Balance efficiency and effectiveness or risk a marketing ‘death spiral’

According to new analysis of the IPA Databank, budget is eight times more important than ROI when it comes to driving effectiveness. When looking at how variations in profit were generated in IPA Effectiveness Award-winning case studies, ROI only accounts for 11% of the variations in payback observed, compared to 89% for budget.

This, however, is different to what marketers believe is the determining factor of success. According to a new industry-wide external survey commissioned by Medialab, conducted among 500 senior marketing decision-makers, just 35% stated that budget was the most important contributor to effectiveness, compared to 65% for ROI.

Trying to do more with less risks doing less with less

Les and Will’s research also reveals how marketers are scaling back their ambition and reducing the scope of their activities as a result of tight budgets. Over half (56%) target sub-segments of customers with advertising, rather than all of their potential customers. Older generations are particularly neglected, with 62% of marketers not targeting over-45s, despite that cohort accounting for 50% of consumer spending.

This narrow targeting is often matched with a narrow media mix, with a bias towards digital performance media and activation being prioritised over brand building activity. This risks leading to what Les refers to as a ‘death spiral’ of budgets, campaigns and profits all getting smaller and smaller.

A playbook for ‘Big Media’ best practice:

Les and Will stress the importance of balancing effectiveness and efficiency, citing adam&eveDDB and Medialab’s 2024 IPA Effectiveness Awards Gold-winning Laithwaites case study as an example of experimentation and ‘going big’ in practice.

Further to their findings, they set out a wider playbook for effectiveness that brands and their agencies should focus on for maximum success.

Focus less on efficiency, and more on effectiveness

The latest figures from the IPA Databank suggest that ROI has increased by 4% since the Covid pandemic, but net profit generated is down 11% in the same timeframe. While a tightly targeted, narrowly focused approach does increase efficiency, it also reduces effectiveness significantly.

Remember that effectiveness is about budget, reach and scale

Effectiveness and profit generation depend on a campaign’s ROI and its marketing budget. While outstanding media planning and creativity can boost ROI, it is not as significant as budget and scale when it comes to driving profit.

Budget setting is the most important bit of the planning process, so get better at it

The most important marketing decision is how much to spend, but budget setting is often quite crude and financial modelling is rare when setting budgets. Budgets get cut without proper financial evidence to justify requests, further increasing pressure and the focus on efficiency.

Think big media: big budgets, high exposure and broad reach

Fewer than half of CMOs actually maximise reach but research shows that advertisers need to generate 30-60 million exposures to drive a statistically significant sales uplift. With 200 million to 1 billion exposures required to drive major results, broad reach and big media are essential for boosting effectiveness.

Commenting on the findings:

Les Binet, Author, Consultant and Visiting Professor at Ravensbourne University:

“Our industry is obsessed with efficiency, and rightly so. We’re spending other people’s money, and we need to spend it wisely. But efficiency isn’t everything – you also need scale. Our research reveals a paradox: the more we focus on efficiency, the less money advertisers and agencies make. We believe that the only way out is to rediscover advertising’s super-power: to deliver creativity at scale. We need to Go Big or Go Home.”

Will Davis, Chief Data Officer, Medialab Group:

"This isn’t about digital versus offline or brand versus response. It’s about balance: doing all of these things well and at the right scale. Efficiency is vital, but the data shows it drives larger growth when combined with scale, creativity and the bravery to experiment. That balance is what unlocks transformative results, and that’s the rallying cry we shared at the IPA Effectiveness Conference."

Laurence Green, Director of Effectiveness, IPA:

“Understanding what truly drives marketing effectiveness is vital for all brands to succeed and grow, and Les and Will’s new research marks a tipping point for our industry. We can continue to prioritise efficiency and small margins, or we can make the case for big, bold advertising at scale that will drive big profits for clients.”