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Is P&G down on digital advertising or just plain rational?

Procter & Gamble’s chief brand officer made headlines earlier this month when he announced the CPG giant had slashed its digital advertising budget by more than $200m in 2017. Marc Pritchard’s outspoken comments on digital are a refreshing reality check in an industry awash in hype.

This time, Pritchard went even further than talking numbers. He pulled no punches in diagnosing what’s gone wrong for advertisers in the digital age.

“As we all chased the Holy Grail of digital, self-included, we were relinquishing too much control – blinded by shiny objects, overwhelmed by big data, and ceding power to algorithms,” Pritchard declared.

For those of us who have been digging deep into the data on ad spend since the advent of digital, Pritchard’s words ring all too true.

They also demonstrate laudable humility. If a C-level marketer in his position can admit to missteps, shouldn’t any other marketer be able to?

It takes pragmatism and fearless honesty for an advertiser to question how such mismanaged investment came about. And that means a willingness to invest significant resources in evaluating how you’ve historically measured and analyzed advertising effectiveness.

Pritchard’s mention of big data and algorithms brings programmatic advertising to mind. When programmatic hit the industry, it seemed like a holy grail. Many marketers thought their prayers had been answered by these demand-side platforms (DSPs) and their algorithms. If you can figure out who’s the most likely — and most ready — to purchase your brand, and deliver ads to them (and only them), what do you have to lose?

As P&G and its contemporaries have discovered, the unintended consequences of targeted ad buys can be devastating. And that’s not just a reference to the CPG giant pulling all its ads from YouTube over disastrous algorithmic placement.

P&G was ahead of the pack on programmatic, and Pritchard was instrumental in pursuing the innovation. But as he now says, “We kind of chased the dream of endless supply of websites and places to advertise. What we found is yes, you can buy anywhere, and you can get it really cheap. And you get what you pay for."

Pritchard’s warning deserves more specificity.

The first hazard of programmatic is the money brands lose by hyper-focusing on consumers at the bottom of the purchase funnel. By intensely targeting only those who are primed to purchase right now, the brand drops the ball on filling the top of the funnel. Every advertiser needs new people who will be ready to buy from them later, or who might buy from them occasionally. No brand has the luxury of neglecting to stoke desire in potential future consumers.

This highlights a hidden advantage of untargeted ads: You’re bound to build awareness and desire among those who aren’t yet ready to spend with you – or don’t know they are. There is far greater potential growth in getting non-users or infrequent users to buy your brand occasionally than there is in trying to squeeze yet another purchase out of loyalists.

Worse, the increasing ability to target has meant many advertisers aren’t devoting a meaningful portion of their budget to brand-building. Which means increasingly fewer consumers – and fewer purchase-ready ones at that – will have the brand top of mind or in their consideration set.

By definition, brand-building advertisingmust be at least somewhat broader in scope than ads intended to focus solely on those who have demonstrated prior brand purchasing behavior. While some advertisers are busy getting overly excited on the greater short-term ROI produced by highly targeted ad buys, they’re leaving unfathomable amounts of money on the table.

The second unintended consequence is that by the time they get to the point of purchase, those consumers you’ve identified as your prime prospects are probably really irritated with you. We’ve all experienced the annoyance of being served the same advertising messages over and over. This is no less grating when you’re being bombarded by ads from a brand you are already buying from – in fact, it is often more infuriating. “I just bought your product. Why can’t you leave me alone?!” Nobody likes a nag.

The math is simple: if you have the same $10m to spend that you had last year, but this year you spend it buying impressions against a group that’s one-fifth of the size, everyone in that segment is going to get five times the impressions. If you’re mindful of the effects of frequency and provide a sufficient range of valuable content, you can keep engagement up and exasperation down. But odds are, that’s not going to happen. Production budgets are shrinking more than ever, and restrictions on non-working dollars are tighter than ever.

Most brands simply don’t have the money to produce the broad pool of creative needed to make hyper-targeting successful. And most advertisers don’t increase the breadth of their campaign executions in proportion to the narrowing of their target buy. What’s more, you’re still left with the consequences of hitting people over the head with ads after they’ve already purchased from you.

Investments in new technologies must be coupled with broadening from your existing target consumer base to create interest among those who might not be aware of your brand. It’s also vital to remain vigilant in monitoring for the negative effect targeting has on oversaturated consumers within that target group – and who might never spend with you again after experiencing your ads as harassment.

If your measurement is only giving you one side of the story, you will lose – and lose big. As Pritchard demonstrates by his willingness to question his assumptions, review his (very expensive) decisions, and change course as demanded, it takes a lot of guts to be a leading marketer. It also takes robust measurement, validated data, and keen insights drawn from those numbers.

In P&G’s case, Pritchard admits that measurement data made all the difference. “Once we got transparency, it illuminated what reality was,” he says. With an ad budget exceeding $7bn in the last fiscal year, P&G has the world’s largest stake in ensuring advertising effectiveness. But those with smaller budgets have even more at risk. After all, those billions provide a lot more distance between brand success and brand death than even tens of millions can.

It would behoove all advertisers to take a cue from P&G and take a good, hard look at the scope, reliability, and comprehensiveness of their ad effectiveness measurement. Are you measuring the right things? Are you measuring the right things with the right methods? Are you questioning your assumptions about which trend bandwagons your brand “needs” to jump on? If the $7bn marketing team can do it, so can you. More to the point, more should you.

Jeri Smith is the chief executive of Communicus