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WARC Talks: How McDonald’s built a culture of creative effectiveness

In this episode of the WARC Podcast we are given a look into how McDonald’s has built a culture of creative effectiveness.

• WARC Insight Director Aditya Kishore talks to Joan Colletta, Senior Director of Global Brand Leadership Team at McDonald’s.
• They discuss how McDonald’s overhauled its marketing communications to become a real driver of commercial growth.

Listen to the episode in full here

Timestamps

02:39 – Tariq Hassan on Famous Orders.
05:35 – What caused McDonald’s transformation?
06:45 – The link between creativity and impact at McDonald’s.
09:16 – Who is responsible for ensuring this new approach is adopted?
10:48 – Working with agencies to continue building on this success.
12:53 – Celebrating success at McDonald’s.
15:12 – Has a culture of creative effectiveness taken McDonald’s forward?
17:06 – Tariq Hassan on the effects of this transformation.

Further reading

McDonald’s: Famous Orders

Building a culture of creative effectiveness

Creative impact unpacked: Building a culture of creative effectiveness

Growth efficiency: a new metric to monitor brand health and generate future sales growth

Short-term sales efficiency is not an indicator of how efficiently a company can grow, but by measuring longer-term growth efficiency, scale-up brands can plan for profitable growth, according to a new report from WARC.

Growth Efficiency: Marketing’s Existential Metric, produced in partnership with brand tracking company Tracksuit, and WARC sibling company Perpetua, a provider of e-commerce advertising optimization and intelligence also highlights that building brand awareness drives greater effectiveness in performance marketing.

Key findings

• The Paradox of Unscalable Efficiency
  A common pattern among brands seeking to scale up is that at a certain point, growth plateaus, becomes more expensive, and previously strong performance marketing metrics, such as ROI or ROAS, decline.

• Growth Efficiency and Brand Strength
  High awareness brands generate more than twice the sales lifts of low awareness brands as they increase their spend. At a 10% spend increase, high awareness brands yield an average 13% sales increase, while low awareness brands yield just a 6% sales increase.

• Future demand and growth efficiency
  Very low awareness brands (1-5%) with small overall sales have very high growth efficiency. But as those brands grow past a certain scale, if they haven’t built awareness among Future Demand, their growth quickly diminishes. 

• Modelling growth efficiency as brands scale
  When brands scale up awareness at the same time as scaling up performance spend, sales can continue to happen very efficiently and brands can grow profitably into a much bigger and much more valuable business.
  Greater levels of brand awareness supports greater levels of growth efficiency. Both are critical to sustainable, profitable growth. And the latter is very much dependent on the former.

A complimentary sample report is available to read here. WARC subscribers can read the report in full. 

Aldi grows on the consumer shift to private label

Private-label products are at record highs, says Giles Hurley, CEO of Aldi UK and Ireland, in a sign that economic trouble remains a reality for many people despite a cooling in inflation. 

Why private labels matter

To an extent, private label products are the enemy of brands (other than the brand of that supermarket) and during lean economic times or when everything is getting more expensive, private labels tend to encroach on traditional brands’ customer bases. 

The Aldi equation

• Now the UK’s fourth largest supermarket, over half of everything bought at the German-originated discounter has been from its private labels, the supermarket told the BBC, with “own label products growing at twice the rate of branded goods,” said Hurley.
• Two thirds of UK households are now buying from Aldi, according to Hurley, with many of those purchases made up of Aldi’s typical mix of own-brand products. Eyeing a greater opportunity, Aldi said on Monday that it was planning to open a further 500 UK stores in the coming years.
• This week, the company posted strong results even if it noted that many shoppers continued to be “under real pressure”. However, there is now pressure on the discounters as traditional supermarkets also accelerate their price cuts; for the first time in months, Aldi and Lidl lost some ground to traditional rivals, according to Kantar data reported by the FT.

 Key quote

“Why would [shoppers] go back?” - Giles Hurley, CEO of Aldi UK and Ireland. 

Sourced from the BBC, FT, WARC

A greenwashing crackdown is coming 

As a Vienna commercial court finds Austrian Airlines misled passengers over claims about sustainable flights, the EU has taken another step towards a complete ban on greenwashing.

What’s happened 

The airline said that flights to an art show in Venice would be fueled with 100% sustainable fuel. But only 5% derived from renewable resources, according to a copy of the court decision the airline was required to post on its website and social media account where the original ad appeared. It was also made to pay the costs of the consumer-protection association that brought the case against it, Bloomberg reports. 

Why it matters

The sanction on Lufthansa-owned Austrian Airlines amounts to little more than a slap on the wrist but a new EU law will outlaw such practices altogether (although not until 2026), Euractiv reports. 

• Airlines will no longer be able to use carbon offsets to suggest flying is climate-neutral.
• Generic environmental claims will require proof of recognised performance.
• The use of terms such as “eco” or “natural” will need to be backed by evidence.
• Manufacturers' labelling will need to display expected product lifetimes. 

Key quote

“We are clearing the chaos of environmental claims, which will now have to be substantiated, and claims based on emissions offsetting will be banned” – Biljana Borzan MEP.

Sourced from Bloomberg, Euractiv

Apple’s plan to change sport

With its arrival in the world of sport broadcasting, Apple is now working on the experience of watching sport as if it’s an Apple product, a process that requires it to go beyond the typical influence of a broadcast partner. 

Why Apple’s adventures in sport matter

Apple appears to have slickly made its move into sport broadcasting to catch a wave of interest and subscribers. However, for the company, the deal was as much about the ability to innovate and keep a focus on the product beyond a traditional rights deal, explains an Apple senior executive. 

What is interesting about the tech giant, which is undeniably a brand of special fascination for many marketers, is that its size and ambition is so vast that it can sometimes leave executives worrying that ideas aren’t big enough to make a mark (after all, it made $81 billion in the three months ending July). As a result, it can sometimes miss opportunities – MLS season pass was almost one of these.

What’s going on

Lionel Messi’s move to the US – a boon not just for his team Inter Miami, but for the entire MLS – has drawn increasing attention, not least because of his very novel deal with Apple: he is reported to be receiving a cut of the revenue from subscriptions to the iPhone maker’s MLS season pass. 

Sport is an increasingly vital element of big tech’s entry into TV entertainment, with sport one of the most reliable ways to gather and retain a big audience. Apple is no exception, but it wanted to add new features and a uniquely good experience for subscribers. 

GQ’s sports vertical interviewed Apple’s Eddy Cue, SVP of its services division – a $21 billion per quarter business that encompasses music, TV, news, and even fitness and health services – who confirmed the revolutionary deal with Messi. 

• Early innovations included the idea of a “close game” notification, in which subscribers can be alerted to a tight finish they might otherwise miss. 
• But Apple’s ambitions went much further: not least the right to broadcast every single game played in the league (usually, parcels of games are divided and sold to different broadcasters). “I was positive: we're not going to get in the game of playing here if we have to play by those rules,” Cue told GQ.
• Other adaptations are less revolutionary but help simplify the experience, both for fans at live games and for subscribers. Games now take place at 7:30pm, local time, on Saturdays and the occasional Wednesday (rather than throughout the week as they used to). 

Key quote

“We like to design things in a way that they're simple and intuitive and beautiful for people. And we always start the process with building a great product,” Oliver Schusser, VP, Apple Music & International Content, quoted in GQ. 

Sourced from GQ, WARC 

[Image: Apple]

Amazon Prime Video gets ads

The internet giant’s streaming service, Amazon Prime, will start to include advertising from early 2024 across select markets in the US and Europe, as the company seeks to monetise its audience beyond its membership fee. 

Amazon announced the changes in a blog post, explaining the move as a way to sustain investment in content and noting its “aim to have meaningfully fewer ads than linear TV and other streaming TV providers”. 

The rollout will begin in the US, UK, Germany, and Canada in early 2024, followed by France, Italy, Spain, Mexico, and Australia later in the year. 

Why Amazon Prime Video ads matter

This isn’t entirely new territory for Amazon: advertising has taken a TV-esque form in its NFL Thursday Night Football broadcasts in the US and across its football and rugby coverage in the UK. In addition, its Freevee service (FKA IMDb TV) is already an ad-supported video-on-demand service. 

The complication, of course, is that viewers of Amazon Prime Video are already paying a fee, though they will have the option of paying a bit more to have no advertising. However, given that the core benefit of membership is the fast shipping, it’s likely that inertia will keep most subscribers with the service. 

It is a large and significant opportunity, with Amazon Prime’s more than 200m members now addressable through the one-stop retail shop of brand-led creative video advertising, right through to the point of purchase. 

In context

From a more or less standing start at the end of the last decade, Amazon has established itself among the ‘big five’ advertising firms. In its specialist area of retail media, Amazon is expected to take a global share of 37.2% of all spend, according to WARC forecasts. 

For Amazon, this has manifested as a consistent area of extreme growth during its conversations with investors. 

• While most of the growth in Amazon’s advertising business comes from performance, studies are beginning to suggest that the company’s advertising is capable of helping brands’ sales beyond Amazon.
• The will to spend on Amazon advertising is clearly high, but recent research from Tracksuit and WARC indicate that awareness scores remain vital to brands looking to perform on Amazon – effectively, performance is not enough.

Sourced from Amazon, WARC

[Image: Amazon]

Marketers are ‘missing out’ on attention by not focusing on auditory content

In the battle for attention in busy front rooms – including distractions from second screens, children, pets and good old-fashioned conversation – audio is a key weapon for advertisers, a new study concludes. 

Why auditory attention matters

The majority of advertising attention research has focused on visual media, often via eye-tracking technology. This approach has helped brands to move beyond viewability as a measure of ad effectiveness. However, it may fail to fully capture the multisensory nature of human attention.

The big experiment

New research, commissioned by Thinkbox, the trade body for UK commercial TV, and carried out by Dr Alastair Goode, a cognitive scientist from Gorilla In The Room, set out to understand how much attention brand advertising can gain when consumer eyes are focused on other tasks. 

It was the follow-up to a 2022 study (Giving attention a little attention), which compared business research with academic literature on attention to advertising. 

Participants were asked to watch video ads while performing different tasks, including: listening to music; scrolling an Instagram-style feed of images; listening to speech; reading posts on X (formerly Twitter); reading a web page; texting; and having a conversation. 

The study found that auditory memory consistently outperformed visual memory (72% vs. 60%), and that people are able to process and retain numerous audio cues (including spoken messages, sonic brand assets and jingles) without paying visual attention to an ad. 

“If you aren’t maximising auditory content then you’re missing out,” concluded Goode. 

Takeaways

1. Audio is the most important thing to consider when people are not fully paying attention to an ad.
2. Audio-visual is more than just audio plus visual: brands can use them together when forming a narrative.
3. Visual attention does not automatically guarantee an ad will end up in memory.
4. Media and creative, as well as psychological factors, are important in producing outcomes. 

AB

Sourced from Thinkbox, Gorilla In The Room

Targeted online ad campaigns face profitability problem

Advertisers should be cautious when running targeted online ads because this practice is less likely to be profitable than simply running an untargeted campaign, a study finds. 

The research looked at what audience segments advertisers should select for randomized controlled trials and found that the more narrow the audience segment, the less likely you will break even, much less become profitable. The authors attributed this to the role that data cost and reach play in profitability. 

Why targeting matters 

In 2018, global digital ad spend surpassed television ad spend for the first time. The primary appeal of online ads is their capacity to target users more strategically, based on user demographics and online behaviour. 

Intuitively, targeting should increase an advertiser’s profit by allowing the advertiser to stop wasting money on people who aren’t interested in a brand’s products; but targeting comes with extra costs and it reduces the number of reachable people, which can affect conversion and click-through rates.

Takeaways

• Researchers examined how a targeted ad campaign can be as profitable as an untargeted one, by developing a model that considers the trade-off between reach, cost, and performance (i.e., effectiveness). 
• Targeting extremely narrow segments is ‘highly unprofitable’ due to the large increase in performance needed (in click-through rates and conversion rates) to compensate for the loss in reach.
• One experiment looked at running campaigns on Spotify: approximately half of the audience segments tested required the click-through rate to double compared to an untargeted campaign, which is unrealistically high for most ad campaigns.
• The introduction of Apple’s ATT suggests ‘that advertisers benefit less from targeting narrower audiences with growing restrictions on third-party data’ because the true reach of audience segments might be overestimated. 
• ATT more negatively affects the click-through rate of narrow (versus broad) audience segments.

Key quote 

‘Our paper provides ad agencies with important arguments for why they must meticulously evaluate the profitability of narrow audience segments before committing to them’ – study authors, ‘Overwhelming targeting options: Selecting audience segments for online advertising’.

About the study

An Austrian ad agency designed broad, narrow, and no-targeting strategies for one of its clients (a car dealer in Vienna), to compare their profitability. The budget was 5700 euros and the experiment lasted three months. 

A second study looked at running a campaign on Spotify, while a third assessed the impact of Apple’s ATT framework on 86 different campaigns from six advertisers in diverse industries.

Sourced from International Journal of Research in Marketing 

Nestlé reassesses its approach to creativity

“Creativity can be more effective,” argues Nestlé’s global chief marketing and digital officer at DMEXCO – putting a particular emphasis on the words “can be”.

Why creativity matters

Speaking at the conference, Aude Gandon added: “It can be more diverse, it can be more responsive, it can be more valuable, and it can be more effective – but it can only be [those things] if we know how to leverage these [digital] tools, if we know how to handle the opportunities that we have ahead of us.”

It’s significant that she refers to digital tools, noting that effective content around the world – and she cited the WARC Effective 100 in support of her contention – often does not include a TV ad anymore. 

Takeaways

• “Don’t get too enamoured by the plumbing” is effectively Gandon’s version of not being distracted by the latest shiny new thing. Tech is the foundation of marketing, not the end product, she said: success is about pairing your existing expertise in the fundamentals of marketing – which have never changed – and amplifying that with the tools of the time.
• For example, Nestlé’s Creative X tool, powered by AI, has freed up teams from a digital checklist and enabled a 66% increase in ROMI on Meta platforms.
• In one territory, Nestlé Content Studios was able to produce 5,000 different, personalised assets for a variety of platforms from seven master assets.
• “There’s no room for lazy marketing” in an era of ad blockers and ad-free subscriptions, argued Gandon: the bar for creativity and value is getting higher.
• Upskilling at scale is essential (and Nestlé is doing just that with its 12,000 marketers around the world) to enable proper use of AI and other digital tools in order to “unleash a whole new era of creativity”. 

Key quote

“Creativity is not dead. Creativity is being reinvented and it looks pretty exciting to me” – Aude Gandon, Global Chief Marketing and Digital Officer at Nestlé.

BEC

[Image: Nestlé]

Differentiation and the ‘deadweight’ economy

With recent reports suggesting that inflation may be stabilising, Gartner describes the new climate as a “deadweight” economy and it will involve businesses investing in differentiation to succeed, the research firm argues. 

Why differentiation matters

“Branding lasts, differentiation doesn’t,” argued marketing science guru Byron Sharp, but some thinkers are beginning to disagree. 

The debate between distinctiveness and differentiation has started to assume an “ideological” profile, as Mark Ritson put it, but the debate is vitally important to marketing and sets out the why and the how of the discipline. Getting around two incredibly similar words is tough, however. Check out this WARC Podcast on the topic featuring Ehrenberg-Bass’s Jenni Romaniuk and Northeastern University’s Koen Pauwels. 

What Gartner says

An illuminating new blog from Gartner’s finance practice breaks down the challenges facing finance departments at major businesses, all of which are interesting, but the big ones for marketers are:

• Zero-sum growth
• Waning pricing power

Where the debate comes in

Value rather than volume becomes important for marketers in an inflationary environment, as Dom Boyd, managing director, UK Insights and Effectiveness practice at Kantar, and Felipe Tomasz, of Oxford University, explained earlier this year. 

“You’ve got to design for difference in every way in your brand strategy; in your innovation, in your communications, in your experience – design for difference,” explained Boyd. 

For finance professionals, too, Gartner argues focusing company investments on points of differentiation or uniqueness in a battle for market share. 

Key quote

“The deadweight economy challenges an organization’s ability to meet corporate performance expectations by constraining traditional avenues for growth, pricing, investment funding, cost management, people management, and productivity gains, and deadweight economic conditions can be expected to linger through most, if not all, of organizations’ current strategic planning horizons” – Randeep Rathindran, distinguished vice president, research, Gartner Finance practice.

Sourced from Gartner, WARC

E-commerce the big winner from holiday sales period

US shoppers will be looking for bargains in the upcoming Amazon Prime Day and Black Friday/Cyber Monday sales – UK shoppers maybe not so much – so brands and retailers on both sides of the Atlantic will need to be alert to where their main opportunities lie.

What’s happening? 

A post-pandemic burst of spending has abated and with inflation continuing to affect consumer purchasing behaviour, sale days like Black Friday and Cyber Monday are likely to be more important than ever in this year’s holiday spending plans. Volume sales will grow, but the value of sales will increase at a slower rate than last year.

Retailers will need to pitch their offer accordingly, taking note of shifting patterns of demand, while those brands not being promoted by retailers can still benefit from driving traffic and being “retail-ready”.

Takeaways

• Deloitte is forecasting a 3.5%-4.6% increase in US holiday sales this year, or around half that of 2022, although e-commerce sales are expected to grow three times as fast as the bottom end of that range.
• It’s reported that TikTok will be offering sellers, in its recently-launched-in-the-US TikTok Shop, subsidies of up to 50% as it seeks to win over holiday shoppers.
• In the UK, a minority (14% in a consumer survey by It Works Media) are regular hunters of Black Friday deals; most people (58%) believe Black Friday deals are not good value for money, so retailers could be better off focusing their holiday marketing efforts outside of this date.
• Previous research has shown that a strong seasonal campaign can positively frame brand experiences to build stronger business results beyond the critical Christmas months to the following year.

Sourced from Deloitte, Bloomberg, It Works, WARC

‘Marketing at the speed of consumers’ as the AI wars heat up

The use of AI in marketing can help marketers respond more effectively to consumers, even as consumers themselves are finding that AI helps them get through their own tasks more quickly. 

Why AI matters to marketing

Everyone understands that AI is a game changer. In the words of Google’s Gaurav Bhaya, speaking at DMEXCO in Germany, the current situation is an inflection point when “it finally became possible for marketers to market at the speed of consumers”. And for those consumers, he also holds out the welcome possibility of no longer showing them ads for a particular product once they’ve bought it.

Takeaways

• Google reports that using AI in its Performance Max platform helped airline Lufthansa increase new bookings 59% while at the same time reducing cost per acquisition.
• Simple AI-driven techniques such as flipping horizontal video to vertical for different platforms can drive up to 13% more conversions. 
• At the same event, Microsoft’s Mascha Driessen reported that 72% of people coming to Bing Chat arrive via Google Search; one-third of them have never used Bing before. “We’re extending our reach with this,” the regional vice president for advertising, Continental Europe, said.
• Bing Chat users tend to be younger and they complete their tasks in half the time of traditional search.

Key quote

“You’re not competing against AI. You’re competing against other marketers who are using AI. The sooner you start practising and experimenting with AI, the greater the advantage you have over your competition” – Gaurav Bhaya, VP & GM Google Ads, Measurement. 

BEC

Why brands should rethink social for Gen X

Despite their numbers and spending power globally, Gen X consumers are often ignored by brands and the advertising industry, particularly across social media advertising, according to new research from Wavemaker. 

In Finding the Gen X Factor, the media agency highlights a huge untapped opportunity for brands, especially when it comes to how they interact with this age group on social. 

Why Gen X matters

Gen X accounts for around a third of the global population (31%) and more than a quarter of global spending (27%), but only 4% of the ad industry’s research into different generations includes Gen X. 

Takeaways 

• Gen X is on track to be the most affluent generation of all time, as $70tn of wealth is passed to them from Boomers.

• 92% of Gen X use social media every day, half of them use TikTok.

• Gen X represents almost a third (28%) of TikTok’s user base but only 5% of brand spend on influencer campaigns.

• Only 13% of Gen X feel represented in the social advertising they see, but when they do see their generation represented it doubles their preference.

• Influencer campaigns tested performed far worse with Gen X than with Gen Z and millennials – 30% lower retention rates, 20% fewer interactions with the content and 47% lower impact on brand opinion. 

• Posts from Gen X creators performed better with that audience and are on average three-quarters (75%) longer than posts from Gen Z (10-25s) or millennial (25-45s) creators.

Key quote

“Gen X are more brand loyal, have longer attention spans and are more engaged on social media, ultimately proving to be more valuable consumers than their younger counterparts” – Zoe Bowen-Jones, Senior Insight Director at Wavemaker. 

Sourced from Wavemaker

Instagram forecast to hit $71bn revenue by 2024

Instagram is set to recover faster than other social media rivals following Apple’s ATT and a wider weakening of the digital ad market to reach $71bn by 2024, as consumers and brands look to the image-sharing site’s social commerce future. 

WARC Media’s latest Platform Insights report provides an overview of the key datapoints that advertisers need to know about the platform, spanning investment, consumption and performance. The full report – with evidence-based insights on Instagram's challenges and opportunities – is available to WARC Media subscribers.

Why Instagram matters

One of the jewells in Meta’s crown, Instagram has not only remained important but is becoming more influential. Nearly a third (30.4%) of consumers now look to Instagram when searching for brands, according to GWI. As a result, retailers are set to invest $9.1bn in the platform across 2024 alone.

“Buoyed by innovations in AI targeting helping it to offset the impact of ATT and improved monetisation of Reels, it is only a matter of time before Instagram surpasses its Meta stablemate Facebook to become the world’s largest social media platform by ad revenue,” explains Alex Brownsell, head of content at WARC Media. 

What’s happening

WARC Media forecasts quarterly advertising revenues of $17.7bn in Q4 2023, up 25.8% year-on-year, and predicts its global ad revenue to reach $71bn in 2024. 

Following a flat 2022 off the back of a digital advertising slowdown and the ongoing effects of the Apple Ad Tracking Transparency (ATT) measures, which hit Meta’s ability to track campaign performance for clients, the platform is now going from strength to strength. 

Aside from brands spending directly on advertising with Instagram, it remains the most popular platform for influencers (used by 90% of influencers versus the 63% who use TikTok).

“The recovery of Meta’s ad business in 2023 has been one of the most notable media industry stories of the year. Twelve months ago, commentators were warning of a ‘reckoning’ for Big Tech, with platforms like Instagram hurting from signal loss resulting from Apple’s ATT policy, alongside a broader slowdown in digital ad investment,” adds Brownsell.

Reels is key to Instagram’s resurgence

Campaigns on Reels reach nearly twice the audience as those on TikTok, according to data from Emplifi, while nearly a third (30.4%) of consumers turn to Instagram when searching for brands.

According to Emplifi, Reels outperformed all other content types on Instagram, generating 55% more interactions than single-image posts and 29% more interactions than standard video posts.

More on WARC’s Platform Insight reports

Platform Insights: Instagram follows the recent release of Platform Insights: YouTube, a new series of reports exclusive to WARC Media subscribers, which include an overview of platform investments, media consumption and performance insights.