The main
theme of this article is to get companies to focus on the long term instead of
the short term. It is much easier for companies to focus on the short term in
this age gaining immediate sales trends but only focusing on the short term
which deteriorates the health of the company.This discount in products,
especially in premium brands, can significantly hurt the life of a product. Discounting
strategy results in changes in consumer behavior, diluted brand equity and a
competitive response.
Companies need to focus more on marketing, new product
development and new forms of distribution rather than gaining short term sales
by discounting products.Nike – Foot Locker, Finish Line.Few ways to
track a brand’s long term health that will help companies evaluate their
products:
o
Evaluate baseline sales over months,
quarters and years
o
Using this data brand managers can
evaluate performance over monthly, quarterly and yearly segments and take
marketing decisions .
THE SHORT TERM VIEW:
·
Store
scanners reduced the lead time for getting the sales data significantly. Store
Scanners gave the real time data to the store managers, thus enabling the
attribution of spike in sale to a price promotion.
·
The problem – Didn’t tell about the
profitability of a promotion.
·
The
Solution – Baseline Sales.
·
Baseline
Sales are estimated by extrapolating from periods when there are no price
promotions.
·
No
discounts
·
Consumers
buying at full price, resulted in higher profit and higher brand value.
CHANGES IN CONSUMER BEHAVIOUR:
- Consumers purchase at next sale rather than at full price.
- Baseline sales eventually decrease and lift over baseline
increases.
- This lift makes promotions look highly profitable so managers push
for more discount.
- Eventually most of the product is sold at discount and profit
margins decrease.
LONG TERM
VIEW:
The effects
of discounts and other components in the marketing mix-such as advertising, new
products, and distribution only can be understood over long run. Distribution
in high end stores and product innovation play greatest role in increasing sale
in the long term.
LONG TERM METRICS CAN REDRESS SHORT TERM MYOPIA
- Dashboard approach will improve brand performance
- Prevents an exclusive focus on
short-term data. Managers can establish whether price promotions have damaging long-term effects on brand
equity and can therefore make more strategic decisions about marketing
spending.
- Brand managers’ performance can
be judged on a combination of quarterly sales and quantity and price
premiums. The temptation to discount a strong brand will be reduced,
because damage to the brand’s long-term health will become more apparent.
- Finally—and most
broadly—long-term metrics inform a
company’s marketing decisions
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