What's Happening?
Recent research conducted by Les Binet and Medialab Group's chief data officer, Will Davis, has highlighted a significant perception gap among marketers regarding advertising effectiveness. The study analyzed winning IPA Effectiveness Award case studies and found that budget size is eight times more likely to drive effectiveness compared to the return on investment (ROI). Specifically, budget accounts for 89% of the variations in profit payback, while ROI contributes only 11%. Despite this, many marketers continue to prioritize efficiency and ROI over scale, with only 35% of surveyed senior marketing decision-makers recognizing budget as the most crucial factor for effectiveness. The findings will be presented at the IPA Effectiveness Conference 2025, emphasizing the need for marketers to focus on size and scale rather than narrow targeting and efficiency.
Why It's Important?
The research underscores a critical shift needed in marketing strategies, as the focus on ROI and efficiency may be undermining broader campaign effectiveness. This fixation on 'doing more with less' has led to reduced sales and profits, as evidenced by a 4% increase in ROI since the COVID-19 pandemic, contrasted with an 11% decline in net profit. Marketers are increasingly targeting sub-segments of customers, neglecting broader audiences, particularly older generations who account for significant consumer spending. This narrow approach may result in a limited media mix, prioritizing performance over brand building, potentially leading to a 'death spiral' of shrinking budgets and diminishing campaign impact.
What's Next?
The findings suggest a need for marketers to reassess their strategies, potentially shifting focus from narrow targeting and efficiency to broader, scale-driven campaigns. This could involve expanding media mixes and targeting wider audiences, including older generations, to maximize consumer reach and spending. The upcoming IPA Effectiveness Conference may serve as a platform for further discussion and strategy realignment among industry leaders, encouraging a move away from the current trend of reduced budgets and narrow targeting.
Beyond the Headlines
The implications of this research extend beyond immediate marketing strategies, potentially influencing long-term industry practices and standards. The emphasis on budget over ROI may lead to a reevaluation of how marketing success is measured and reported, impacting how companies allocate resources and prioritize campaign objectives. This shift could also affect consumer engagement, as broader targeting may enhance brand visibility and loyalty across diverse demographics.
