I have been giving the future of the ad business a lot of thought. It’s an interesting dilemma. We operate in a world where the most creative people I know exist yet their efforts have been undermined by an industry rife with pitch comparisons… agency/ client divorces… and short-term briefs chasing this year’s numbers.
And if you look at the world of the markets where management is increasingly under pressure to increase shareholder value – then a short term tactical approach is easily understood.
CEO’s concentrate on business profitability, market capitalisation, and ROI. They are critiqued by the market where analysts - with a buy, sell or hold call - can keep, lose or put in question the CEO’s contribution and job.
I often ponder how much time the CEO spends understanding, engaging in, debating and looking after the reputation of his brand.
There has never been more focus on the short term aspects of corporate performance. That’s not to say companies have not been successful, the concern is that these types of strategies cannot be sustained in the long term.
In investor speak we are pigeon holed into the area commonly known by corporate analysts as GAP - essentially the competitive advantage one company has over another, assured through actual quarterly projections.
Brands create choice, build trust and loyalty, drive a premium price and provide an important source of competitive advantage and the resultant share price. With this in mind, it is amazing to see the amount of poor advertising that is being produced.
Why is work that clearly has little brand impact allowed to consume huge swaths of company budgets, when it’s only pressuring short term results? Who is accountable for the poor and ineffective allocation of current marketing spending?
It goes without saying that great, creativity and advertising has an important role to play in building brand and shareholder value.
I would challenge that many CEOs do not appreciate the financial significance of getting branding right. In today’s economic scenario brand and intangible values cannot be left uncounted as they bear upon the very destiny and survival of a firm.
Look at Murdoch and the headlines. Could we dare say that his lack of involvement, and his employees’ lack of respect, is a reflection of how they viewed the News Corporation’s brand principles? Would a stronger brand vision, rather than just operational focus, avoided the predicament he is in? In the long term shareholders will shoulder the burden of the demise of News of the World and the defunct take over of BSkyB. Will his brand recover? Will Rupert be held accountable?
I think it’s time to look at brands like a life line. In investor language this means - Competitive Advantage Period – CAP. CAP is the long tail portion of what analysts look at when they apply a risk curve to a company’s short term GAP performance. It’s all about how long the company can sustain the competitive advantage it has demonstrated in the short term.
To secure a longer CAP, a company needs to create barriers to entry and identify long term opportunities. This should include the brand management and a vision of where they are, and where they are going. Great creative work that gives character and emotional connections to the brand – has a major role to play in lengthening the CAP.
Identifying a real insight and creating an emotional connection - which changes a consumer’s behavior to purchase – should be the goal of all advertising. If done well, it will extend the CAP curve and increase profits.
So, if market capitalization is the way CEO’s keep their jobs, and if analysts are looking for CAP as a measure of company confidence over time, one must again ask why any CEO would enable his teams to produce creative work that clearly only exists for a short term GAP focus?
More analysts should seek out CEOs that are getting it right. I believe they should evaluate the relationships corporations have with their ad agencies. They should interrogate the brand strategy and ask is it really working.
There are definitely CEOs who get it.
A brand which differentiates on design, demands a premium; and has a devout, unquestioning cult-like following. Apple.
Last week, Apple officially became the world's most-valuable company, in terms of market capitalisation, worth $337.2 billion. In 2010, Fortune magazine named Steve Jobs the CEO of the Decade. A New York Times columnist recently wrote a column in which he said, “America needs more jobs, Steve Jobs”.
Jobs demonstrates the importance of the CEO in being responsible and in control of making sure the organization embraces the GAP and CAP aspects of building their brands.
In the future will CEOs who do not manage their companies’ brands be held accountable? Perhaps it’s time to stir a shareholder class action against a CEO, who isn’t and hasn’t, been spending the company marketing budgets in the right way.
Now wouldn’t this change the sophistication of an industry that can truly claim that it could make (or break) a company?