[Issue 7] The Advertising Meltdown

Why “performance marketing” needs to take a backseat to brand building

The Odysseus Files, Issue 7

Build a Castle, Not a Village, Part 4

It’s Time to Slow Down

[Note: this is Part 4 of a miniseries within the broader Odysseus Files called “Build a Castle, Not a Village.” These miniseries will group broad topics thematically, helping you connect the dots between them more easily.]

Last week, we introduced the concept of “fast marketing.” We defined this as a “churn & burn” business model: putting all of our efforts on the front end of chasing new leads, followers, and sales; churning through customers; then starting the process over again.?

We try to move too fast - rushing from one tactic to another, chasing “what’s working now,” trying to outcompete all the other voices by shouting louder and more often.?

We pump out more & more content to show up on more & more channels, without ever stepping back to flesh out the fundamentals and make sure all the “things” we’re doing actually makes sense for our brand.?

We then went deep into the content marketing and creating world to see how it’s evolving as “fast marketing” stops landing the cheap clicks we’ve gotten used to.?

Today, we turn our attention to the advertising industry.?

The Problem with Paid Ads

We know based on research that companies that keep spending on marketing during recessions perform better over the long haul than companies that don’t.?(Nirmalaya Kumar & Koen Pauwels, “Don’t Cut Your Marketing Budget in a Recession,” Harvard Business Review, 2020.)

(Similar to how continuing to attack the enemy was better for the morale of the Greek and Trojan soldiers than doing NOTHING, even if the assaults accomplished little.)?

So that marketing is doing something. But when you dig into the nitty gritty, it looks less promising, to say the least.?

Author and speaker Andrew Davis produced a video series around this very question, citing multiple examples that suggest that, despite all our emphasis on tracking, targeting, testing, measurement, and data, we may still be missing the mark a bit. (?Andrew Davis, “Does Advertising Really Work?” (Parts 1-4), video series, 2021. Video 1, video 2, video 3, video 4.)

• Researchers tested how a blank ad fared against similar banner and Facebook ads online. The blank ad had a click-through rate 60% better than the Facebook ads and double that of the banner ads. They concluded that 44% of all banner ad clicks are mistakes. Only 14% of web users actually notice banner ads.
• Ebay executives turned off all their Google PPC ads to see its effect. They expected a 5% drop in sales. Instead, the dip was only half a percent. Instead of getting the $1.50 back for every $1 spent on advertising that they thought, they were actually losing $0.60. When a user searches for a product, triggering the PPC ad to come up at the top of the page, they click on it first, but chances are, the organic result shows up right below the ad and they would have clicked there anyway.? In response to this, Ebay cut their ad budget by $100MM.?
• Facebook takes credit for a purchase related to a retargeting ad, even if the buyer never clicked that ad or purchased the product before seeing the ad.?
• As if ad platforms exaggerating effectiveness weren’t enough, ad fraud is on the rise: fraudulent activities (including a range of options, such as using bots to repeatedly click ads to drive up CTRs and therefore costs to the advertiser) were believed to reach a cost of $81 billion in 2022 in the US, and in 2019 up to 20% of all ads served programmatically in the US were fraudulent. As ads are increasingly traded programmatically, the risks and costs of ad fraud will only grow. (“Digital ad fraud losses worldwide 2018-2023,” Statista, 2023.)?
• Davis cites further studies that found that 1) out of 500 companies, 84% declined in value, fewer than 10% of their new product launches were successful, and their average ROI was only 4% and that 2) doubling your advertising budget only increases your ROI from 1-2%.

(Note: if some of these ad industry terms are foreign to you, don’t worry about them. They don’t matter. The bigger point is that advertisers are constantly trying to do more with less, which means sacrificing authentic brand building in the name of getting cheap clicks.)?

Overall, advertisers are either putting too much trust in their data (while being blind to that data’s potential vulnerabilities) or are collecting way more data than they actually know how to effectively use. In other words, there's a misalignment between the person providing the data and the person making decisions based on that data.?

Much of what marketers claim consumers want (or at least what they think they’re doing for consumers in their content and advertising) is misaligned with what consumers actually want.?

Exhibit A: marketers know that consumers are spending a lot of their online time on social media, so they believe they have to be there to get in front of those consumers. The logic works - to an extent. The problem is, those consumers are on social media for entertainment purposes. They are there to engage with entertainment, not marketing messages. The result? Engagement and organic reach have shrunk to pitiful levels. (Elena Cucu, “[Study] 2022 Social Media Industry Benchmarks,” SocialInsider, 2022. “YouTube Engagement Rate Benchmark,” SocialStatus.io, 2022.)

It’s Getting Worse

So, our performance marketing is a little more hit-and-miss than we’d like to admit. But we’re just getting to the good part…

Privacy concerns and shifting consumer behavior are shaking the online advertising world:?

• Apple’s iOS14.5 update put a big damper on Facebook’s targeting abilities
• Google is planning to remove third-party cookies (as soon as they stop delaying the transition…)
• Banner blindness and ad blocking software usage are up, significantly - meaning consumers are taking back control of their attention… and ignoring you
• The very platforms that gave us easy access to the world have heavily contributed to the reduced attention spans and dopamine-addicted behaviors of their own users (to the point where the average person has to scroll on their phone while watching TV)
• Costs-per-action (whether CPMs or CPCs) are rising while effectiveness is falling - meaning you have to spend more to get less

The ad tech industry promises AI/machine learning-driven solutions to the looming data problem. Maybe it helps, maybe it doesn’t. Regardless, these changes will (hopefully) force marketers to step back from all their tracking and data collection long enough to actually look the customer in the face.?

(Much like Odysseus stepping back from the battlefield to concoct his wooden horse ploy.)

So, to work past all these looming issues, marketers are digging in to run faster and harder on content production - leaning on it to power their growth through building trust. Yet compromising that trust-creating effort by producing so much lookalike content that few users could possibly be motivated to try and consume it all, much less actually buy something.?

Flipping the Script

Let’s not throw the baby out with the bathwater. All of these tools, tactics, and techniques make for a great grab bag of “things” you can choose from.?

But without slowing everything WAY down - and thinking from the bottom up - they clearly don’t do us a whole lot of good.?

So, if the problem is “fast” marketing, defined by our “churn & burn” business model we discussed above, what’s the opposite??

Last week, we highlighted the Italian organization Slow Food - a pushback against the invasiveness of fast food. It champions traditional and regional cuisine, farming of products native to the local ecosystem, small businesses and sustainable foods, and food quality over quantity.?

In the same way, I believe that the answer to “fast marketing” is to slow it down.?

What does Slow Marketing look like??

Slow Marketing

Instead of beginning with the list of things to do, or the tactics and media channels we want to allocate budget to, we start with the end in mind.?

We start with the customer…?

…then find a big idea - one that links our identity as a company with the experience we want to provide. A hook that is interesting and arouses curiosity.?

Then we carefully pick and choose the “things” we do based on how they align with our messaging.?

And in everything, our aim is to delight the customer.?

Andrew Davis ends his video series discussing how dramatically Apple and Tesla outperform competitors Samsung and Ford - despite those companies dramatically outspending the former on advertising.?

He concludes that our focus as companies and as marketers should be on product innovation and customer experience. Advertising (and all our other marketing efforts) are only useful so far as they reinforce those things.?

The Harvard Business Review article cited earlier reinforces this idea. While the article acknowledges the importance of continuing to spend on advertising during a recession, the authors recommend reallocating spend to areas like research & development and new product development, advertising messaging that shows solidarity, and focusing on caring for the customers you have.?

Through all of this, you will likely use content marketing, social media, paid advertising, etcetera. It’s not that those platforms and tools are bad or don’t work. It’s that brands need to step back and ensure alignment between brand identity, strengths, and positioning >> marketing objectives and strategy >> messaging >> and customer experience. These should all reinforce each other in a positive flywheel effect.?

But managing this alignment requires slowing down. Giving time to the thoughtful, strategic work needed. Revisiting your brand’s “why” - and what makes you different. Then slowly building out a sustainable foundation that is not based on the algorithms or the latest trends or tactics.?

The Benefits of Slow Marketing

Out of a slow approach to marketing should come the following:?

• Focus - on saying the right thing to the right people?
• A streamlined, simplified marketing strategy?
• Crystal clear brand messaging and differentiation?
• Two-way relationships with your audience
• A loyal, rabid fan base who will buy anything you sell while promoting you to their circles
• New customers who come to you from word-of-mouth, making them the highest quality leads you could expect

This is sustainability over growth - the antithesis to the VC-funded tech startup world. It’s building to be around for decades, not just the next quarter.?

This approach says that by building out your world - your brand (its identity, positioning, messaging, experience) - you will sustainably attract people to you and keep them for the long haul, rather than having to chase them time after time, begging for another sale.?

(Remember when we talked about world building in last week’s issue? If not, go back for a refresher here. Scroll down to the “Content Marketing 3.0” section, near the bottom.)

Who’s doing this??

The iconic brands - the ones who have been around and will continue to be around:?

• Apple - their 1990s “think different” campaign told a story that customers today can’t get enough of
• Tesla - their purchase and product experience and product innovation drive word-of-mouth reputation?
• Disney - no matter their vertical (film, merch, destination, cruise), their theme of “magic for the whole family” unites them to their tribe
• Harley Davidson - they have built such a specific, rabid fan base and community that they’re now at risk of becoming obsolete once that community ages off the road
• Red Bull - their event sponsorships and content that focus on extreme sports clearly position them to a highly aspirational crowd
• Trader Joe’s - the legendary supermarket built its reputation solely on the surprise deals and clever copy in its print and digital newsletter and directly in its aisles; by the time they added social media profiles, they had a hungry audience just waiting to engage online (so much so that the first profiles were built and managed by customers!)

These companies all had a long, slow climb to current market dominance (Tesla is the only one under 20 years old). Which means they “grew up” in a different time. So the question is, how can the qualities they represent (even if the size and scope of their market leadership isn’t what we’re going after) be built from the ground up in a new or small business today??

To answer this, we’ll start looking at the framework behind the line “build a castle, not a village” that this miniseries is named after. But that’s for later.?

Takeaways

Your takeaways for this week:?

• Performance marketing is running out of steam
• It costs more and is less effective than ever - and algorithm changes and shifts in consumer behavior is making it worse
• Let’s replace “fast marketing” with Slow Marketing - an approach based on building a firm foundation (your brand) then aligning everything else with that; the tactics will all fall into place in time
• Slow Marketing is a more sustainable approach to building a business that lasts; it does this by focusing on delivering an experience that keeps customers coming back again and again?
• Achieving this comes back to world building - a concept we’ll keep exploring through our “build a castle, not a village” analogy

P.S. - Worldbuilding. Start with your brand vision. Alignment. The intellectual entrepreneur. Odysseus vs Achilles. “Build a castle, not a village.”? If you read regularly, some of these ideas and concepts will be starting to jump out at you as consistent themes. Threads that keep popping up.?

The promise behind The Odysseus Files is to tie these threads together into a framework for how to think about crafting a sustainable business that supports a lifestyle you love and a legacy you can be proud of.?

Stay with me; we’re starting to connect these dots. Thanks for coming along for the ride.?