The Wrong Incentives Are Killing Your Marketing

“Brand Aware” explores the data-driven digital ad ecosystem from the marketer’s point of view.

Today’s column is written by Alex Weinstein, senior vice president of growth at Grubhub and the author of the Technology + Entrepreneurship blog.

CEOs have complained for decades that half of marketing spend is wasted, and we don’t know which half. Despite the move to digital, the massive amount of data that Google and Facebook have collected about each of us and the near-Orwellian AI systems that can automatically pick a face in the crowd, we are close to where we started, with most marketing investment driven by gut.

Why? Aren’t machines supposed to be doing our jobs by now, 10 times more effectively?

Unfortunately, there are several root causes and industry patterns that keep us down. If marketers can actively counteract these in their company, they can lift their growth efforts well above the industry average.

Smokescreen: sophistication where it barely matters

Highly sophisticated platforms generate all sorts of data aimed at convincing buyers that they’re very data-driven. Ad recall, view-through impressions and other unsubstantial metrics are everywhere. Last-click attribution, which – let’s be honest – almost everyone uses, makes SEM look like the best channel of all time. Google, of course, is not unhappy with this interpretation.

Being a marketer and looking at dashboards is so easy these days, but looking at numbers all day does not make you “data-driven.” You’ve got to look at the right metrics, and the platforms are likely to do everything in their power to show you the metrics that make you feel good about your analytical rigor and make you invest the most with that platform.

Don’t get me wrong: The platforms aren’t actively nefarious, but if you don’t look out for your business’s interests – and the metrics that matter – they certainly won’t either.

Fire and motion: temptation to chase after ‘sexy’ marketing

There’s a concept in military strategy called “fire and motion,” which is as simple as it sounds: You shoot at the enemy, and while they’re distracted and unable to shoot back, you move to a more advantageous position.

Same exact concept works in business. While you’re chasing the latest fad that Amazon is trying in your industry – drones, internet 3.0, the ability to try on clothes via augmented-reality apps embedded in your mirror! – it is also quietly improving core business operations. Over time, that distraction – your focus on competitors, its focus on customers – adds up to a massive business advantage.

If you narrow your view to just growth, product and marketing, you’ll see the same thing: AI-powered creative, self-optimizing landing pages, automatic bid adjustments (just sit back and watch it do its thing!). While you’re adding all of these “sexy” tools in an attempt to look innovative, your competitors are obsessing over the product-market fit, core-purchase funnel and pricing – the business functions that matter.

Fixed mindset, manifested in risk aversion and herd mentality

As the famous saying goes, “Nobody was ever fired for following advice from McKinsey.” In the growth world, this maps to “Nobody was ever fired for buying ads from Facebook and Google.”

Especially if you’re in a well-established business, inertia is powerful; there are clear lines between departments, and budgets are doled out many months ahead. That’s when the opposite of our previous problem arises: an organizational fixed mindset, where you’re stuck in an environment that looks down on taking a risk.

And what’s not risky? Going with the ad platforms that have the most market share. Going with a Top 5 agency.

This approach, of course, doesn’t allow you to find a structurally better answer. Without the ability to take a risk, you can’t try “out there” solutions. Over time, you might find yourself stuck continuously implementing small, incremental improvements while your competitor builds a better “mousetrap” twice as fast as yours.

Organizational misalignment: channel focus instead of business focus

When was the last time you heard a marketer say to their boss, “My channel isn’t performing, so you should cut my budget and reallocate it to another channel”?

Exactly, this never happens.

Somehow, in our formative years as marketers, we came to believe that our significance was measured by the number of dollars we controlled. “I manage a $10 million budget!” seems like a badge of honor, a budget that marketers at smaller startups can only wish they had.

In a “brand -> agency -> ad platform” money-flow scenario, who has the incentive to pull the ripcord and say, “Wait a minute, most of this traffic is not incremental?”

Here’s a hint: It isn’t the agency, which is paid a portion of the spend, and it’s not the ad platform because it’s straight-up revenue for them. For this same reason, Facebook and Google don’t have any real motivation to fight bot traffic – it just helps their bottom lines.

So how do you self-diagnose if your organization is suffering from these ailments? Ask yourself:

1. Are you lauded as data-driven for showing a bunch of numbers that don’t correlate to driving revenue?
2. Are you celebrated as innovative just for trying “sexy” things that the top “innovative brands” are doing (think: Snapchat filters three years ago)? Is innovation a singular goal, rather than business growth?
3. On the flip side, are you reprimanded for taking a counterintuitive step, such as using offline advertising for an online brand just because it “feels” outdated? TV is dead, right? Nope.
4. Finally, do marketers in your company speak about their role in the organization based upon the size of the budget they manage, not the incremental growth they’ve driven?

If you answered yes to any of these questions, you’re dealing with misalignment of incentives. If a marketer can feel successful without accomplishing the overall business goals, the issue will fester. So, how do we fix it?

Create a culture of feedback loops. We talk about “growth mindset” a lot – this idea of learning, trying and failing, and yet all this talk can amount to absolutely nothing if you can’t measure whether the clever experiment you just tried worked or not. If you pick a vanity metric (“I got a million installs of the app during the promotion!”) or an irrelevant metric (“I got 2 million impressions on my Instagram post in an hour!”), your entire experiment is, basically, worthless.

Instead, concentrate on metrics that matter – those that you can prove correlate with long-term growth of your business. For example:

• Cost per response for your TV advertising, not ad recall
• Lifetime value of your acquired customers, not just the cost of acquisition
• Unsubscribe rate of your emails, not just opens and clicks

Encourage your organization to be intellectually honest and define specific metrics that actually correlate to your business performance. Ultimately, make sure your growth team is proud of the business growth the company has achieved, not the size of their budget.

Follow Alex Weinstein (@AlexWeinstein), Grubhub (@Grubhub) and AdExchanger (@adexchanger) on Twitter.

This post was syndicated from Ad Exchanger.