Hidden Costs of Activating a True Performance Marketing Organisation
Performance marketing has become the cornerstone of many brands approach to modern marketing including their hiring tactics. Promising precision, efficiency, and measurable results it wins in the team meeting and at the board table. However, the shift towards a performance-driven approach is not without its hidden challenges and costs. While it offers numerous perceived advantages, the challenges of scaling a performance marketing division can be substantial as I saw recently as Consultant Performance Marketing Global lead for one of the worlds biggest automotive companies.
Understanding and Acting on Results
One of the primary challenges of performance marketing is the ability to interpret and act on data and for colleagues at all levels to have any comprehension of what statistically significant means!
As a start-up with just 100’s of visits a week calls are made on gut even when looking at the numbers as statistical significance is rarely reached in weeks, and guess what, in that time the site/promotions/ads and more change in the flexible start-up world!
In a large organisation performance marketing generates vast amounts of data, from click-through rates and conversion metrics to customer segmentation. The complexity lies in not just understanding this data but being able to make real-time adjustments based on it which most marketers struggle to handle. According to a report by Forrester, 74% of companies struggle to use data effectively to drive decision-making*.
This challenge necessitates hiring data analysts and marketing experts who can translate data into actionable insights, without destroying the skill that made us marketers in the first place, the understanding of the consumer, creative, trusting our gut and daring to be brave.
The cost of such expertise can be significant, particularly for small to mid-sized businesses that may not have the resources to maintain a large analytics team. This budget is then taken away from hiring the best marketing talent trusted to make the right calls through their talent and experience!
Ensuring Asset Availability
True performance marketing demands a high level of personalisation and variation in marketing assets. For example, if an automotive company wants to advertise their top 10 colours and top 3 body styles, that’s 30 varients of an asset required before we talk about showing talent, locations and more. A simple brief can quickly turn into a need for 150+ assets….
This requires a well-organised asset management system and the ability to quickly produce and update content, easy when you have 1 product in 3 colours, less easy when you have 20 products in 10 colours!
Maintaining such systems can be costly. The creation, storage, and management of numerous digital assets require investment in digital asset management (DAM) solutions and the personnel to oversee them. As highlighted by Gartner, companies spend an average of $65,000 annually on DAM systems* and for those that don’t, you can bet that their teams struggle with managing shared drives and content internally!
The Loss of Experienced Marketers’ Control
Performance marketing heavily relies on algorithms and automation, which can undermine the influence of seasoned successful marketing professionals. Traditionally, experienced marketers make bold, strategic decisions based on intuition and experience. However, performance marketing shifts this control to data-driven algorithms that optimise for specific metrics like click-through rates and conversions often missing the bigger picture.
I recall as a Marketing Director being told by my major agency that they weren’t going to run the beautiful digital Xmas ad we had created as facebook was optimising after £100 (less than 1% of the budget) to a basic how to curl hair video, well no shit, of course it was! Sometimes brand building and desire must shine through the algorithm and choices made for metrics sake.
Managing the conflicts can be unsettling for marketers who have built their careers on creativity and strategic thinking. According to a survey by Deloitte, 58% of marketers feel that automation has reduced their ability to make impactful strategic decisions*.
Other factors to consider
Managing a performance marketing operation at scale involves integrating various tools and platforms. Dashboards that consolidate data from multiple sources, Software as a Service (SaaS) partnerships for marketing automation, and analytics tools are all essential components. These systems require not only financial investment but also technical expertise to set up and maintain.
A study by Marketing Land found that the average company spends $120,000 annually on marketing technology solutions*. Additionally, the need for IT support and ongoing maintenance adds to the overall expenditure. Whilst these costs are nowhere near for smaller businesses, the cost as a % of marketing budget we have seen gets very high!
Conclusion
Activating a true performance marketing organisation comes with hidden costs and challenges that extend beyond the ROAS seen on the charts. From understanding complex data and ensuring asset availability to dealing with the loss of strategic control and the expenses of sophisticated technology, businesses large and small must navigate a multifaceted landscape. While performance marketing offers precision and measurability, it is essential to balance these advantages with the creative, strategic thinking that has historically driven brand success and invest in your marketing hires, do not assume the way to success is throw a dozen assets at the META wall and see what sticks! There is still a place for brilliant marketing executed holistically with a prime prospect audience, but if you disagree I’d love to hear from you!
Dan
Sources:
Forrester, "The Future of Data-Driven Marketing," 2023.*
Gartner, "Market Guide for Digital Asset Management," 2023.*
Deloitte, "The Impact of Automation on Marketing Professionals," 2022.*
Marketing Land, "Annual Marketing Technology Spend Survey," 2023.*
Harvard Business Review, "The Limits of Personalization," 2023.*