Brand versus performance marketing: is the classic ‘60:40’ split now defunct?

Survey of global marketers reveals that many multinationals still don’t use profit and revenue based KPIs to assess their e-commerce performance.

E-commerce-focused multinationals are spending significantly more on performance ads than brand messages, defying the traditional 60:40 split, according to new research.

The research, from the World Federation of Advertisers (WFA) with dentsu international, indicates that 71% of major multinationals say e-commerce is either ‘critical’ (51%) or ‘very important’ (20%) now, but the figure rises to 93% over the next two years.

That sense of growing priority is not surprising given that 59% of WFA members also claimed double-digit growth in e-commerce share of sales compared to 2019.

At the same time the shift is also challenging many aspects of corporate behaviour and organisation.

‘Mature’ players spend big on short-term performance marketing conversions

The study found that organisations that attach a high importance to e-commerce have inverted their media spend versus those earlier on in the journey.

Brands who apply greater importance to e-commerce (those who are more exposed to e-commerce and therefore more mature in approach) are spending 59% of their media budgets on driving short-term ‘performance marketing’ sales.

This compares with those who regard e-commerce as less important (or growing in importance) at just 37% on driving immediate sales. This latter group is more in line with the 60:40 brand: performance ratio recommended in studies by Binet and Field.

Developing a Successful Strategy for Global e-commerce and Marketing has been co-developed with dentsu international, WFA’s strategic partner for Marketing Transformation, and is based on responses from 41 major multinationals, across 13 sectors, with 46% in media roles and 48% in sales/ e-commerce roles.

The total combined global ad spending of respondent companies represents in excess of $50bn. For the majority of these respondents (73%), e-commerce represents less than one quarter of total sales. For 44% it stands for less than 10% of all sales, while amongst FMCG this rises to 53%.

In companies that attach a high importance to e-commerce, the difference is even more stark and two thirds of non-FMCG respondents are delivering 25% of total sales via e-commerce channels.

Evolving metrics on for e-commerce success

As this sales channel becomes more vital for business success, the KPIs on which it is assessed are evolving too.

Just one in five of respondents were aware of the impact on profitability from their e-commerce activity, and few organisations use profit as a measure of success.

Source: WFA/ Dentsu

However, the metrics do start to shift from activity and volume to commercial contribution as organisations become more mature in this area. Only 34% of respondents identified KPIs that relate to the contribution e-commerce makes to the bottom line as one of their top three metrics. This drops to 25% of respondents for whom e-commerce is not yet of high importance.

Part of the challenge of adapting to seize the e-commerce opportunity is structural. Most respondents said that e-commerce is managed in specific siloed teams, normally within the sales function (37%) and occasionally within the marketing team (16%).

Only one in five of all respondents combine e-commerce into a single function that manages sales and margin across e-commerce and traditional channels. Twenty-eight percent of respondents added that traditional sales channels are managed independently from a central e-commerce function, with each seeking to maximise its own sales and margins.

Barriers to unlocking e-commerce growth

Key e-commerce organisational barriers identified by the study include the need to create new, or re-engineer existing processes (61% of respondents). Lack of available resource was also a major challenge (58%).

The top eCommerce delivery barrier is focused on warehousing, packaging and distribution (45%).

Source: WFA/ Dentsu

This reflects the fact that pivoting business models from a wholesale/retail focus, to a direct-to-customer focus (and dealing with all the financial and logistical challenges associated with this) are very material challenges. Delivering integrated media planning that meets the needs of both short and long-term planning is also a major barrier to success (42%).

Matt Green, Director of Global Media at WFA, said: “The level of inter-departmental integration needed by multinational business to make eCommerce work can be hard to achieve. A plethora of partnerships, with both traditional and emerging businesses are required. Ideally, sophistication with emerging market tactics, including influencer marketing, shoppable media, social commerce, and others, are needed.

“A key barrier for many in making these changes is that they will have to be made before it’s clear how profitable the eCommerce proposition will be for brands, and when it may payback.”

Other key findings from the research include:

  • E-commerce is already recognised as a key growth driver of organisation success; however, it is still a small proportion of total sales in 2021/2. While nearly six in 10 respondents have seen double-digit growth in sales via e-commerce channels, for 44% it represents less than 10% of all sales.

  • As omni-channel measurement capability grows, we see a shift to looking at the impact of all media on all sales. By 2023, 48% of respondents expect to have the capability in place to understand the impact of all media on all sales.

  • Just over half (54%) have ‘established strong relationships with all relevant retail partners’ and ‘have Joint Business Plans and appropriate processes in place’.

  • Social Commerce remains an underutilised channel while Influencer Marketing tactics are more common. Both will see major growth throughout 2022. 69% of respondents are using social commerce to some extent. Meanwhile, 48% agreed that they are adopting a strategy to identify and use influencers and creators to drive awareness, traffic and conversion.

  • Shoppable media remains a tactic in pilot for most respondents, with significant room for growth into 2022. All respondents have trialled shoppable media and we expect more brands to adopt this mechanic in 2022/3. An increase in collaboration and integration of creative and media efforts will be required to make the most of the opportunity.

Source: WFA/ Dentsu

Nick Broomfield, Global Director, Transformation Consulting, at dentsu international, said: “The Covid pandemic was responsible for triggering a step-change in the growth of an already fast-growing eCommerce marketplace, and these consumer behaviour changes are here to stay. Organisations cannot simply continue with business as normal; they need to reimagine the consumer experience, develop new go-to-market strategies and innovate with how they connect through media.

“At the same time, organisations will need to better integrate their internal operating models across functions to be able to deliver the required changes, cost effectively. We hope this report provides the advice and recommendations needed to accelerate that journey,”

To download a copy of Developing a Successful Strategy for Global eCommerce and Marketing visit www.wfanet.org/ecommerce2022


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