What is the long term value of marketing?

There have a been quite a few blogs and other posts talking about why more smart marketers aren’t trying to make the case that investing in a recession can help a company be stronger once the recession is over than competitors that don’t invest.  This spurred the question, how should we define the long term value of advertising, (whether it’s during a recession or not.).  Here are my thoughts.
Advertising has both a short term and a long term impact.  (For the purposes of this document, I am defining advertising as any message received about a brand or the category, regardless of whether it was received directly from the manufacturer through mass media or direct response, or indirectly through the distribution channel, experts & endorsers, other consumers or any other brand information sources.)
Short term advertising effectiveness can probably best be measured based on last touch attribution (see a previous post on this topic.)  This method attributes all revenue to the last touch, regardless of prior or concurrent touches.  It totally ignores any residual effects that accrue to marketing as described below.
Medium term advertising effectiveness includes the impact on the emotional impressions of the brand.  There are two dimensions:

• Awareness – Awareness for a brand typically has a long term effect.  Awareness decays over time, where a particular consumer is either aware of the brand or unaware of the brand.  There is no partial awareness.
• Consideration set – Just having awareness of a brand doesn’t mean it’s in the consumer’s consideration set.  What brands require is that the advertised brand will be considered as one of the choices in the category.  Advertising must keep the brand in the consideration set by continuing the advertising.  If advertising is discontinued, a brand may eventually fall out of the consideration set.  This is probably certainly true for categories that are highly considered where the consumer is expecting that the value of their purchase will provide long term benefits, either through a valid warranty or through the brand impact of a purchase among friends.  (e.g., ‘I like to be seen showing off my branded clothing’).  Consideration also decays over time.  Just as in the case of awareness, the consumer either holds the brand in the consideration set or not.  There is no partial consideration.
• Purchase intent - The incremental intent to purchase attributed to a specific media channel.  This decays over time as well.  Purchase intent, however, can be any value and therefore can be either increased, through more advertising, or reduced through the lack of advertising.
• Brand imagery – The attribute association scores measured in many brand health tracking studies.  The association scores can be strengthened based on the message (s) in the creative.  These include attributes such as, ‘this brand is good value for the money’, ‘this brand is eco-friendly’ or ‘this is a luxury brand’.  They are emotional and driven by both the advertising and prior experience with the brand.

Each of these have some decay rate if no further messages are received about the brand.

Long term advertising effectiveness has two components:

• Brand equity is an emotional consumer element that lasts significantly longer than the purchase intent above and can be interpreted as the residual marketing impact that makes any future advertising more effective.  That is, any advertising this year delivers value in the following years.  This too, probably has some decay rate if no further advertising is done, although I haven’t seen any discussions to this effect.  Its impact is also affected by external events.  If the brand has high brand equity, the impact on future purchases is present.  In a recession, however, the impact is reduced.  In uncertain economic times the value of investing in long term brand equity is lower because of potential deleterious effects outside of the control of the brand.
• Customer equity can be defined as all those customers that have tried the brand at some point in the recent past.  (It is sometimes called penetration).  Since a consumer has used the product/service in the past less advertising will be required to induce them to use it again (assuming there was no negative customer satisfaction event).  Investing in customer acquisition has a higher long term value over just advertising to drive revenue from existing customers.  This long term effect may also be slightly different for an initial trial versus continued usage.  Just giving out samples may not have the same customer equity value as a consumer actually purchasing a brand and consuming it.

Some exceptions to consider:
1) If there was a negative customer satisfaction event, this can be overcome, but it would require a bunch of advertising, or another negative customer satisfaction event from their new competitive provider/brand?
2) How does advertising drive ubiquitous brands like Coca Cola or Pepsi?  I have been told there is a long term advertising effect to advertising.  Also, what is the long term value of Coca Cola’s sponsorship of the Olympic games?

Very Long term advertising effectiveness - Is there a very long term brand value?  For example, when I was a kid, I loved the Ferrari.  I still do.  Is there any value today, based on the advertising and marketing undertaken a few decades () ago?  Is there any present value of advertising, based on results that may or may not be achieved decades from now?

Implications for marketers

A few questions to think about:

• For fast moving consumer goods (FMCG) marketers with high penetration and an older brand, how can marketers deliver incremental medium and longer term value to their marketing?  Very little marketing will drive customer equity, since the brand already has high penetration.  Is there incremental customer equity delivered through a line extension in the form of some new variant with some new (or perceived) attribute.  Or is marketing all about driving short term purchase? Or should marketing now harvest the brand and reduce advertising to an extent that market share stays about even?
• For FMCG marketers with a new brand, what is the optimal mix between driving brand value, short term sales and customer equity?
• For highly considered products and brands that are purchased infrequently (e.g., life insurance or a car), how do these classifications differ?  Short term advertising may deliver new customers where the customer is already in consideration.  After all of the long term brand building done, the consumer is finally ready to purchase and is spurred to purchase your brand due to some short term offer or advertisement.

Have I left anything off?  I’m sure I have.  Please let me know.  I would love to hear from you.
If you’d like to hear about some tools to support marketers in these areas let me know.  Many of the currently employed tools don’t quite cut the mustard to provide the tactical and strategic decision support necessary to make the best decision and reduce risk.