Why Premium Brands Are Taking a Step Back from Performance Marketing and Focus on Brand Equity
Successful premium brands have taken a long journey from investing in brand equity to digital conversion just to find out that effectiveness lies within the fundamentals of advertising
According to eMarketer, Amazon will account for roughly 9% of U.S. digital ad spend in 2019. Digital advertising leaders respond to the emergence of Amazon by offering multiple conversion tools to marketers. A quick online journey will unearth multiple opportunities to purchase a product or goods via Google and Facebook and their associated platforms Instagram and YouTube.
The need for measuring a direct conversion has begun with the rise of performance marketing and sophisticated audience targeting tools. Marketers have received an impressive tool set allowing them to act upon insights and test how digital actions influence directly on their revenue.
Marketers have widely adopted a ‘digital transformation’ approach and promoted the utilization of data and proper measurement. However, the focus on conversion has placed a lens on sales at the expense of improving the premium perception.
In essence, every premium brand aspires to measure direct impact advertising has on its revenue but not all marketing campaigns have a direct influence on sales. Brand image campaigns that strengthen the premium perception or a sponsorship to a sports team are examples where the direct impact is almost intangible. In the absence of more accurate tools, marketers are using online surveys to quantify that impact.
P&G and Adidas have invested heavily on performance marketing in the past but have reawakened from the need to validate immediate conversion. In retrospect, they admit spending too much on performance without receiving the desired results and emphasize the benefits of investing in brand equity.
Similar to The Alchemist’s narrative, P&G and Adidas have taken the journey of performance marketing but found out that the treasure of effectiveness lies within the fundamentals of advertising.
P&G | Moving from hyper targeting and focusing on reach
Procter & Gamble has announced already in 2016 it would stir away from hyper targeting in favor of mass reach. A year after, P&G has immediately cut its ad spend by $200m and reallocated more funds to legacy media for increasing the overall reach.
P&G Chief Brand Officer, Mark Pritchard, has explained that the company has “targeted too much and went too narrow”. Hyper targeting was overall ineffective to P&G as it involved increasing ad spend without seeing the desired growth effect on P&G brands.
In June 2019, Pritchard has emphasized how P&G are considering reach to be a key metric. P&G is trying to reach more people while reducing the number of times an ad is shown to a person. In other words, more people are seeing P&G ads but at the same time are not bombarded by the same ads.
P&G is taking a step forward that combines a thorough data understanding along with the purpose of increased reach. On the one hand, P&G designs custom messages to hundreds of different audiences. On the other, P&G favors mass reach over a direct impact of ads on sales.
Adidas | Last-Click attribution vs. brand building
Adidas has also taken a step back from performance marketing and only recently admitted it has over-invested in digital advertising. The previous approach had favored performance marketing over brand building in a ratio of 3:1. Nowadays the ratio is 3:2 in favor of brand building.
Simon Peel, Adidas global media director,explained that Adidas had focused on efficiency and monitored the impact on sales without brand tracking. The Last-Click conversion method has led to the fact most products were sold under promotions, hence eroding the premium perception of the brand.
When transitioning back to launching campaigns that do not result in a direct conversion, Adidas could reach consumers with an emotional message that had a positive effect on the overall perception of the brand.
Peel has stated that the shift to brand building has drove adidas sales up across all categories, and even provided a better impact on e-Commerce. According to Peel, 65% of the ecommerce sales are driven by brand activity rather than digital performance tools.
In a way, the positive connection consumers were having with Adidas campaigns had increased their willingness to purchase more products and pay premium.
The common sense behind the magic of traditional advertising
The connection between a brand and consumer values is not trivial, especially when consumers and marketers hold different views on ads.
The purpose of performance marketing is to find consumers that are inclined to purchase and continue showing ads until conversion is reached. Consumers may see this tactic as intrusive, especially when it is based on their habits and online actions.
Mass reach creates the feeling of freedom of choice. No brand is forcing you to purchase the product but rather notifies you on its existence and values. When this approach is also followed by major investments on brand image campaigns, the mindset of consumers changes slowly and they place the brand on their considerations set. Finally, more consumers are likely to end their consumer journey with buying a product from the brand.
In the end, premium brands should aspire to fortify the emotional bond they have with consumers, both within the booundaries of advertising and beyond.
Originally published at https://www.linkedin.com.
