Faris Yakob wrote an article for The Economic Times’ Brand Equity.com titled Learning the right lessons from Adidas.

« When we don’t share failures, others can’t learn from them and thus repeat the same mistakes. Brands, like scientists, are in competition, so there is a bias towards not sharing failures for that exact reason. This hinders the entire industry at a time when the advertising effectiveness could use the help. »

« We should all be grateful then to Simon Peel, Global Media Director at Adidas, for his candid EFF Week presentation last month. He stated that focusing on efficiency not effectiveness had led the brand to over-invest in digital advertising. »

« Growth is a function of penetration – 60% of Adidas revenue came from first time buyers – not loyal customers. Well, yes, we know all that – and so did the people at Adidas, as Simon said in his talk. Yet the overall budget split was heavily skewed towards digital and performance – 77% versus 23% for brand. Why? »

« The issue writ large can be described as “metric fixation” and it operates at every level of modern business  »

« Direct to consumer sales, whilst only a small portion of total, are the most profitable, which biases the business toward them. It used attribution modeling from Google and Facebook and had no brand tracking in place. Thus it succumbed to the McNamara fallacy, ignoring that which it didn’t measure, and began to believe that last click digital advertising was driving sales, a fallacy its digital partners were complicit in propagating. These short term and indeed short sighted metrics are unfortunately part of a much broader issue, which is short termism foisted on companies by finance. »

« The solution begins with investing in broader and more robust ways to measure advertising and to focus on media quality above cost. When Adidas brought in econometric measurement they learned that 65% of sales were being driven by brand activity, performance online was driving sales offline, and that it needed to invest more in tv, outdoor and cinema to create a balanced communication strategy. Nothing is as simple and clear cut as it seems, all advertising does some blend of brand and performance, and everything must be considered holistically. Last click attribution from Google led them to invest in paid search, which is only ever demand fulfillment rather than generation and hence doesn’t drive penetration. When AdWords went down in Latam and their paid search stopped, it had no impact on website traffic or revenue. »

 

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