Digital spending and the long-term implications for brand value

WARC has released a media spending forecast predicting digital formats will exceed $100 billion and make up one-half of American advertising expenditures in 2018.  This is no surprise given the growth in digital channels and the cost efficiency of digital media.

However, there is a downside to this trend: digital media’s impact on brand value and long-term profitability. Marketers obsessed with using “pay per click” and similar KPIs to drive an increase in digital media spending must be prepared to manage a decline in brand sales and profitability over time.

When marketers become obsessed with using big data to optimize digital brand performance, it leads to a short-term focus on transactions. Extensive research by the Institute of Practitioners in Advertising* shows highly rational, short-term propositions delivered through digital media do contribute to short-term sales; however, they do not contribute to long-term brand profitability. That’s because rational approaches are not memorable and do not create the engagement required to build brand value.

There’s no doubt that digital media can be used in brand-building, but it needs to be used in combination with traditional media. In fact, the effectiveness of traditional media is significantly improved when paired with digital. The IPA study showed campaign effectiveness increased by 20 percent when only online video was used; 40 percent when only television was used; and a significant jump to 54 percent when TV and online video were combined.

The optimum spending balance between traditional and digital is 60/40 percent, according to IPA. Digital media definitely helps satisfy a customer’s immediate needs. However, research shows that it takes more emotionally engaging traditional media to create a distinctive, salient brand story that is important to longer-term profitability.

WARC’s forecast suggests many marketers will soon be confronted with this reality. Visit our Services page to see how Radii Latin America can help you create your unique brand story for long-term profitability, and contact us today!

Credit to Jim Cobb (The Bloodhound Group)