The Adidas Case: An End to Data-driven Nonsense?

Here the Horizon guest post - THERE the annotated lecture video

Adidas' announcement that the brand had invested too heavily in online performance advertising in recent years is a major concern for the industry. Companion CEO Michael Heine hopes that the sporting goods company's change of strategy will lead to other company managers returning to the essentials: Namely, to manage their brands.

Guest article by Michael Heine

Adidas is restructuring its marketing mix: With 23 percent "brand" and 77 percent "performance," it's probably time to call it a day. What is remarkable about this? Nothing, really, because according to Pwc, 62 percent of a brand's value and success is created in the consumer's head, stomach and underbelly - and not at the workbench, not in the product, and not in retail.

Doing the right thing means putting value creation at the center through brand communication

To recap: 62 percent of a company's value is generated by the associations consumers make with a brand - before, during and after their encounter with the product. 62 percent - and marketing communication is largely responsible for this. That's great, that's exactly why we all do our job. And we especially like doing it for emotionally highly charged brands like Adidas, where the share of marketing in the value of the company will be much higher, an estimated 80 percent.

However you create value, you can't do it by one thing: by increasing efficiency. Because efficiency is only ever about cutting costs. Even management guru Peter F. Drucker knew that value is only created through innovation and marketing. Only through these two functions, nothing else. Of course, he also knew that cost reduction (efficiency) is an important exercise for a healthy company, but it is not value creation. After all, nothing is easier than saving yourself to death. It is not enough to "do things right" (efficiency). You also have to "do the right things" (effectiveness). For the past 40 years, these Drucker maxims have been part of the basics of corporate and brand management.

You don't build brand equity with clicks

The Adidas case and also its commentary in the good HORIZONT article by Ingo Rentz show how important it is to remember such basics in the digital marketing environment. Too many "digital experts" seem to have forgotten self-evident facts, or worse: never dealt with them.

Instead, in year 24 of its existence, online marketing is still dominated by "performance marketing". This is a mechanism for click-based advertising optimization that, from a brand's point of view, can only pay off in terms of sales promotion (direct marketing), but not in terms of brand value. You don't build brand equity with clicks. But you can build it with viewing time, with passive "engagement" in the form of inner involvement in watching or reading content.

So when a brand like Adidas goes 77 percent "performance", you don't need to know anything more about the campaigns to predict for sure: that works for short-term sales success, but AGAINST the brand. In this respect, Simon Peel's decision is logical, correct and actually not worth mentioning.
What is remarkable, however, are the reasons given for the change in strategy. They shine a spotlight on the shockingly weak quality in which "digital" is discussed and apparently managed among advertisers and agencies. Let's look at the points made in the HORIZONT article.

Digital nonsense - what the daily madness obscures the view of

1. "There was no suitable model in-house at Adidas to track the importance of individual contact points in the customer journey for the purchase decision."

As if the existence of such a model would have made any significant difference to the results. Even with a functioning "customer journey analysis" including "attribution models", one would only have optimized even more effectively for sales (e-commerce) instead of brand. Even more damage would then have been done to the brand - but at far less favorable costs. This is because the so-called "customer journey," a Google invention to legitimize the seamless personal monitoring of online users' privacy, can only be "analyzed" across channels at very high cost. It is a spy technique that has to be used and paid for, and there are enough scientific studies to prove that targeting is NOT economically worthwhile because of clearly inadequate results - for the advertiser, mind you.

The situation is different for Google, Facebook, performance marketers, retargeters, ad server providers, fingerprint experts, data traders, DMP operators, etc., etc. - for all the middlemen of the monitoring industry (formerly: online marketing). They all earn money from the counterproductive nonsense for branded companies, which is sold as "success" in the "data-driven" environment. What ratings and recommendations do you think they gave Adidas when they boosted performance in Herzogenaurach to 77 percent?

2. "Instead looked at the last click".

Ouch. That's really a mistake. It's surprising. Who would have thought that today somewhere is still optimizing for the last cookie? Since the end of the 90s, the digital industry has been aware of the dimensions and criminal means used to fight for the last cookie entry in the affiliate marketing environment. Those who mark the last click for themselves get the sales commission (keyword: hijacking).

So if, as everyone knows, a real war is being waged over the last cookie, how can it be that a global brand like Adidas optimizes on this maximally unreliable information? Was it ignorance? Did it have internal reasons? Probably it did. They probably kept their eyes on short-term e-commerce margins until they started doing affiliate marketing themselves. A global brand in the hands of commission hunters.... What kind of management is this, what kind of lead agency is this that allows this to happen?

3. "Contrary to what last-click attribution suggests, investments in moving image, TV, out-of-home, and cinema are better spent than paid search and online display."

Yes, that's true. A brand is not moved by performance, but by the emotions of the customers. But who is trying to make any assumptions about moving images, TV, out-of-home and cinema based on click attribution (cookies, a highly dubious database)?

The dominance of US platforms in the global advertising market continues to grow. This is the conclusion of the World Advertising Research Center (WARC). According to this, Google, Facebook and Amazon alone are responsible for the growth in ad investment in the coming year.And that you can't build a brand with paid search and online display is something everyone who doesn't get their expertise from Google training courses should know. "Brand needs reception" - what can be done to ensure that this truism from the basic rules of marketing migrates into the general knowledge of the digital naïve?

4. "And so it remains at least doubtful whether Adidas is suitable as a key witness in an anti-online argument."

It is not about "anti-online," a "conflict between genres" is not the issue. It's simply about the question of which media and communications strategy to use to achieve growth and success in digital times. It is a fact that the media world is becoming inexorably digitalized and fragmented. But this change must not be the top issue for advertisers.

Your top topic must be growth and success and the question of what "digital" can contribute to this. Everything else is technology and day-to-day business, both of which can be left to the agencies. But the agencies are so dominantly concerned with "digital transformation" that they no longer provide proper advice. And advertisers seem to have forgotten what the success of a brand is based on because of their preoccupation with self-referential digital nonsense. There is no other explanation for Adidas' 77 percent performance.

"What works?"

It's time for advertisers and agencies to put this question back at the center of marketing. But to do so, they have to want to get out of the digital silos that have become trenches over the past 10 years.