Since the advent of Internet advertising, us marketers have gotten lazy. Innovation and product positioning has been replaced with bidding strategies and algorithms. The old “everything can be tracked” mantra is repeated even to this day.
However, as Phil Collins would say “I can feel it in the air tonight” there is a seachange happening. You see, as companies put more and more budget online the “real estate” gets more and more expensive.
With the “new normal” likely to lean heavily towards e-commerce this will accelerate. Thousands of companies like Primark who has no e-commerce facility will join the mix. As a result, auctions across multiple sectors will become inflated.
Now more than ever reducing reliance on direct response channels is essential for growth. The problem is that direct response is mostly an auction function these days. As a result, more competition means higher prices.
A failure to understand this auction dynamic has many boards on the precipice of a rude awakening.
Your Direct to Site Online Sales Are The Future
Log into your analytics packages and look at “direct” traffic. Sales made by people entering your URL directly into their browser. Show me a company where the vast majority of sales come through “direct” and I will show you a company with the highest EBITA in their sector.
This is the best indication of the strength of your brand. Amazon has done it, Apple has done it, Spotify has done it and so should you.
Rebranding Branding at C-Level
Experienced professionals know that Marketing is underrepresented in the C-suite. People with operations and functional backgrounds wield the most power.
Digital marketing is easily understood by people with engineering, finance or project management backgrounds. As a result, us marketers greedy for budget pushed the likes of PPC and Affiliate marketing at the expense of brand building.
And it worked. It really did. I have made a career managing Paid Search campaigns over the last 16 years. However, every year the squeeze gets tighter and tighter.
So, what’s the solution? How can companies increase profitability?
The simple answer is brand building. However, try saying that at a board meeting. Especially to people looking to reduce ad budgets. It’s difficult to get support.
So, branding needs to be rebranded. Yes, this is inside baseball but look there is nothing wrong with us marketers using a bit of our magic on ourselves.
Enter the Chief Disintermedian Officer (CDO).
CDO – Role and Objectives
In truth, the CDO is the CMO under a different name but let’s keep that quiet for now.
Okay so here is the job spec:
- Reduce advertising costs on third-party platforms
- Reduce incremental advertising costs per transaction
- Increase direct sales
- Hedge marketing channels
- Grow owned media
The Age of The Intermediaries
So many companies rely on direct response strategies on Google, Facebook, affiliate sites and Amazon. A huge percentage of their costs are advertising on these platforms.
In the medium to long term, this is not a good business strategy. Your margins will be squeezed over time. You are in the diminishing return business at that point.
Google – Supply versus Demand
Firstly, let me outline how I define the three phases of PPC.
- Transactional Phase: where you can make a profit on every transaction.
- Customer Lifetime Value Phase: Where you don’t get a positive return on your first transaction but you do get one over the lifetime of the customer.
- Shareholder Value Phase: Where an increase in users results in increased company valuation.
In summary, we are approaching maximum ad depth across most major sectors. As a result, bids require unachievable conversions rates to deliver a positive CLV (Phase 2). So a lot of businesses are in a catch 22 position.
In summary, if you don’t have a large enough customer database and rely too much on Google you will burn through all your cash. This is okay for start-ups who can get massive valuations and move through the funding rounds. But for established businesses with modest valuations, they are in trouble.
Social Media Ads – Buying Attention
Social media is hard to scale if you deploy only a direct response approach. The traditional attribution method of “last click” is a killer for social campaigns. Instead, a social strategy focused on the long term will lead to a much better return.
Grow your owned media and then work it. Start by clawing back the spend by using organic reach CPM as a metric. Sales will come if your product and messaging are good enough.
If you have a recurring revenue model and you have affiliates on revenue share deals this can cost a massive amount over the customer’s lifecycle. IF you are looking at one-off retail sales affiliates often leverage aggressive discount codes layered on top of their commission. In some ways, affiliates are the ultimate intermediary.
Programmatic is overrated. It simply is. Yes, from a view through an angle, a lot of the results seem to be correlated. However, when you look at the domains were impressions were viewed they mostly fall into a category that you customers would have visited anyway. So the question is, does programmatic cause or front-run the purchase.
I’m not convinced. I think that people like to sound cool by saying programmatic at meetings.
There is a place for Programmatic. but in simple terms, I would categorise it as a “reminder” channel.
Customer Retention and Constant Front of Mind
Repeat purchases are key. This involves applying the latest CRM techniques with clean and processable data. On top of this, you need to be constantly “front of mind.” As a result, your CRM strategy must move outside of email to ATL channels, phone/voice contact, social media (owned), video and fit in with your overall marketing mix.
Two years ago I posted that SEO would spur a return of the Mad Men. You can check it out here. Now in 2020, disintermediation strategies will drive brand marketing. Yes, this is a reactive approach but if you make the move now you could actually make some worthwhile changes across your organisation.
It’s up to us marketers to turn it from a reactive to a proactive position.
The question remains, will the Chief Disintermediation Officer be the new star of the boardroom? I think through necessity they have to be.