That brand was Adidas, and Adidas freely admitted that they had focused too much on direct ROI and online advertising, and too little on building a strong brand. A practice that many brands are guilty of. Not only the German sportswear brand is affected by this short-sightedness, Dutch brands and marketers also suffer en masse from this “disease”. With catastrophic consequences.
To grow online sales, Adidas based its budget allocation entirely on incomplete attribution models, namely those of Facebook and Google. These are very capable of measuring the value of their own channels, but those of others are ignored or undervalued. This, along with a focus on efficiency rather than effectiveness, caused the brand to invest too much in digital advertising and performance marketing. Activities that contributed little to nothing to long-term growth.
When Adidas researched the true value of each channel with a small army of econometricians, the sports brand came to the conclusion that it spent too much on performance (77%) and too little on brand building (23%). This while brand building was responsible for 65% of the sales. A percentage that is consistent with large-scale studies of the renowned Les Binet and Peter Field.
Despite the very valuable insights that this case and scientific research give us about optimal budget allocation, many brands make the exact same mistake and base decisions entirely on quantitative metrics that can be measured, such as last click attribution, but ignore all other factors that you may not can measure, but can have an influence. As a result, brands mistakenly spend too much money on channels that are believed to perform well, but in reality contribute little to nothing and only benefit from other channels.
For example, due to a malfunction in Google AdWords in Latin America – which prevented them from advertising for a while – Adidas did not experience any negative effect on total online sales (!). It is often unnecessary to advertise on your own brand name – those people have their own choice already made – but I have yet to run into the first search firm that admit it wholeheartedly or at least wants to test it instead of defending self-interest. And the results of many social ad campaigns run entirely on remarketing. The conversions of users who already intend to purchase, but have not yet done so, will be fully attributed to the ad that you saw in your newsfeed ultra-short.
The true influence of many online advertisements is much less than expected. Performance marketing is very often the lazy striker who only scores easy tickers and does not thank his teammates for that, but claims the credits completely for himself. Jesse Frederik and Maurits Martijn of De Correspondent illustrate it even more beautifully. Imagine that a pizzeria pays three teenagers to hand out coupons. After weeks of handing out flyers, one of them seems like a marketing genius. One customer after another uses the coupons he gave out. The other two don’t get it! How? After some insistence, he explains his trick: “I’m in the foyer of the pizzeria.” We are that “smart” teenager!
The very extensive article from which I derive this anecdote, explains well-founded and in clear language which thinking errors we as online advertisers make en masse. Nevertheless, after the appearance, little changed in our behavior. We still focus too much on the short term and are guided by incomplete data. Data can be incredibly useful for making better decisions, but if that data paints an incomplete picture, it does more harm than good. On the other hand, we ignore the importance of a strong brand. A brand that generates recognition and trust. A matter of patience and consistent policy. Not easy, but proven effective. Something we cannot say about many of our advertisements.
This article previously appeared in MarketingTribune 19, 2020.