Ooh er, adland gets jiggy with performance

Thanks to a forensic examination by Les Binet and Peter Field, the ad industry now has a good hold on the ideal balance between short-term performance marketing and longer-term brand-building

Someone sent me the above slide from the IPA’s Deep Dive into this month’s Effectiveness Awards winners a couple of weeks ago (I’d include the link but the IPA site is under reconstruction).

It’s a bit of a surprise. Is adland finally embracing performance? I don’t believe I’m alone in thinking traditional adland – by which I mean the established creative agencies – has historically had a downer on performance marketing.

There’s a few reasons. Cultural differences between performance specialists and creative agencies, for one. It’s the province of people with black boxes and spreadsheets, not strategists and creatives who want to tug the emotional heartstrings, for another. It’s not about brand-building and long-term value creation (indeed, some hard-liners would say it is, over time, brand destructive). And every pound that goes into performance is one that doesn’t go into creative or display budgets, which is another reason why creative agencies diss it.

But here’s a turn-up for the book. One of last month’s Effectiveness winners was for online gambling business 32 Red, with the case study entered by its media agency, M.i. Media whose slogan is ‘Transforming Advertising Performance’ – so no doubts about which side of the divide it comes from. You can see a short video here.

Thanks to sterling work and forensic examination over 20 years of Effectiveness winners by Les Binet and Peter Field (see item below), the industry now has a good hold on the ideal balance between short-term performance marketing and longer-term brand-building. The broad picture is well-known – roughly a 60:40 split between long-term and short-term – and I’m not going to go into it here.

But life in adland is never static, and the big change in recent years is the rise of online brands. Now Les n’ Peter have turned their attention to them to see if the rules about performance/brand-building are different. You can download their deck or see them in action about 20 minutes in here at last week’s Thinkbox ‘Perfectiveness’ event (those TV people love a good portmanteau).[advert position=”left”]

Their conclusions are fascinating, although I can only do a quick summary here.

1. The online world is no place for weak brands. Activation may help them survive in the short term, but at a high cost to the brand and their ability to grow long term.

2. To find new customers, online brands need broad reach – i.e. broadcast media.

3. In high-research categories (i.e. rational sectors like insurance or travel), emotional ads work harder than non-emotional ones. The split therefore needs to be rebalanced to around 75:25. In less rational, or more System One categories, 55:45 is the ideal.

4. Brand-building is more important for subscription or services brands, most of which are now online.

5. Using digital media as a primer makes broadcast media more effective.

6. In today’s digital environment, activation ads need to be tightly targeted, informative (i.e. tending towards the rational) and responsive. Brand-building ads need broad reach, emotion and memorability – and VoD is especially effective because of the incremental reach it offers.

This is useful stuff. But it is not always clear how it works when it meets the everyday challenges faced by online brands. Generalising, they have to hit critical mass very quickly, either before they run out of cash or their owners (particularly if they are VCs) lose patience. They live in a world with restricted time horizons.

Balancing the longer-term benefits of brand-building versus the immediate gains of activation must therefore be hard, all the more so if – like online estate agents – they are in a sector where the consideration period is an extended one.

Activation is therefore critical for survival, but brand-building for extended prosperity. If a snapshot of the top TV advertisers is anything to go by, the bigger online brands (i.e. those that have built critical mass) appear to get this: BGL (the meerkat people) spent £40m last year, Confused £29m and Moneysupermarket £24m. Further down the list you’ll find the likes of Trivago (£23m), Shop Direct (roughly the same), Go Compare (£20m) and AO.com (£17m). I don’t have its figure for this year, but Purple Bricks will surely also figure high.

Effectiveness winner and online gambling brand 32 Red certainly invested in its share of brand-building – including TV and sports sponsorship – on the way to quadrupling its valuation over a four-year period. But I asked them what the split was: and the answer was 25:75.

I don’t think, somehow, they will look back and think to themselves ‘if only we’d done more brand-building’. Nonetheless, if I was a VC or other potential investor in a consumer-facing online business, I’d want to read this before I parted with my money.

First-name brands

If you’ve been hanging around adland for Eff Week and all its offshoots, two names will have stood out. If you want to think about it in advertising terms, they’re multi-channel, achieving high reach and frequency.

Yes, I’m talking about the ‘Godfathers of Effectiveness’, Lesn’Peter, who have now become a one-word brand in their own right. Name recognition is high, the brand dominates its category and we all know what it stands for.

If they weren’t so naturally modest and self-effacing, I’d suggest they study themselves as object lessons in building a brand – their own.

They would do a far more rigorous job than I, but think about it: The Lesn’Peter brand has stood the test of time; it reinvents itself about every two years, staying fresh and relevant; share of voice is high; it is both trusted and reliable; and I sincerely hope, although I have no idea how its business model works, that the brand demonstrates both long-term profitability and price inelasticity.

Eff(ing) gold all the way, IMHO.