Marketing News 2
Adidas Admits to Over Invest in Digital Marketing
Currently, Adidas is on a shifting journey from marketing efficiency to marketing effectiveness. Admitting this focus, Adidas CEO Simon Peel expounded on this matter and confirming that the company had over-invested in the aspect of digital and performance at the expense of brand building. By overemphasizing the short-term objective of sales growth, Adidas has been investing in digital marketing platforms for the last four years to attain performance over the brand establishment and effectiveness over efficiency. Adidas spent much time and resources strategizing on cost reduction rather than what was in the best interest of the brand.
With the current models of econometrics and new long-term marketing mechanisms, Adidas is now placing more emphasis on brand activities and its sales results. The primary concerns were as follows; brand activity moving at 65% of sales, though Adidas focused on advertisements at 77% on performance while only 23% were attached to the brand.
Discussions and Analysis
The effects of marketing effectiveness emphasis were felt when the Company’s econometrics worsened. Its modeling attribution was mainly based ion the effectiveness leading to no brand tracking at all. The outcome is that specific Key Performance Indicators on the cost reduction are given priority. Notably, the KPIs are the metrics tracked in the business to help determine the overall relative effective marketing and sales efforts. The various marketing and sales KPIs include Cost per Lead; Marketing Qualified Leads, Customer Retention, Cost per Customer Acquisition, Marketing Return on Investment, Sales Qualified Leads, Opportunity to Win Ration, and Sales Revenue.
For the case of Adida’s choice on marketing effectiveness, it means that the company chooses the way of Marketing Return on the Investment strategy that focuses on cost minimization during a marketing lead campaign. This KPI is all about the revenue generated or realized by a specific marketing campaign compared to the cost incurred in running the campaign. Therefore, ROI is considered as a monitoring and assessment tool for business and organization performance. To track ROI, the number of lead campaigns are generated divided by the opportunity value or average value per win divided by the average cost to lead ratio. Unfortunately, ROI at times characterized by the difficulties of determining direct returns in certain situations, such as when a lead views an ad without clicking, then visits the business site at a later time.
In the case of Adidas, the efficiency focus was one of the numerous issues that required sorting and rearrangements to drive the long-term growth and development of company sales. It also experienced the problem of oversupply, an indication that its products were frequently sold on promotions, thus creating price sensitivity. Besides, it had multiple agencies, inconsistent measurements, and a business structure that allowed its significant components to compete for one another, creating friction on messaging and creativity. This Menes could not have allowed the company to use the efficiency marketing strategy and realize a profit in the long run.
To change such a situation, new marketing campaigns, marketing research and analysis, and new campaign frameworks are needed to be at the center. The company then was to make attempts to connect to the consumer during the campaign rounds that can be either four or three times per annum and, at the same time, running rational messages around the social media platforms. The concept of social media marketing and advertisement has had a clear role in the marketing field. Thus, managers and researchers should understand the impacts it has on purchase behaviors, customer relationship management, brand management, innovation management, and employee management.
The main reason behind social media marketing is that there has been an extraordinary growth and development of digital technology impacting most of the lives of young consumers globally. The new interactive revolution is the outcome of the internet achievements that recently has more than three billion users worldwide. Social media has become a vital part of life in the era of modernity, especially among teenagers and adolescents consumers called generation Z. This generation has enthusiastically adopted the modern ICT platforms such as Twitter, Facebook, YouTube, LinkedIn, Instagram, WhatsApp, Google Plus, WeChat, Pinterest, and Tumblr. These social media platforms permit the young to create online accounts and pages to interact and communicate with friends, and hence they can easily be found by marketers in those platforms.
The depth of Adidas’ marketing effectiveness had a performance budget connected to e-commerce, hoping that digital marketing and advertisement will drive a digital sale. With such a motive, I could mean that Adidas required to apply most of her efforts to the online sale as that was the major profitable component of its business. Therefore, the success of that strategy would mean that desktop and mobile driving the required sale would be the final consequence for the overemphasizing investment in that area. This can be proved by the Customer Relationship Management indicator as a new econometrics model that the company applied to help to attract new and first, time customers. According to the company report, it showed that 60% of the revenue came from first-time customers. Proof of that effectiveness marketing bored fruits.
Digital marketing that Adidas used was not limited to football marketing only. It also includes the use of other social media platforms to push marketing goals to prospective customers. Under typical scenarios, the percentage split between brand activity and performance usually is 65:35 or 60:40 ratios driven across the wholesale, retail, and ecommerce. In contrast, performance drives wholesale and retail sales. Surprisingly, the Adidas case curved on the ration of 23:77 in the view of brand activity and performance. According to Les Binet and Peter Field, the recommended ratio is on the range of 60:40 in favor of brand building.
This kind of marketing strategy cannot be used in the long run periods of the business because of the quick sales growth forecasting, and the outcome is the short-termism. Looking at the case at hand, the wrong metrics that the company procrastinated could have been as a result of the application of the four attribution models – Facebook, Google Custom, Adobe, and Google Last Click. In addition to the models, the problem could have also been an outcome of short term focus, and the real-time measurements that focus on Return on Investment (ROI) and Return on ad Spend (ROAS). Remember, over investing in a particular marketing platform would go to the extent of overpaying, such as marketing and advertisement companies. For example, Adidas over-invested and paid the Google Ad Search, and sometime later, it experienced a breakdown, causing a dip in traffic or revenue derived from SEO.
Conclusion
Adidas also applied various data points to negotiate investment decisions. I was directed to consumer sales, while just a small portion is profitable, and this biases the business toward them. From the look of things, it appears that the company used attribution modeling from Facebook and Google and had no brand tracking in place. These short term and indeed short-sightedness forms the unfortunate component of the broader view, which is short-termism entrenched on the companies by finance.
Therefore, the solution starts with investing the broader and more robust strategies to determine advertising measurement and focus on media quality above the cost. For example, when Adidas engaged an econometrics measurement, they learned that the activities of the brand were driving 65 %, performance online had the drive of sales offline. Meaning, more TV investment, cinema, and outdoor were required to create a balanced communication strategy during the marketing campaigns. All in all, the most effective and efficient marketing strategies blend the brand and performance, and everything must be considered holistically.
References
Carr, D. (2019). The Effectiveness of Collaboration within Supply Chain Management: A Case Study of Adidas Group.
Crasto, S. G., Kee, D. M. H., Xin, C. W., Juin, H. X., Man, L. K., & Pandey, D. (2020). Product innovation by Adidas Group through Sustainability. Journal of the community development in Asia, 3(1), 1-7.
Fontaine, S. P. (2020). Analyzing the Social Media Presence of Nike, Adidas, and New Balance Using Social Listening.
Kumar, V., Choi, J. B., & Greene, M. (2017). Synergistic effects of social media and traditional marketing on brand sales: capturing the time-varying results. Journal of the Academy of Marketing Science, 45(2), 268-288.