Short term focus versus long term brand thinking can make the difference between a successful organisation and a smart organisation. It can also determine the company culture regardless of its size. Over the last twenty years I’ve seen companies that end up commoditising their offer nearly always start by trying to fix a short term problem. I saw it with motor insurance providers when they first tackled price comparison sites. They dropped their premiums to chase volume sales, attracted the wrong customers, eroded their retention figures and saw lifetime value fall.
Short term focus makes you solve the wrong problems
Short term focus perpetuates rapid decisions that often solve the wrong problem. I worked with a high street bank that had a shortfall in new credit card customers, so their acquisition team introduced a 0% balance transfer offer. They exceeded their acquisition targets. A year later the retention team felt the impact when everyone switched out. It cost them more to administer the cards than they made in interest. The problem wasn’t a shortfall in acquisition, or necessarily the 0% offer. The problem was the segregation of their acquisition and retention teams meant they didn’t share a view of their perfect customer or have a strategy to acquire them.
I remember being told that when growing their insurance book, Legal & General wanted to reduce the administration costs when handling claims. They calculated that payout was cheaper than processing, and it worked – for a while. Over time Legal & General became known as Legal & Generous, and as they grew the business their number of claims rose exponentially.
In both cases these short term actions not only hurt the business, but it stimulated a change in consumer behaviour that’s felt today. Of course neither were solely responsible for the market, but as an industry, insurance is now a tougher gig.
Short term focus also guides an organisation’s innovation strategy. There are countless success stories of tech firms using data and AI applications to disrupt commoditsed markets. Xero, the accountancy software platform did it with their real time bank balance feeds. Sage reacted quickly by copying them. But they were again outmanoeuvered when Xero introduced a complete cloud based solution that included third party mobile applications and a really smart user experience. While Sage worried about the short term impact, Xero had mapped out a 10-year innovation programme, and subsequently scaled the business from $60k in 2008 to $60m in 2018.
That’s not to say that you don’t get successful fast growth organisations in commodity markets. But smart organisations always look before they leap and this is why.
Long term thinking protects your meaningful difference
Few companies have a truly unique offering outside of their brand. See Axa, Andrex or Acer. Without one, the method to outpace the competition is by either exploiting a niche audience, providing an ever better service, or simply outspending everyone else on promotions. Unless diversifying, none of these are sustainable for a company looking to grow.
On an annual basis Millward Brown and Kantar track and report on the world’s top 100 performing brands. They outline factors that are driving success in the current landscape and have defined the essential core of successful brands as ‘Meaningful Difference’. And it’s this that drives brand power.
A meaningful brand meets the consumers needs both functionally and emotionally, whilst being different by standing out from the competition through their distinctiveness in positioning and offering. This gives them purpose. Marketers like us should help brand leaders understand their purpose, and articulate their meaningful difference so they can put their innovation in focus.
Smart organisations are already successful, but they maintain their competitive advantage by aligning their purpose with their customer. Smart organisations build their brands for the long term by focusing on three core principles.
- Clear purpose
- Clear communication
- Brand love
Internally a clear purpose should drive an organisation’s values, NPD, decisions on people, relationship with customers, innovations and approach to sales.
In a recent Think Google interview, Marie Gulin-Merle, Calvin Klein’s chief marketing officer cited that 50% of all sales are now digitally influenced. That means generating Brand Love externally requires a consistent representation of an organisations purpose at every touchpoint.
Xero is a smart organisation because its purpose rests on easy access to real time accounting information for small businesses. This means ever evolving software that’s always relevant, useful and easy to use. Nauto is a startup data platform that’s sole purpose is to positively influence driver safety. It uses AI to gain situational awareness when on the road. This single minded purpose has influenced the innovation of the platform and how the data can be used in the future. It can support driverless technology, report on fleet driver performance and even underwrite insurance policies.
In the majority of cases we have found an organisations purpose is already known, rarely recognised and never articulated. It’s a vital exercise that supports the process for small companies to scale up, and for large conglomerates to simplify in a smart and practical way.