Adidas admits that a focus on efficiency rather than effectiveness led it to over-focus on ROI and over-invest in performance and digital at the expense of brand building.
Adidas is on a journey to shift from marketing efficiency to marketing effectiveness, admitting a focus on ROI led it to over-invest in digital and performance marketing at the expense of brand building.
The sports brand’s global media director, Simon Peel, explains that four years ago the company didn’t have any econometrics, its attribution modelling was based on last-click and it didn’t do any brand tracking. It also focused on efficiency over effectiveness, leading it to look at specific KPIs and how to reduce their cost rather than what was in the best interests of its brands.
This focus on efficiency was one of a number of issues that needed sorting at the company in order to drive long-term growth. It also had an over-supply problem, meaning its products were too often sold on promotion and creating price sensitivity. Plus, it had multiple agencies, inconsistent measurement and a business set-up that meant its main divisions were competing against each other and creating friction on messaging and creative.
“All the basics that exist to tell you how much you should invest in marketing didn’t exist,” Peel told the EffWeek conference this week.
Over the past four years, Adidas has been working to change this. Under a new marketing playbook – dubbed ‘Creating the new’ – and a renewed focus on generating brand desire, Adidas introduced a new campaign framework with emotional, brand-driving activity at the centre. This was an attempt to connect with consumers around major campaigns three or four times a year, while at the same time Adidas ran advertising with a rational message.
Adidas also had a performance budget linked to ecommerce in the belief that digital ads drove digital sales. Adidas was keen to drive online sales because it is the most profitable part of its business.
“We had an understanding that it was digital advertising – desktop and mobile – that was driving those sales and as a consequence we were over-investing in that area,” said Peel.
At the same time, Adidas brought in an econometric model. That helped it discover that where it had thought loyal customers were driving sales, and it was therefore investing in CRM, in fact 60% of revenue came from first-time buyers.
Adidas also found that…
