If Brands Are Built Over Years, Why Are They Managed Over Quarters

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