adidas is on a marketing effectiveness journey as it shifts its focus from simple efficiency measures and embraces econometric modelling to give it a more nuanced view of the impact of its spending.
Speaking at the IPA EffWorks conference in London, the sports brand’s global media director, Simon Peel, set the scene.
“About four years ago we didn’t have any econometric modelling, our attribution modelling was based on last click, we didn’t do brand tracking”, he explained. “All the basics that exist to tell you how much you should invest in marketing didn’t exist.” (For the full story on adidas’ pivot, read WARC’s exclusive report: adidas makes course correction on marketing effectiveness.)
Despite this oversight, the brand has been growing. Its market capitalisation is $60 billion, it operates in 150 markets, advertises in 120 and claims an 8-9% market share compared to market leader Nike’s 11%.
“We think we’re going in the right direction,” Peel added – the growth rate would certainly suggest that – “but we can also be easily misled about some metrics.”
For instance, in e-commerce, he said, “we had an understanding that it was digital advertising – desktop and mobile – that was driving those sales and as a consequence, we have probably been over-investing in that particular area.”
As it turned out, “brand [and category] is driving 65% of our sales across wholesale, retail and e-commerce, and yet [at 55% of investment] it has an under investment; so if you look at efficiency, brand is under-represented here.”
“The previous KPI was just about how do you buy cheaper media,” he admitted, but “that can be gamed; you pay the agency crap money and then you get into this problem where there’s no real insight, there’s no transparency that’s going to tell you what is driving effectiveness.”
The problem then is not the metrics per se but a focus on the wrong metrics. Digital technology offers a wealth of short-term measurements, often in real time, which has resulted in marketing investment being misdirected. “We do overly focus on digital attribution and digital sales but we are improving”.
Sourced from WARC