The advertising industry is suffering from an efficiency bubble. Data-driven digital advertising, in particular, has been highly efficient at driving short-term metrics such as sales, click-through rates and mobile app installations. However, industry experts warn that a focus on efficiency and an immediate return on investment means advertisers are putting long-term advertising effectiveness and creative bravery at risk.
Key measures such as awareness, consideration and brand love are being neglected because they take months, even years, to measure, rather than a sale that can happen in an instant.
Short-termist thinking putting advertising effectiveness at risk
Les Binet, head of effectiveness at adam&eve/DDB, the advertising agency behind John Lewis’ Christmas ads, says: “The efficiency bubble is a real problem.”
Mr Binet is co-author, with Peter Field, of an acclaimed study, The Long and the Short of It: Short and Long-Term Marketing Strategies, which has shown that advertisers should split their spend roughly 60:40 between brand-building and short-term direct response.
When you look at understanding your customer and focusing on your company’s core proposition, you can increase your effectiveness tenfold
The pendulum has been swinging dangerously away from brand-building and advertising effectiveness in favour of short-termism and efficiency, according to Mr Binet.
“Businesses that put efficiency first are businesses that are heading for disaster,” he warns. “It’s advertising effectiveness that matters most. Only once you’ve got effectiveness should you worry about efficiency.”
Advertising has had to change as consumer behaviour shifts
Part of the reason that advertisers have shifted money into online direct-response channels is because of the dramatic change in consumer behaviour in the last decade thanks to the rise of the smartphone and super-fast broadband.
Google and Facebook are the world’s two biggest online advertising platforms and much of their success has been built on the fact they make buying digital ads easy through an efficient, self-serve model.
Advertisers use search and social media ads to target key audiences, increasingly with personalised messages, and drive an immediate, measurable short-term response.
Such advertising has been dubbed “performance marketing” because it drives business performance.
What’s more, digital agencies are experts in optimising performance, such as bidding for cheaper search keywords or increasing the number of app installs, which can increase the efficiency of their clients’ marketing spend.
Efficiency yields faster results than effectiveness
Chief financial officers and procurement chiefs in big companies are fans of performance marketing because the return on investment is accountable.
As Rory Sutherland, vice-chairman of advertising agency Ogilvy, puts it: “Had we put procurement people in charge of the D-Day landing, they would have insisted that the landings took place at Calais to minimise fuel costs.”
Long-term brand-building and emotional storytelling are harder to justify in the boardroom when most companies are worrying about their next quarterly results, not their brand’s health in three years’ time.
Zaid Al-Qassab, chief brand and marketing officer at telecom giant BT, says it is vital to prioritise advertising effectiveness, even though efficiency remains important.
“When you look at the efficiency of your marketing spend, you will be able to do a lot of efficiency tweaks; maybe you can switch the media channels and save 10 per cent, maybe you can improve online click-through rates by 5 per cent,” says Mr Al-Qassab.
“But when you look at understanding your customer and getting the consumer insight right, and focusing on your company’s core proposition, you can increase your advertising effectiveness tenfold.”
Moving the focus towards long-term success
The debate about advertising effectiveness versus efficiency has been maturing as companies ask themselves whether they have got the balance right between short-term performance and long-term brand-building.
Enders Analysis has published a landmark report, Mounting Risks to Marketing Effectiveness, which examined why advertisers have become obsessed with efficiency.
“A focus on quick returns and cheap media at all costs is hurting marketing effectiveness, measured in long-term return on investment, brand equity and consumer satisfaction,” according to Enders.
The report blamed…
