage to your business down the road.

3.  Identify Brand Drivers that Show You the Money

A company was looking to reposition and rebrand itself in a highly commoditized category.  Qualitative research was conducted and a new positioning platform developed.  The Brand Economics model was applied in tandem.

The model revealed that current brand drivers were not influencing any meaningful behavior and therefore not converting to revenue.  The Brand Economics analysis also identified alternate brand drivers that would have the greatest impact on behavior and, ultimately, on sales and revenue.

This is the math CEOs and CFOs are looking for.

Brand Economics is a game changer for CMOs.  Marketing math cannot contend with an entrenched financial approach to decision-making, so it is time to look at new methods.  Marketing mix models and ROI are great, but they are tactical.

Marketers own the customer and steward the Brand which is worth, on average, about 20% of a company’s value (source; Ocean Tomo 2016 and MASB/Strata 2017).  That’s a value worth investing in.