Why you, like Amazon, should start focusing on long-term strategy instead of short-term campaign gains
In 1994, Jeff Bezos, an ordinary computer scientist working in the banking industry, wrote a business plan for a company called “Amazon” during his drive from New York to Seattle, expressing his desire to pursue an opportunity in an emerging technology at the time called the “internet”.
Now, the company he founded in a garage about 20 years ago has become one of the largest internet retailers in the world. It brings in over 100 billion dollars of revenue each year and is valued at almost half a trillion dollars.
Jeff Bezos has since become known as one of the entrepreneurial prodigy of the century, joining the ranks of people like Steve Jobs, Mark Zuckerberg, and Bill Gates.
However, little do people know, the fuel behind Amazon’s success was not a burst of genius nor a special business strategy. Rather, the core of Amazon’s success is its obsessive focus on long-term strategic consistency as opposed to short-term gains.
In fact, despite its current popularity, Amazon didn’t become a profitable company until 2004, almost 10 years after its original founding. This lack of profitability, was, according to Bezos, completely intentional.
This long-term focus is most evidently illustrated in his first letter to stakeholders after going public in 1997 (which he still attaches to every annual report), he wrote:
“We believe that a fundamental measure of our success will be the shareholder value we create over the long term. This value will be a direct result of our ability to extend and solidify our current market leadership position. The stronger our market leadership, the more powerful our economic model. Market leadership can translate directly to higher revenue, higher profitability, greater capital velocity, and correspondingly stronger returns on invested capital.”
Many scholars and management researchers who studied Amazon success attributed its achievement to Bezo’s relentless focus towards a long-term strategy, and I believe, us, as digital marketers and business owners, can apply the same principle he used to the digital marketing world to improve our businesses.
Small and Medium businesses are currently not focusing on creating a long-term digital marketing strategy
So how does this relate to the digital marketing world?
After talking to over 100 small and medium sized business owners since founding Humanlytics, one of my biggest realizations the biggest obstacle preventing businesses from succeeding in the online world is their lack of long-term strategic focus in their digital marketing efforts.
This lack of long-term focus manifests in two ways.
First of all, companies gave up too easily on their online marketing efforts.
One of the biggest complaints I heard from business owners was that, “we tried Google Adwords but it didn’t work out for us so we gave up and never touched it again.”
However, in reality, most of these companies only ran advertisements on Adwords or Facebook for a month or so and took minimal steps to optimize their keyword or advertising performances.
Often times, the advertising campaigns didn’t even have a chance to gain momentum or be optimized before they were killed off because of their owners short patience and immediate desire for a “silver bullet” that can immediately bring traction to their businesses.
Secondly, even when companies hire advertising agencies to launch well calibrated campaigns, the real business impacts of these campaigns often remain unclear.
Usually, advertising agencies judge the success of their campaigns using metrics such as “click through rate” or “conversion”.
However, while those metrics are good at measuring whether the campaign itself was a success, they are by no means an indicator of whether the campaign made a real impact on your business.
This may sound strange but the rationale is logical. When a company runs an advertising campaign, it oftentimes offers discounts or additional benefits on its product in order to encourage more purchases and, in order to do this, it has to sell its product at or below margin.
This means that, unless those who purchase your product during these promotions become repeat customers, they actually negatively impact the revenue of your business despite what high click-through-rate or conversion rates of the campaign itself may show.
Essentially, short-term ROI on ad campaigns are useless in reflecting the actual benefits to your business.
How you should adjust your digital marketing mindset to focus on long-term gains
With all that said, how do you adjust your digital marketing strategy to focus on long-term gains? I recommend the following action steps.
- Start with a clear strategy
While it might sound cliche to state this again, having a focused digital strategy is absolutely essential for the long-term success of your company.
In order to do this, it is essential to recognize that a good digital strategy does the following:
- It focuses on ONE clear business objective targeting ONE specific buyer group (targeting men over 30 years old with a shaving cream product).
- It delivers messages through multiple well-researched channels with each one targeting a specific part of your intended buyer’s journey — whether that’s during their initial introduction, repeat purchase, or referral.
- It focuses on ONE business-related long-term goal (such as total revenue contribution per customer or total revenue contributed by a customer group).
- It has multiple short-term KPIs (key performance indexes), such as short-term conversion rate, to help you judge your progress in achieving the long-term goal.
Let’s go back to Jeff Bezos for inspiration. In the same annual report we mentioned earlier he also mentioned :
“ …We first measure ourselves in terms of the metrics most indicative of our market leadership: customer and revenue growth, the degree to which our customers continue to purchase from us on a repeat basis, and the strength of our brand. We have invested and will continue to invest aggressively to expand and leverage our customer base, brand, and infrastructure as we move to establish an enduring franchise.”
Notice that he used two long-term metrics — “repeat customer purchase” and “revenue growth” — as the ultimate objectives of the company.
If you don’t have a clear buyer group or business objective in mind, it’s important to use analytics tools such as Google Analytics to identify your target audiences beforehand. Here is the link to one of our articles that will help you do just that.
2. Don’t over commit. Only take on as many goals as you can efficiently manage.
Running a digital marketing strategy focused on the long-term is like going to the gym — you will only see results if you maintain consistency. Plus if you set a goal that is too high, you’ll likely give up and stop training.
That’s why it is important to not take on too much commitment when you’re just starting off. Instead, first focus on one or two channels until you see results and then, once you get more familiar with the operations and results, expand your reach into other channels.
3. Use short-term analysis to identify small wins, and long-term analysis to guide strategy changes
Focusing on the long-term does not mean that you should forgo short-term analysis and monitoring altogether, but rather is intended to ensure that you understand the limitations of short-term information.
For example, short-term information can tell you about your traffic during a recent ad campaign or whether that campaign is effective in raising conversion.
However, what you shouldn’t conclude from a short advertising campaign about the true effectiveness of that campaign. Nor should you, as many people do, conclude whether or not you should conduct a similar campaign in the future without waiting for the long-term trend change in your data.
You should only modify your strategy or change your focus if you see an increase or decrease in your long term business-related metrics. Even then, you need to be careful about external factors that may cause the increase or decrease independent of your business actions (such as seasonality).
4. Be patient, but vigilant
I am going to be honest, digital marketing is NOT a “silver bullet” for all of your marketing problems.
Rather, it is a new channel of marketing that can help you bring in an enormous amount of business if done consistently and properly.
However, just like any other marketing channel, it takes time for your audience to become familiar enough with your product or brand to make their way through the conversion funnel you have planned for them.
However, that doesn’t mean that you should do the same thing over and over again expecting the same result (Einstein call that insanity) .
Instead, you should constantly adjust and improve based on both your short and long-term signals.
For example, to optimize the short-term performance of your campaigns, you should review key short-term metrics such as click through rate and conversion rate of that specific campaign with either your marketing team or consultants before adjusting the copies or targeting of your ads on order to maximize their effectiveness.
On top of the weekly micro-adjustment, you should also schedule a monthly meeting to review the long-term impact of each of your campaigns and, according to these long term metrics, modify your strategy and channel.
With the slight improvements this will bring, your message and performance will improve day by day both on a macro and micro level. Eventually this progress will snowball and your returns will become huge.
With all of that said, I will send you off to experience the wild and wonderful world of digital marketing. Just like Jeff Bezos, start now, start small, and one day maybe you can create your own Amazon (I’m rooting for you).
This article is produced by Humanlytics. At Humanlytics, we build tools for SMBs that not only help them answer their business questions and track metrics in real time, but also tell them what questions they should be asking in the first place — all with the goal of teaching them how to implement solutions that have long-lasting impacts.
If you have any questions about the article, please email email@example.com