As stated in a 2019 Forrester report, advertising is facing an “existential need for change,” having unwillingly surrendered its once leading role in understanding consumer culture to Big Tech. With third-party cookies crumbling and first-party data becoming more important again, now, advertisers and their agencies have a unique opportunity to regain some control and more effectively market to prospective and existing customers.
Unfortunately, most of the industry concerns revolve around the following questions, or variations thereof: How to maintain a personalized ad experience in the post-third party cookie era, or how to use first-party data to increase the effectiveness of targeting. The focus on these questions perfectly exemplifies today’s gaping disconnect between marketers and consumers.
What advertisers should ask themselves today, which we addressed in our “Rewriting the Marketing Playbook” report, is how to make advertising less noisy and intrusive. Advertisers need to make the industry-relevant again, rather than continuing their hyper-targeting game plan in the post-cookie era.
I do not have one definitive answer, but I can suggest a sensible starting point: Advertisers need to actually start holistically measuring marketing effectiveness. The proliferation of new measurement methods alone could eliminate a lot of the intrusive and ineffective advertising that causes roughly one-third of Internet users to use ad blockers and hate advertisers almost as much as they hate criminal hackers.
One company that has benefited from holistically measuring marketing effectiveness is Adidas. The sportswear manufacturer was spending three-quarters of its marketing budget on digital ads a few years ago, as their digital attribution models suggested that digital ads were a key sales driver. At some point, however, Adidas decided to use econometric models to analyze the effect of digital ads on the customer journey. These models demonstrated that the sportswear manufacturer’s long-term sales were in-fact largely driven by brand-building activities such as video, which hadn’t perform well in last-click attribution, as well as TV and outdoor advertising. Performance-based digital advertising had a relatively small impact.
As a result of these econometric models, Adidas shifted their advertising split, which had been 23% brand and 77% performance to a 60% – 40% split with brand advertising taking the larger share of the budget.
Hype Versus Reality
By properly measuring marketing effectiveness, advertisers would identify the same problem that academic literature has been talking about for a long time: There is a huge discrepancy between what the industry thinks consumers want and what the consumers really want.
Contrary to the importance commonly placed on personalized ads, a 2019 study by Dutch and German academics found that “While advertisers believe that personalization leads to fewer ads online and creates a stronger bond between consumers and brands, these effects remain unnoticed by consumers.”
In our work as marketing-innovation consultants with numerous Fortune 500 clients in a range of product categories, we have also observed that greater personalization does not necessarily increase advertising effectiveness. More broadly targeted mass media activities have resulted in a substantially stronger long-term effect on sales and brand strength per dollar than highly personalized digital campaigns for multiple clients.
What we have found is that the recipe for success is not more personalization, but the right level of personalization in tandem with other important marketing levers, most notably branding and messaging, that cannot be neglected.
So why, then, are companies still so obsessed with personalization? One reason is that personalization has been a trend in marketing over the last few years, despite its questionable results. The conventional wisdom has been that if people are more likely to buy a product based on the recommendation of someone they personally know, then they’ll be more likely to buy from a marketer with a personalized offering. Another reason is that marketers predominantly measure the effectiveness of ‘last click’ marketing activities, as Adidas had previously done, and sometimes, they are not measuring attribution at all.
From our experience, established brands fare better when they don’t put most of their focus on personalization, but as one lever among other levers including messaging and branding. There has been an unhealthy tendency to neglect these classical levers in favor of personalization and optimizing the efficiency of digital ads which marketers must correct.
Towards Outcome-Driven Marketing
The best way for the industry to go forward is to use the shift towards first-party data to move from an efficiency to an effectiveness paradigm.
Accordingly, instead of just aiming to increase personalization, we first need to ask: What is the optimal level of personalization (this also applies to messaging and branding) that will drive sales and brand strength? It’s about knowing exactly what is best for each marketer, rather than debating numbers and being blinded by the current hype.
The key to achieving this is the ability to compare the performance metrics of all media channels, both online and offline, from paid search to TV. Unfortunately, many advertisers still struggle with incomparable performance metrics. This must be rectified.
Solutions to this problem, however, do exist and they can be found by looking into new, more strategic applications of data. We’ve implemented a proprietary real-time ROI tracking system while working with a leading international FMCG client. Utilizing machine learning and advanced data aggregation techniques, this system serves to create a unified currency to measure the performance of all channels in real-time by building on aggregated, yet consumer-centric, digital data.
Using this approach, the company was easily able to identify underperforming channels. They were provided with a plethora of opportunities to save money by cutting back wasted spending while investing in other advertising initiatives to make them more effective. As a result, by getting rid of superfluous measures or optimizing them, the client’s total marketing ROI increased significantly.
This example may point the way to bringing about the change advertising needs. We should rally around the goal of freeing the world of ineffective advertising, and we can get there by knowing, rather than assuming that we understand the effectiveness of our individual and collective marketing activities.