Alex Steer

Advertising effectiveness, analytics and strategy / about

Sustained vs temporary advantage

697 words

In marketing, as in so much of life, there are two types of advantage: temporary and sustained. This is obvious when you think about it, but thinking is hard.

Temporary advantage comes from doing the same thing as your competitors, but better, for a while. Most industry depends on temporary advantage. You may temporarily have better robots on your production line, better debt financing, better refund policies on your products, etc. Temporary advantage is driven by tactics, which let you grow share by getting ahead of the competition.

In marketing communications, temporary advantage comes through optimisation: better targeting of your advertising, better scheduling and allocation of your spend, faster or sharper algorithms to bid on placements or search keywords, and so on. Advertising tactics pay back handsomely for fairly early adopters, until most of their competition have the same capabilities. Temporary advantage is rewarding because the gains from it are realised very quickly (when you can suddenly do something others can’t), and decay quite slowly (as others catch up with you at different speeds).

Sustained advantage is more expensive and pays off more slowly, but it is structural. In most sectors, intellectual property is the only source of sustained advantage: patents, trademarks, and strong brands.

The last two of these sound the same but aren’t: a trademark is the protection of your identity, a brand is the identity worth protecting. Brand equity is the value attributable to a brand’s ability to influence purchase in spite of tactics. It is the sustained advantage created by communications and customer experience (both broadly defined).

To take a simple example: at today’s prices, you can buy a 420g tin of baked beans in Tesco for three prices: 32p (Tesco brand), 65p (Branston) or 75p (Heinz). Assuming that the quality of the beans is much of a muchness (ie roughly equal numbers of people would reject each in a blind test), it’s reasonable to say that Branston is carrying about 33p in brand equity, Heinz about 43p. In other words the value of the Heinz brand is worth 34% more to its buyers than the whole tin of Tesco beans. Now that’s a sustained advantage, built over years, paying off over years, but quantifiable.

The obvious question is: is it sustainable? Maybe not. If the Heinz brand didn’t continue to have distinctiveness in people’s minds – that mix of recognisability, emotional reassurance and legitimate beliefs that make people reach for it. or click for it or ask their Amazon Echo for it, despite the price premium – it would lose that pricing power. However, it would do so slowly, over years and not weeks. A strong brand is a battery that is slow to charge, slow to drain.

Much of the drama and debate in marketing at the moment seems to hinge on whether different groups of people are more interested in temporary or sustained advantage. There are obviously vested interests here. Technologists and management consultancies tend to like temporary advantage because they are complex to realise (mainly involving technology and data these days) and they decay fast, ensuring repeat business. Creative agencies tend to like sustained advantage because it requires real insight and creativity to realise (mainly involving very good design and writing) and it requires craft, ensuring repeat business.

The rather obvious answer is that you need both. Temporary advantage generates sudden improvements in revenue or profit, which keeps shareholders and executives happy. Sustained advantage creates ongoing revenue and profit and is an insurance policy against future austerity, allowing you to keep making money even if your product or service is temporarily uncompetitive.

There’s no magic formula for the right balance but there is a guideline: ignore any professional services business that tells you that either temporary or sustained advantage is unimportant. If a consultant or technologist says that mass communication is dead and only hyper-relevant brand experiences matter, they are trying to sell you software. If a creative agency says that tactical communications don’t matter and big ideas are all that count, they are trying to sell you expensive advertising. You may be right to buy both, but don’t ignore either.

# Alex Steer (02/07/2018)


RSS