Brands Are Assets; CMOs and CFOs Must Learn How to Manage Them

Marketers constantly struggle to prove the ROI of marketing investments. CFOs understandably want positive, immediate, and certain returns. As a result, many companies may be underinvesting in marketing activities that have delayed or uncertain impact.?During economic downturns, this bias may become overwhelming, and leads to critical (but avoidable) errors of judgment about how and where to invest.?In our experience, what is needed is a set of metrics that help improve the immediacy and confidence with which long-term ROI can be measured.?

As discussed in our first article in this series and also by Prince Ghuman, professor at Hult Business School, in a recent Forbes CMO Network article, an important component of our proposed solution results from an understanding of how brand impact is stored inside of the consumers’ brain.?By incorporating cognitive metrics that are rooted in the principles of behavioral economics / neuroscience, long-term ROI can be indicated in a matter of days after marketing investments, and financial impact can be estimated in a way that captures a brand’s future value.?Furthermore, these cognitive metrics help give a rapid tool that marketers can use to optimize the impact of their brand marketing investment.

Good marketing drives incremental sales, and good brand marketing drives incremental future sales for extended periods of time.?

The magnitude and timing vary by industry, but BCG’s recent analyses indicate that companies that increased their brand spend saw 1.6x higher average shareholder returns, and companies considered to be top brand spenders saw 2x growth vs. average brand marketing spenders. Additionally, an increase in brand spend (as a % of sales) is a predictor of future growth. This effect is especially pronounced during economic downturns, when a shrinking share can lead to continued declines.?

Marketing efforts aim to ensure that a brand is top of mind and mentally available for existing and future consumers. So what’s the problem? One issue is that not all brand marketing is equal, so how can we tell if a campaign is a good one? Another is that incremental sales may not be immediately noticeable—when should we expect to see a lift, and by how much? How do we know how much is enough? Once we get answers to those basic questions, we get into more interesting ones: How should we change the way we invest in (and value) our brand across different moments and audiences, especially in a digital world? And what are ways we can maintain our brand as competitors continue to disrupt consumer behaviors?

We need rapid measurements that can tell us what value our brand is driving within our consumers’ brains during moments of choice and how that will translate to future sales. And we need those measurements to be acceptable to CFOs and shareholders. Robust measurement can be grounded in assessing which short-term metrics (e.g., awareness, consideration, brand contribution?margin, brand value, cognitive and mental availability and recall?indicators) are?correlated with long term results?(e.g., sales,?market share).

Historical measures like brand awareness, brand affinity, NPS, or even specific attribute associations (e.g., “trustworthy,” “innovative”) have been included in econometric models to quantify the value of a brand. However, these metrics share a common flaw: They don’t consider that a brand may have a different associated value to a consumer based on what problem he or she is trying to solve. One household cleaner may be selected to make a house smell fresh, while another may be chosen when heavy disinfection is required. One sports apparel brand may be an obvious choice for a high-intensity workout, while another is great for lounging around the house.?

Furthermore, historical brand measures tend to activate a conscious, considered answer and fail to capture the more intuitive impulse that a consumer feels when they are making a purchase decision. In the parlance used in our previous article, none is specifically designed to measure a brand’s System 1 strength (“mental availability”) in the context of a specific demand space (or “specific job to do”).

A New Metric to Measure Brand Impact

First Fast Response (FFR) is BCG’s new metric designed to address these concerns, and it shows promise as a contributing metric for brand valuation and brand marketing association-building. FFR gauges how quickly and easily a brand comes to mind as a solution for a specific type of occasion/demand space.?What we call an “FFR brand” here are brands that a) were first to come to mind for the given demand space and b) were easy for the consumer to think of.

For example, when looking at a specific demand space within the sports apparel category, we can see that FFR has a higher correlation to consideration and purchase than other historical brand measurements.

Besides contributing to purchase, FFR also drives first consideration and future first consideration. The impact on consideration exists even if a consumer has not yet purchased a brand, implying that the relationship is not just correlation but includes a causal component.?

Digging further into the findings about causation, we observe that:

1) FFR is driven upward by marketing, especially marketing that creates an association between the brand and demand-space-specific emotional/functional needs ??

2) FFR and consideration both contribute to explaining marketing’s impact on purchase.

3) FFR varies at a demand space level and can therefore be optimized differently by precisely targeted brand messages.

It goes without saying that not all brand campaigns are created equal. As marketers prepare for their 2023 brand campaigns, they should think about the elements that can boost FFR and make brand marketing even more effective. Data shows that frequency, memorability, consistency, and congruence with a specific demand space help drive and reinforce FFR. Let’s break these up:

1) Frequency—from existing research (S.Schmidt 2015, Advertising Repetition: A Meta-Analysis on Effective Frequency in Advertising; Simulmedia, TV Advertising Reach & Frequency Imbalance), we can identify an individual’s sweet spot is between 10 and 15 impressions a month.

2) Memorability—messaging tactics that make a brand easy to remember and worth remembering (e.g., jingle and aromas can lead to a sales increase of ~30%; HBR 2015, The Science of Sensory Marketing).

3) Consistency—based on consistent implementation of common brand identity, personality, and meaning (e.g., 10–20% increase in revenue with consistent brand and branding; Lucidpress, Brand Consistency Report).

4) Congruence—as we move away from one size fits all and we assess needs based on demand spaces, aligning between brand and psychological/demand space needs of category (e.g., individuals more likely to act for a specific cause when messaging and branding are congruent with demand-space-specific emotional/functional needs).

Additionally, ad campaigns with admired celebrities and shown on frequently visited sites/apps also contribute to drive FFR.

Building strong System 1 associations requires an investment in marketing. Brands with strong FFR showcase a higher frequency of exposure, easier memorability (even better if ads elicit a personal or celebrity connection), and higher perceived brand congruence across campaigns. These findings apply both for those individuals who have recently purchased the brand as well as those who haven’t.

It’s important to note that these findings, and correlations, hold true against various demand spaces within the Athleisure space. However, each space can have a different FFR brand that is most commonly referenced. This data further reinforces the need for marketers to take a demand-space-driven approach when activating campaigns and messages to specific audiences. Because of shifts in competitive dynamics and an individual consumer’s current cognitive state, marketers may have different objectives:

1) Challenge: Individual has previously purchased a competitor’s brand, FFR brand is that of a competitor.

2) Build: Individuals newly in market who have not yet purchased.

3) Reinforce: Individual has previously purchased target brand, FFR brand is in line with the one we’re seeking to promote.

This is not to say that marketers shouldn’t care about driving awareness (particularly unaided awareness, which will be explored alongside FFR in our next article). Rather, the comparative power of awareness vs. FFR in driving consideration and purchase can help inform how much a client should spend on driving plain-old awareness (through conventional marketing activation) vs. true brand-building activities.

What does this look like in practice and how can marketers activate these findings? How should marketers think about the complementary role of traditional measures like unaided awareness and FFR in informing their marketing and brand spend???And, what do best-in-class brand campaigns look like?

Stay tuned for our next article on the topic of precision branding!?

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ABOUT THE AUTHORS

David Ratajczak?is a managing director & senior partner based in BCG's Atlanta office.?Lauren Taylor?is a managing director & partner based in Dallas.?Mario Simon?is managing director & partner based in New York.?Gaby Barrios?is a partner & director in BCG's Center for Customer Insight, based in Paris.?Leonardo Fascione?is a principal based in New York.?Kelly Kutas?is a Knowledge Expert for Customer Demand & Innovation, based in Chicago.

Acknowledgements

The authors would like to thank Tanu Singh, Saurabh Chaddha, and Gaurav Bajpai for their support of the fieldwork, data processing, and analytics for our FFR in Sports Apparel survey.

For Further Reading

Marketers: Your Customers Think Fast; You Can Be Faster

How Nimble CMOs Invest Their Marketing Budgets

Companies Gain When CMOs and CFOs Measure Success Together