Clicks ’n Tricks: Performance doesn’t pay off for Adidas
by Charlie Stewart (@CStewart_ZA) Simon Peel, Adidas global media director, made a startling but refreshing confession during a talk at the EffWeek conference mid-October 2019: he laid out his findings of performance marketing not driving sales on his brands’ ecommerce platforms.
What was particularly unusual about Peel’s presentation wasn’t that he’d found issue with Adidas’s performance campaigns but that he was willing to talk about it. For too long, chief marketing officers (CMOs) and others walking in marketing’s gilded halls have been quick to brag when things go well, but come over all omertà-like when things aren’t so rosy.
Heart of malaise
At the heart of Adidas’s malaise was an overreliance on short-term metrics and last-click attribution modelling. The company had worked hard to curb costs by measuring outcomes and data seemed to suggest that not only was digital advertising cheaper than conventional brand building but it was driving quantifiable sales. The lightbulb came on a couple of years ago when a Google Ads outage took the company’s paid-search campaigns offline for two days. Surprisingly, this had no discernable impact on its ecommerce sales.
It is not the first company to have discovered inconsistency with digital media; — back in 2017, Procter & Gamble slashed programmatic spend and saw revenue climb in an otherwise flat market.
But Adidas was hit by another outage six months later. This one lasted a full week and once Peel had established that it, too, had no meaningful effect on sales, he started thinking.
His journey took him to research by Peter Field and Les Binet, a pair of industry veterans who’d been espousing the theory that advertising was losing its efficacy due to overreliance on short-term campaigns. They maintained that organisations should apply a 60:40 weighting in favour of brand building vs performance campaigns. Peel’s audit of his own company’s spend found that it was pumping 77% of its budget into performance and just 23% into brand.
Cue a major rethink, a shift in focus from last-click attribution to an approach driven by econometrics, and the adoption of a more brand-centred strategy, which Adidas christened “Creating the new”.
While it must have been a giggle a minute watching the marketing team members get their heads around the econometrics bit (Wikipedia describes it as the application of statistical methods to economic data in order to give empirical content to economic relationships), once they’d mastered it, they made some very interesting findings.
A previous view that most of its sales came from existing loyal customers targeted through a significant CRM investment was turned on its head when Adidas discovered 60% of revenue came from first-time buyers. It also uncovered no meaningful correlation between business-unit marketing activity and sales of the business unit’s products — for example, football advertising wasn’t the only reason it sold football kits. Plus, there was the reaffirmation that performance didn’t deliver the online sales everyone assumed it did.
Delivered the money
In fact, it was brand advertising — the creation of emotional connections between the brand and its customers — that delivered the money. Advertising on brand drove revenue across all business units. And it generated two thirds of sales across its wholesale, retail and ecommerce channels.
For Field (and I expect we’ll be hearing lots more about him and Binet in the coming years), this was nothing new. He was the person who took Cannes Lions by storm this year with his paper on “The crisis in creative effectiveness”, which presents a wonderful reaffirmation of the need for heavyweight brand-building.
While performance marketing has a clear role in the marketing mix, if organisations neglect their brand and pump too much of their budget into programmatic, dark social posts or Google Ads, they’ll find their consumers buy on price, rather than on value. That’s a race to the bottom I’d rather avoid.
Charlie Stewart (@CStewart_ZA) is CEO of Rogerwilco, a multi-award-winning independent digital agency best known for its expertise with Drupal, SEO and content marketing. A Scot by birth, he moved to South Africa in the early 2000s in his quest to support a winning rugby team — a search he’s reluctantly forsaken. Together with Mark Eardley, he co-authored Business to Business Marketing: A Step by Step Guide, (Penguin Random House, 2016) and may be found on LinkedIn. Charlie contributes the monthly “Clicks ‘n Tricks” column, which looks at how brands are using digital channels to engage their customers, to MarkLives.