What you need to know:

• Pet Circle CMO Jon Wild thinks brands will swing heavily to lower funnel performance tactics as cost and profit pressures bite.
• Says brand metrics won’t cut it and last click will gain traction as path of least resistance – “it’s the simplest of all the bad options”.
• Despite search costs rapidly increasing, and a bid to cut out Google with direct traffic, Wild says the online pure-play is not about to turn off search. It did that during Covid and watched traffic fall 60-70 per cent.
• But that means 30 per cent of search traffic is coming in anyway - which Wild says has now been factored into attribution models.
• But Bupa’s performance chief Clea Baker is going the other direction – backing brand and tying it back to impact on performance channels.
• Per Baker: “I can't understate the impact of performance channels. But optimising that has a huge impact on any business return as well.”
• Baker also predicts an incoming performance price hike.

Horribly flawed metrics

Digital metrics may be “flawed”, but performance marketing – and last click attribution – is about to come back with a vengeance even though marketers will pay more with major price hikes incoming reckons the CMO of private equity-backed online pureplay, Pet Circle, Jon Wild. Brand metrics won’t cut it, he suggests, no matter what academics and consultants may suggest.

“For far too long our industry has been peddling reach and frequency and brand consideration. These sort of metrics are impossible to put on a spreadsheet. And so for want of a vacuum, attribution and digital metrics fill it,” per Wild. He thinks economic headwinds and budget pressures may be the rocks on which brand purists are wrecked.

Pet Circle boomed over Covid, and like many VC-funded online pure-plays, aimed for “growth at all costs”, powering past 800,000 customers and notching revenue into the “hundreds of millions,” said Wild. But across the piste, the gravy train has derailed and marketers must now pump the profit handcar.

“What’s happening now is that as money supply tightens up, people are getting more focused on the return on those [marketing] investments,” said Wild. “You’re seeing a big shift towards profitability.”

That means those pushing brand building may be studiously ignored by those holding the purse strings. Whatever the empirical, academic and awards-based evidence, “the natural gravitational pull is towards the bottom of the funnel.” If that’s true, then the attribution path of least resistance – last click – is most likely to win, per Wild.

“All attribution models are horribly flawed. None of them really tell you the true incremental story of what's really happening,” said Wild. Last click, he suggests, “is the simplest of all the bad options and as it's simple, it's easy to bend and shape so you can add modifiers and get it to behave more like a true full mixed funnel”.

95:5 rule 

His views run counter to former 'growth hacking' proponent turned Damascene digital naysayer Jon James, who suggests newly squeezed start-ups are realising that building brand is a key differentiator in a saturated market, and that VCs are  questioning the validity and cost of acquisition through search and social, given the feedback loop between investment and unit economics “is broken”.

Equally, The B2B Institute earlier this year made a contrarian call for brands to cut their lead generation and performance budgets heading into a downturn because less people are less often in market to purchase. 

"In a recession, people are less likely to buy," the New York-based B2B Institute's Global Head of Research, Jon Lombardo, told Mi3 in June. "So why would you run short-term lead generation trying to get people to buy when they are not going to buy – because they don’t have the money or the confidence? Why would you lean into a thing that is not going to happen? It makes no sense. You would be better off cutting short-term advertising and continuing to invest in long-term brand building, so when the economy does recover – and most recessions only last 12-18 months – you are going to win more of those customers.”

The B2B Institute along with Ehrenberg-Bass' Professor John Dawes have been building the so-called 95:5 rule that states only five per cent of customers are in market to buy at any one time. There are variances depending on the category - and the rule can be applied to consumer and business settings - but per Lombardo: "It explains that sales should focus on the five per cent of known customers, marketing should focus on the 95 per cent of unknown customers and how finance should think about it: here are your current cashflows, here are your future cashflows. It organises every part of how you need to think about marketing: how marketing should work with sales; how marketing works with finance; and how good marketing should work at the organisational level. It is a unifying theory.”

Brand marketers most precarious

Like Wild and Baker, The B2B Institute is also pushing the agenda of more sophisticated measurement in marketing: “Brand marketers, who are in the most precarious position, need to lean in to this idea of being more metrics and data-driven," said The B2B Institute's Global Head of Development, Pete Weinberg. "It’s less about brand purpose and more about association with buying situations. If they position themselves as financial and commercial, I think they are much less likely to have their budget cut. That is an opportunity.”  

Click frenzy

Beyond online pure-plays now suffering a post-Covid hangover, Wild thinks the broader market will also seek comfort in Google’s embrace, at least in the short-term.

“Yes [that will happen] because the cost of money is going to affect everybody. As the world economy grapples with inflation and other forces, the money will tighten up and companies will move to where they can get predictable results. Which at this stage is predominantly last click or click-based attribution systems,” said Wild.  

While in the mid to long-term that might change, “there's very little out there that can replace [last click] at the moment.” In the meantime, he thinks many marketers will be “forced down the funnel” at a time when prices are rapidly rising.

Price hikes

During Covid, Pet Circle's acquisition costs came down circa 30 per cent, said Wild. “Now you’re going to see increasing costs … inflation in respect to click costs”.

Current acquisition costs to get people to buy dog food are “$3.50ish”, per Wild, with the firm trying to take Google out of the loop and get people to buy direct as a result. That's a CX job. But he’s not about to stop paying for search – the firm has already tried that and saw traffic nosedive.

“During covid we had unprecedented demand and we started trying to slow that down by slowing marketing down. So we turned off search – and I would encourage everybody to do this at some point – and looked at the impact on our business.”

As a result, Pet Circle found “roughly 30 per cent of search [traffic] is coming to you anyway … with somewhere between 60 to 70 per cent incremental – and we now factor that into our last click attribution models.”

Healthy skepticism

While Pet Circle thinks performance and last click will be boosted by headwinds and budget tightening, Bupa’s Head of Performance Clea Baker disagrees that upper funnel investment will be sidelined. The health insurer is holding the line on brand spend, for now, while working to connect brand investment to performance outcomes – and crucially, Baker has board backing.

“I'm a huge advocate of performance channels – obviously, that is my role – and search drives such a huge impact on any organisation,” said Baker. “But at Bupa, we've been very focused on how do we more effectively measure brand [investment] and its flow on impact to performance,” she added.

“We are a mature business, we’ve been very focused on driving commercial outcomes, on lowering CPAs, thinking about multitouch attribution frameworks, improving the DSP tools we use to spend more effectively to better de-dupe conversions across channels where possible.”

Back to brand

The problem is, much of that digital performance work is reliant on cookies and third party tracking – which is on the nose. As such, “we want to ensure that we're preparing ourselves for the future, what will measurement look like, how above the line spend impacts bottom of the funnel, and how other variables around offers or discounts or pricing impact our performance as well,” said Baker.

“We've been very sophisticated at the bottom of the funnel, now we're looking at how do we improve our methodology at the top of the funnel and think about metrics such as share of voice or share of attention as just as important drivers as our bottom of the funnel cost per acquisition.”

Ultimately, she suggests, brand investment has a huge impact on performance media such as search – whatever attribution model marketers favour.

“Philosophically I'm a fan of multi-touch attribution concepts, because even if you look at within the search channel, you see the impact of advertising on generic search and how being present in that more competitive, high CPA environment drives, in turn, more brand searches and more brand engagement with your search ads,” said Baker.

“If you take that philosophy further, obviously it makes sense that your TV advertising, your radio advertising, your display investment does the same thing – and would that last touch have happened if not for those interactions before?” she added.

“I can't understate the impact of performance channels. But optimising that has a huge impact on any business return as well.”

$100 a click

Baker also sees higher acquisition costs incoming – with health insurers already facing Google AdWords costs that can top $100 a click. Which underlines Bupa’s stance on maintaining brand investment at a time when consumers are feeling the pinch.

“In our industry, it's very, very competitive and there's also very little brand loyalty – you always have to be spending to maintain those sales,” said Baker. “So as inflation puts pressure on people's wallets, we need to ensure that we help customers feel like they're getting value out of our products so that they continue investing in us. And to me, that's a brand job.”

Baker and Wild were interviewed as part of an Atomic 212-sponsored podcast – marketers also interested in sandbagging against rising inflationary waters and cost cuts can listen here.