Is Efficiency Killing Brands?

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Digital marketing has unleashed an obsession with efficiency and short-termism, one that's trading long-term brand-building for short-term ROI. We've put the golden goose in a battery farm of scientific efficiency, and it's killing the brand, business growth and profit.

Companies such as Procter & Gamble, Coca-Cola and Motorola, for example, have raised the issue recently. This past summer, the world's largest advertiser, P&G, announced it had slashed digital budgets by $140 million, and yet, sales still went up. In July, Motorola CMO Jan Huckfeldt went on the record saying, "If you want to revive a brand and you really want to build a brand quickly, if you bank on social and digital, it's not going to work."

This isn't an attack on digital, but on the short-term thinking it has created. With digital and big data came tighter targeting and a razor-sharp focus on short-term ROI. Yet, ROI increases are an addictive drug, one that's hollowing out the brand and leaving an empty carcass.

Digital has also opened up endless possibilities for one-to-one connections. But this has been filled with cheaply produced, vacuous, branded moments that people skip or avoid with ad blockers.

Since 2012, marketing effectiveness has declined significantly. This has been demonstrated by detailed analysis of over 500 effectiveness papers by Peter Field and Les Binet of the Institute of Practitioners in Advertising.

"Digital metrics are very short-term focused, and that has led marketers into a short-term mindset," Field explains. "A lot of people in management do not have marketing backgrounds, and find the short-term argument seductive. They are judged quarter by quarter, and they want results, by quarter. I wish we had more CEOs and CFOs that understand if we restrain marketing to the quarterly cycle, we stuff it."

The problem with short-termism and a focus on ROI is it forces marketing to concentrate on the lowest-hanging fruit, targeting only those most likely to buy. You get a rewarding boost in ROI, but not long-term profit.

How did we get here? Digital marketing offered marketers the promise of increased efficiency by eliminating an age-old advertising problem: "wastage," the idea that a large proportion of advertising is wasted on people who have no intention of buying the product. A good marketer, the theory goes, should eliminate that waste.

Alphabet, Inc. Chairman Eric Schmidt once asked why one would ever pay to show an advertisement for diapers to households who don't have a baby. That's the wastage problem, neatly summarized, that digital solved. Marketers could now target only those likely to buy, and not waste money on anyone else.

But this is exactly the problem, because the "wastage" premise ignores the way that brands work. The key to brand success is penetration. As Byron Sharp demonstrates in his book "How Brands Grow," the key difference between leading brands and smaller ones is penetration. Loyalty plays a role, but a small one. It is penetration that divides the winners and the also-rans -- attracting new people requires "wastage." You have to reach those who aren't currently interested.

Let's return to the diaper example. Imagine that before your first child was born, you had never seen a diaper commercial. Those canny, hyper-efficient marketers hadn't wasted a dime of advertising on you, because you didn't have a baby. Then, you announce on social media the joyous news that you're expecting and you're bombarded with diaper commercials. The challenge is, you've never heard of any of these brands. They're all new to you, and you're clueless as to which is best.

Compare this to what happens in the real world. In the midst of the excitement and chaos of your newborn, you reach for Pampers or Huggies. Why? Because all those years of "wasted" advertisements have built a strong brand impression with you.

Those "wasted" advertising dollars made Pampers famous. Brands like Levi's, Clorox and BMW (all of which are current FCB clients) are so famous it feels like everyone knows them, whether they buy them or not. They do exactly what a brand should do, which is to help us shortcut the myriad purchase decisions that we have to make every day. Research shows that campaigns designed to make brands famous are the most effective at delivering business results.

At least, that's what marketers used to do for brands, before the mind shift from brand-building to short-term ROI via efficient precision targeting.

This is flawed thinking. Building ever-deeper relationships with a few select fans can't grow business. There are only small gains to be made by increasing loyalty, or getting current buyers to buy more. It's not increasing loyalty that grows brands, but increasing penetration.

Let's look at some examples. In 2010, Pepsi pulled its annual Super Bowl campaign to target a generation that had fully embraced social media. They poured the TV budget into a social media campaign called the "Pepsi Refresh Project." The concept was that people would suggest ideas that would have a positive social impact, which people could then vote on via Facebook, Twitter and YouTube, and Pepsi would fund the winners.

It achieved millions of likes, re-tweets and followers, but as has been seen time and time again, there is no correlation between likes and sales. Pepsi lost a painful 5% share in a year and returned to the Super Bowl.

We need to get back to building campaigns for long-term effects. Focusing on attracting brand new buyers to drive penetration. Reaching all category buyers and not just the low-hanging fruit. Investing in "Never Finished" ideas that pay back again and again, instead of disposable communications. Ideas that people want to come back to, that keep intriguing them, make brands famous.

We need to break free of the short-termism and micro-targeting that digital has spawned. They have important roles to play, but so do brand-building campaigns. "Digital first" is a dangerous phrase, if it means brand second.

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