Has marketing investment in digital and social been effective?
Major advertisers have shown little growth in sales since 2009 -- even though stock prices have risen.
Marketers and their ad agencies have worked hard to master the promise of digital and social marketing channels for the past 15 years or so – a period that included, unfortunately, the financial meltdown of 2008, whose effects lingered for nearly a decade, and the COVID period of uncertainty that began in 2020 and remains today.
Marketing investments shifted dramatically towards digital and social channels and away from traditional advertising channels.
The number of digital and creative “deliverables” carried out by ad agencies skyrocketed (for Facebook and Instagram posts; ad banners; online video placements, etc.), as did the complexity of advertiser-agency relationships.
However, major advertisers, as a group, did not achieve much topline growth from this shift in their marketing mix. My analyses show that the top 50 advertisers grew at only 3% per year between 2009 and 2019 – the decade after the financial meltdown but before the COVID disruptions.
Even worse, 20 out of the top 50 advertisers either declined in sales or grew at less than 2% per year. These underperformers saw their collective sales decline by about 0.4% per year for each year of the decade.
What did grow during this period were the stock prices of all advertisers. Severe cost-cutting (even in marketing) and dividend boosting kept stock prices growing. The 50 top advertisers, who grew sales at only 3% per year saw their stock prices grow by 12% per year. The 20 underperformers within this group, whose sales declined by 0.4% per year, saw stock prices grow by 8% per year.
Clearly, marketing has taken a back seat to financial engineering, and this will always be the case when marketing performance remains an uncertainty, as it does today, and C-Suite remuneration is based on stock price performance.
In the meantime, much damage has been done to the marketing ecosystem. Agencies have been weakened by fee cuts and the increased complexity wrought by the shift in marketing mix to digital and social channels. Marketing departments have become fragmented and confused; CMOs come and go at twice the rate as the CEOs for whom they work.
It is not enough for marketing to claim that they can handle the full range of marketing possibilities, from traditional to digital / social channels. Marketing needs to re-establish the credibility it had decades ago, when it had a better sense of what it could deliver for the dollars it spent.
Until this happens, we’ll continue to see Finance and Procurement as the star executives in the C-Suite, helping to drive up share prices, and Marketing luring in the background, hoping that no one asks why they are not delivering more topline growth.