Opinion

It’s time to reevaluate your performance advertising approach

You’ve probably read about Adidas pivoting their marketing away from digital performance. Their global media director, Simon Peel, explained it thus: “Our attribution modelling, based on last-click, didn’t do any brand tracking. Also, it focused on efficiency over effectiveness, leading us to look at specific KPIs and how to reduce cost, rather than what was in the best interests of our brands.”

Sound familiar? The majority of internet retailers in Australia are driven almost entirely by performance advertising – activities designed to produce an immediate easily measurable return – while brand advertising, activities designed to make people aware of and emotionally connected to you, has fallen by the wayside.

Volvo Australia recently announced a similar move to Adidas, and I’ve heard of others doing it, quietly. Recently, I was able to see inside a successful digitally-led business and was surprised to find their performance-marketing spend was less than 1 per cent of revenue. They had grown entirely through brand marketing, and with an enviable net profit!

This result is no anomaly. Les Binet, Peter Field, Byron Sharp, Jenni Romaniuk and Andrew Ehrenberg have contributed to works which show just how effective brand advertising is. And, these people aren’t some sly, slippery Mad Men-type characters – the ones who have given brand advertising a bad name. They are scientists, publishing peer-reviewed work.

The article about Adidas’ shift away from performance advertising mentions another discovery the brand made. After investing heavily into CRM to boost loyalty, it turned out 60 per cent of revenue was from first-time buyers, something these academics predicted long ago, and had been ignored at great expense.

I have spoken to marketers at publicly listed companies with resources most of us can only dream of, who have done detailed attribution exercises and, without fail, have found top-funnel activities have the best return. 

The downside to brand

Of course, brand isn’t all sunshine. A start up can spend $100 on Google or Facebook Ads and drive their first sale the same day. Brand campaigns ideally need strategy, good creatives, brand measurements and more. It can be done fairly cheaply, but it’s harder than paying Google. 

Then, there is the previously mentioned, advertising sales sharks who, when you question their effectiveness, will play “awareness” like a “get out of jail free” card, somehow exempting them from all accountability. For a marketer hooked on the performance drug, that’s a tough pill to swallow. Broader and more sophisticated brand measurement is needed.

Brand is also typically a slower burn. For a startup living hand to mouth, or, with investors demanding results this week, it’s hard to sell a brand campaign with a ramp-up of a month or two that won’t pay off for three months.

Ultimately, brand vs performance isn’t an either/or approach. Les Binet recommends about 75 per cent brand and 25 per cent performance/activation. For most digital marketers, suggesting you move 75 per cent of your budget into brand would be career suicide. And rightly so. There’s no magic formula, and for a company taking orders or leads online, perhaps that ratio is wrong. But 100 per cent performance is also probably wrong.

What’s an online retailer to do?

The biggest challenge of course is demonstrating ROI on brand without having a million-dollar econometrics and brand measurement budget. There’s a range of ways to measure that, but few online retailers will look at anything more than, at best, medium-term profits.

Building up maturity in brand advertising takes time and trust from your CEO or board. An easy short-term test is to run a geographically bound brand campaign and see the impact it has on revenue over several months. I’ve done this with positive results. Facebook and Google will talk to you about hold out audiences, and brand uplift studies (which aren’t bad), but revenue uplift in a region is more likely to convince the board than a 10 per cent uplift in brand awareness.

Most performance advertisers will advocate for separating Google Ads spend into “brand” and “non brand” buckets (an argument I support). “Brand searches are easy money.” Yet, not once have I had the question: “How do I increase the number of brand searches?” If it’s such easy money and converts so well, surely that’s the holy grail? 

Mark Baartse was the former CMO of Showpo and now is a marketing and e-commerce consultant.