The CPO trap – how controller thinking is ruining your brand

Marketing managers are driven people – or have become so. Controllers have adopted the wrong way of thinking, that every marketing success can and must be measurable in real time. Clicks, conversion rates and short-term ROI are then elevated to the sole benchmark, and values such as brand strength, active and passive awareness are given a shrug of the shoulders due to a lack of possibility to measure them. 

Disclaimer: As a consultant for marketing turnaround, I am not pointing the finger at companies where marketing has a difficult time. I am talking about a broad trend of the last 10 years, which is well described in the business press and in studies. And we marketers have been part of it. And we have to get out of it.

We have what? Can you say that again? We have to stop focusing on performance. We have to stop playing the lower funnel. We have to go back to textbook knowledge about brands, and of course we have to be careful that the pendulum doesn’t swing too far in the other direction again. We will win again in marketing when brand and performance are in a healthy relationship. And that’s not fifty-fifty, but 60% – for the brand. That’s what the research by Binet & Field says, which I’ll discuss in more detail in another video.

Only 40% for performance marketing? If you’re now throwing your hands up in horror, then you’re thinking in CPO. And whether I can help you, I’m not sure. I’ve heard of companies that now measure all marketing spending in cost per order. No matter whether it’s a brand-heavy campaign or a short-term sales promotion. Yes, that’s what they do. And they find that the promotion “performs” better than the brand campaign. Conclusion: The spending is shifted to performance, which seems logical. But soon they realize that the CPOs are getting higher and higher, the ads are not performing, and then campaigns are frantically changed. And it is optimized, reasons are sought, but no one thinks that it is because the target group is losing touch with the brand more and more.

So my solution: just invest more in the brand, thank you, end of video.

But wait! We won’t get that through internally. We need more fodder. All right. Back to square one. Facts on the table. Let’s start with the inventory. Why are we in this mess in the first place? 

The performance hype: Marketing used to be a black box. You put money into expensive advertising and had to wait to see if it worked. Market research was expensive and lengthy. With the advent of digital marketing, we were given supposedly fantastic tools. Suddenly everything was so cheap. And everything was measurable: every impression, every click, every purchase. The dream of completely transparent and controllable marketing seemed to have come true. You didn’t have to send printed material around either, nothing had to be printed and checked and printed, everything happened so quickly! And it was cheap! 

The pressure, yes, the pressure was then quite different. Pressure to succeed. The quarterly targets must be met. How do we get the low-hanging fruit? And quickly? By redirecting advertising money into performance marketing. Because there you could finally address the target group in a very targeted way. No wastage. At least that’s the theory. And did I already mention that it was all so cheap? That’s how performance marketing became the dominant paradigm.

The rude awakening: This fixation on the short term and the easily measurable has serious disadvantages that often only become gradually apparent. I’m not talking about the fact that measurability is not a given. If people don’t give cookie consent when they visit a website, it’s not that easy to determine at the push of a button whether new customers have seen an advertisement beforehand. The last cookie wins, as they say. And anyway, all the difficulties of tracking in the age of GDPR. And the rude awakening has not been caused by the fact that digital advertising is no longer that cheap. Supply and demand, and in real time. Brave new world. No, the consequences are more profound and complex. We are hollowing out the brand, undermining its foundation. Let’s take a look at this in detail.

Firstly: brand erosion: the brand is neglected, and content is only about offers and features. Emotional attachment, values, history – all of this is increasingly neglected. The brand slowly but surely loses its identity and becomes interchangeable. And at the latest at this point, you need a marketing turnaround.

Secondly: commoditization & price wars: When products and services become commodities, when they can hardly be distinguished by the brand, price becomes the main argument. This inevitably leads to a spiral of discount wars and shrinking margins – it’s a “race to the bottom” that no one who participates in it can win. 

Third: declining loyalty & customer churn: customers who have only been acquired through discounts or the lowest price are rarely loyal. They have no reason to be. As soon as they can, they switch to a better offer. Your loyal base, who may have recommended you from time to time, shrinks. This is not a scenario, it has been proven by studies. 

Fourthly: increasing customer acquisition costs: What happens to you when loyalty decreases? And by the way, what happens to others? The costs for acquiring new customers increase. Because you are keeping fewer customers with you and therefore have to invest more in customer acquisition. But acquisition is also becoming more expensive for another reason. More competition in the performance channels and data protection effects, as well as Apple’s App Tracking Transparency, are driving up the cost of digital advertising. Those who don’t have a strong brand that also thrives organically or through trust are mercilessly exposed to this auction pressure.

And fifthly: The low-hanging-fruits trap: You end up in a vicious circle: Because the brand is weak, you need ever more aggressive performance measures to achieve sales, which further weakens the brand and increases dependence on expensive performance. Sounds like a stupid party drug.

Do you also think that brands need to make a comeback? The discussion has been opened. And next time, we will talk about how we need to relearn about brands and positioning. 

Remember: Only those who strengthen their brands today can truly reap the benefits of performance tomorrow and grow sustainably.

The key question is not if, but how you find the balance for your company. Don’t wait until your brand only works on price – you set the course now.

I hope this impulse helps you. My name is Christian Jourdant, your expert for marketing turnaround. Are you interested in a non-binding conversation about what I can do for you? Then click on the red info symbol on the right.