Long-term and short-term

There is no doubt that a long-term brand building strategy brings many advantages. Strong brands deliver premium margins, have lower price sensitivity, and attract more repeat buyers. A brand is a tool that delivers value to consumers and companies. However, companies are shifting their resources and attention from brand building to short-term activities. A graph by Peter Field and Les Binet, advocates of marketing effectiveness, indicates the rise of short-term case studies in their database. Watch full presentation.



Why are resources moving towards short-term activities?

Marketer’s job is to meet certain business objectives by developing a strategy, then use tactics to achieve it. On top of it, tactics are measured by key performance indicators, which track performance and help to react accordingly. Let’s look at two strong forces that prefer short-term activation over the long-term view.

Business Objectives

A company, especially a publicly listed one, wouldn’t exist without the profitability business metric. Corporate governance, internal culture, pricing policy, products, technology, innovation and other objectives exist only to increase profitability, and shareholder value. There are companies that deliver other value than profit to stakeholders, but they are not listed on stock exchanges. Here I am looking at the majority of public companies, that exist to deliver value to their shareholders.

In the pre-internet days in the 60s, the average stock holding period was around 7 years, but it has fallen to 8 months. Please, pause for a moment and put in perspective an idea that an average shareholder owns a piece of a company for less than one year. New York and London stock exchanges have progressed similarly.

NYSE FTSE stock holding average period

“Back then most stocks were held by individuals rather than investment funds; transaction costs were massively higher than they are today; quarterly earnings information appeared only in the 70s; there were no computers, which made people less active in the market.”

Michael Mauboussin, former Head of Global Financial Strategies at Credit Suisse. Full interview on Financial Times Alphachat podcast.



Shareholders measure companies with quarterly earnings only. Analysts haven’t got any other objective data points that could be used to compare separate firms. If there is an opportunity to earn more by selling off shares, make no mistake, the investors will use it. Internet and low transaction costs increased the frequency of trading and eased movement of capital. To keep company’s stock evaluation high, executives must deliver quarterly earnings all the time. Market pressures on growth are so high that executives are forced to cut costs, even value-creating investment.


“A 2005 survey of 401 financial executives by Duke University’s John Graham and Campbell R. Harvey, reveals that companies manage earnings with more than just accounting gimmicks: A startling 80% of respondents said they would decrease value-creating spending on research and development, advertising, maintenance, and hiring in order to meet earnings benchmarks.”

Alfred Rappaport, economist, best known for developing the idea of shareholder value.


Short-termism is so prevalent that PepsiCo’s CEO Indra Nooyi had to be stopped by her colleagues while she was ranting about “number crunching analysts” suggesting to blindly cut costs during Davos 2018 interview. The whole Towards Better Capitalism session in Davos turned into a discussion about shortcomings of the short-termism. The only satisfied and cornered person in the group was representing a private investment fund, she fully agreed that companies are value creators while investors are valued extractors.

The business objective is quite clear, a publicly traded company has to deliver shareholder value every quarter and do it all the time. Cutting long-term investment is a sound option for shareholders to increase earnings in the short-term.

Tactics in the digital era

The emergence of digital technologies, e-commerce and social networks has introduced new opportunities and tactics how to reach, deliver value, and communicate with consumers. Digital spend is rising fast in marketing budgets. However, most of the new tools are remarkably well designed for the short-term activation and capturing customers at the last stage of the buying process. No doubt, digital tools are compulsory for any organisation, but their focus on efficiency rather than effectiveness must be seriously taken into account. The most popular but very far from perfect KPI is ROI (return on investment).

Although ROI brings clarity and accountability, it can be misleading. ROI is based on a profit and investment ratio; therefore, it is too easy to deliver ever-increasing ROI at expense of profit. Moreover, oversimplified ROI does not include either time or discounted cash into the equation and therefore is not an accurate representation of investment.

Other digital metrics (cost-per-lead, cost-per-conversion, search engine rankings, click-through rates, social media footprint, and etc.) focus on immediate activation rather than long-term brand building. It is very tempting to use precise metrics that deliver prompt feedback, but it must work for the long term as well. The highest evaluated brand is Apple; customers are willing to pay a premium for their products, but not everyone knows that Apple hasn’t got social media strategy. Although they use Instagram to share pictures made by customers on iPhones, their twitter and facebook accounts are empty. Apple is an excellent example of the long-term thinking and building more profitable products than any competitor in the market.

Strategy Sandwich

Long-term brand building strategy is sandwiched between two short-term forces: quarterly earnings and digital marketing tools. Both forces are highly measurable, concrete, and more tangible than long-term strategy. This creates an environment where short-term activation data becomes easier to understand and justify to shareholders than long-term brand strategy. “Grandparents and grandchildren get along because they have a common enemy”; P&L and sales activation get along because they speak the same language. Comparing performance numbers is the only way forward, but not all numbers count equally for the long-term.

On the bright side, it’s good to know that NYSE sees a decreasing number of IPOs. The average number of new publicly listed companies in the US has decreased by 66% compared to the 90s. Companies avoid going public due to available capital from private investors and ability to hide from ruthless public short-termism.


Article illustrated with Tiffany’s 6” silver and walnut ruler, priced at $450