Binet’s and Field’s The Long and the Short of it (2013) has become one of the most referred-to books in marketing nowadays, as it first urged brands to recognise the importance of investing in both short-term and long-term performance. In marketing science, this is referred to as Physical Availability, capturing existing buyers and measured by instant sales, and Mental Availability, building memories among potential category buyers, which cannot be measured instantly – but is still crucial for long-term growth and can be assessed by Mental Availability metrics, writes Neil Krikul marketing scientist, Ehrenberg-Bass Institute.
The book also provided an optimum balance between the two spends, famously known as the 60:40 split, however, the authors also acknowledged that this may vary by category and potentially other uncontrollable factors. In fact, the split was derived from the IPA (Institute of Practitioner in Advertising) database, containing case studies submitted for awards competition, therefore, it might not be representative.
Since then, there have been more publications circulated, especially on LinkedIn, about the magic split, which I will not name, but all of them were self-published and possibly did not go through an academic peer-review process.
Previously, I wrote an article comparing brand to athlete performance. In this instance, prescribing a magic budget split to every brand is like prescribing a new athlete an Olympic training program and expecting them to achieve the same elite performance.
Evidence-based Budgeting Approach to Prove Your Accountability
Advertisers have always leaned towards a simple budgeting approach, such as this magic split or advertising-sales ratio, rather than more evidence-based and sophisticated approaches, which they may find overwhelming or may lack access to data or training. But as often stated and repeatedly shown in science, a little information is better than none, and a knowledgeable guess is better than intuition.
Each budgeting approach has limitations, which is why the Ehrenberg-Bass Institute recommends combining multiple approaches for best outcomes. One of the approaches that has stood across time and remains common today among large and advanced advertisers is the objective and task approach (also referred to as zero-based budgeting), whereby advertisers first set objectives that they would like to achieve and determine activities and costs to achieve them.
When it comes to spending for short-term performance or Physical Availability, the budget should be spent to the point of diminishing returns rather than focusing on high ROI (return on investment) alone. Here, advertisers may look at the maximum cost per acquisition/conversion they can afford to break even and make some profits from the placement.
On the other hand, Binet and Field were right to remind advertisers not to over-invest in short-term performance at the cost of long-term brand growth. Marketing science shows that most buyers are not in the market at any one time, making it more effective to build Mental Availability before they enter the market, rather than competing for them closer to purchase when acquisition could be more expensive. Budgeting for brand growth should optimise for the key metrics of media planning; reach, frequency and continuity, adjusted appropriately depending on the category, especially its purchase cycle. Advertisers may estimate their budget based on total reach or impressions required over time and media costs, which vary due to many other factors. They may also consider competitors’ spending to maintain or grow market share, following the Share of Voice budgeting approach.
Here, we can see that the optimal split becomes meaningless once costs are assessed based on objectives. Smaller brands may spend more on short-term performance to bring the money in fast and grow. Nonetheless, in-market buyers only represent a small proportion of category buyers in the long term, so spending more for the sake of following the magic formula would end up as a waste.
Marketers would seem more credible if they show this thinking to senior managers rather than quoting a magical number from someone else.
Neil Krikul is a marketing scientist at the Ehrenberg-Bass Institute.
