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Data is vital, ideas are unique: the rise of performance marketing

Harnessing ideas and creativity to data is transforming the near century-old business of performance marketing.

Data is vital, ideas are unique: the rise of performance marketing

"The time has come when advertising, in some hands, has reached the status of a science. It is based on fixed principles and reasonably exact. The causes and effects have been analysed until they are well understood.

"The correct methods of procedure have been proved and established. We know what is most effective, and we act on basic law.

"Advertising, once a gamble, has thus become, under able direction, one of the safest business ventures."

No, this is not a recent description of tech-fuelled performance marketing but the beginning of Claude Hopkins’ Scientific Advertising, published in 1923. Almost 100 years later, the performance marketing community lauds Hopkins, who also wrote My Life (the two books are often published in a single volume), for laying down the foundations of a data-led algorithmic approach of which he couldn’t have dreamed.

"Hopkins was talking about direct mail, but it’s pretty much the same approach that has been carried through from the 1920s to today," Tim Grimsditch, chief marketing officer at personalised menswear service Thread, says.

Nevertheless, improvements in technology have made performance marketing a more powerful, and creative, tool. Automation is allowing emphasis to shift away from repetitive, process-driven tasks to strategic and innovative executions.

"Whereas in the past, performance marketers were engineers, their job is now more a conductor," Chris Seigal, director of direct to consumer at shaving brand Harry’s, says. "It is far less about going in and tweaking bids and the account structure, and more about the creative and the customer experience and offer."

Executives at some of the larger ad groups have expressed concern that continued uncertainty over Brexit and the wider economy is encouraging marketers to seek refuge in the more measureable parts of advertising. Chris Hirst, global chief executive at Havas Creative Network, has said that, anecdotally, it appears "marketers are looking to shift some of their spend" to such areas.

Grimsditch argues that there is a tendency to see performance marketing and brand-building as competing forces. However, he believes brand-building work can still be infused throughout performance marketing campaigns.

"There is an opportunity to blend the art and science of it all together," Barney Harrison, commercial and marketing director at The Gym Group, says. "Utilisation of data is vital to the success of any business, but that is not unique. What is unique are great ideas."

David Shiell, founder of performance marketing agency House of Kaizen, advises a balance between brand-building and performance marketing. "Suddenly becoming obsessive about performance marketing is detrimental to a brand," Shiell says. "It pays me to get clients to spend more on performance, but they need to look at both [performance and brand campaigns]."

Campaign is increasing its coverage of the fast-growing performance marketing sector and hosted the inaugural Performance Marketing 360 conference in Brighton earlier this month. Here, we have compiled some examples of entrepreneurial brands that have built their success on the back of performance marketing – which, in its most simplistic terms, is defined as advertising that is paid for only if it delivers an action such as a click-through – to show how powerful a tool it can be.

At the same time, Campaign has sought out some of the hottest agencies, which have become increasingly strategic and creative as brands build up in-house teams.

Brands

Huel

Performance marketing runs through the core of powdered-food brand Huel’s business. It is perhaps not surprising, as the company’s founder, Julian Hearn, previously set up performance marketing affiliate business Mash Up Media.

Huel’s offering fell into such a nascent category at launch that the traditional performance marketing channel of search proved irrelevant.

As a result, it opted to make greater use of discovery-based channels, such as Pinterest, Facebook and Instagram, where it could showcase the product. Huel has used these channels to target people with a clear, concise message featuring simple and bold imagery.

One of Huel’s more effective pieces of performance marketing ran in 2016 during its first year of trading, where it generated tens of thousands of new customers on the back of a simple campaign that featured two bags of the Huel powder against a white background.

"It’s simple, it’s bold, it is clean and is really effective," Josh Caine Goldsmith, head of performance marketing at Huel, says. "Having that clear, clean message that was repeated built an iconic brand image of the black and white Huel logo."

Caine Goldsmith says data dictates decision-making even if they do not necessarily like what it tells them. For instance, even if one execution looks better, Huel will choose to prioritise the creative that looks worse but is a more effective performer.

Huel’s belief in the power of data means it plans to hire data-science specialists to sit within its marketing department.

Airtasker

Sydney-based Airtasker, an online marketplace for everyday tasks, which has raised AUD33m (£18m) from investors, used performance marketing as its primary acquisition channel for its UK launch last year.

This has enabled it to quickly build up both sides of its marketplace – suppliers and end users – achieving an annualised gross merchandise value of $4.1m (£2.2m) in the first year from a base of more than 115,000 users.

In Australia, where Airtasker is far more established, the company has used performance marketing to address imbalances in its marketplace. Last year, for example, the number of suppliers responding to briefs and offering to carry out tasks was declining, which was affecting the activation rates on the platform. 

Airtasker used Facebook, Instagram and display ads to bring in more suppliers and retargeting to re-engage the registered but dormant suppliers. Advertising zeroed in on specific tasks (such as cleaning, removals or gardening) and locations to rebalance the marketplace, resulting in activation rates increasing 30% in two months.

One of its most innovative uses of performance marketing came about after it noticed a high proportion of tasks did not receive a single offer from "taskers".

The company reacted by creating special filters on its "browse task" pages to show any without an offer. It then used these as landing pages in campaigns on Facebook and Instagram, resulting in its "zero offer" rate declining by more than 30% in a month.

Secret Escapes

Secret Escapes, a members-only platform offering discounts on luxury travel, runs what it calls an "acquire and engage" model that leans on performance marketing.

"Performance channels such as PPC, paid social, display and brandresponse TV acquire leads at optimal cost," Louise Nolder, brand development director at Secret Escapes, explains.

"Then, inspiring discounts on luxury travel earn us ‘permission to push’ to members, via owned and earned channels, especially CRM.

"This builds ongoing salience, so we don’t have to constantly ‘repurchase’ customers, as competitors do."

Relentless optimisation of paid search and social has enabled the brand to achieve "mega efficiency". Improvements to cost per lead in 2018 have effectively generated 500,000 new users but at no additional cost.

Secret Escapes has doubled down on A/B testing, and campaigns are now automatically created for new deals, which is crucial for showcasing "flash" supply, as its offering changes daily.

It combines performance marketing and creativity through its use of "brand response" TV ads.

These showcase its overall brand message but unapologetically push people to an action such as signing up as a member. Others showcase themes or collections of deals with a seasonal appeal, featuring a "book" call to action.

Harry's

Shaving brand Harry’s, which is based in the US, has invested heavily in performance marketing to drive its UK growth since launching here in July 2017.

Marketing investment has swung in favour of it after an initial flurry of brand activity at launch, which included out of home and TV spots to rapidly build awareness.

Harry’s now spends the majority of its budget on performance marketing activity in the UK and has built an in-house specialism after initially using an agency to support its efforts.

Its aim is to view its performance marketing and brand activity holistically. Harry’s hired UK marketing and communications director Sally Higgin and performance marketing specialist Chris Seigal, director of direct to consumer, at the same time for a joined-up approach.

"We don’t think about those two things as mutually exclusive," Seigal says. "Everyone on the performance marketing side is accountable for both brand and shorter-term acquisition."

Every single piece of advertising – whether a Facebook ad, search copy or TV spot – has to adhere to Harry’s brand guidelines.

"We will not put stuff out in the world if it does not actually stay true to our brand, even if it might be a better performer in the short term," Seigal says.

Thread

Like many other early-stage businesses, Thread, an AI-driven personalised menswear service, uses a large mix of digital, because it finds it cheaper than other advertising types.

Thread decides where to invest its performance marketing budget based on modelling how much that customer will be worth to the company across a lifetime.

The online menswear service has its own in-house data science practice – a team of five within a company of 60 staff – which assists the marketing team with this task. It has built a tool that uses the customer’s profile information and activity on the site to estimate their lifetime value "very soon" after first visiting the site.

This allows Thread to prioritise investment, which, for example, could include apportioning more adspend to a particular social-media platform if customers coming from that source have a higher lifetime value.

"Every week, we look at every single one of our campaigns based on the lifetime value of the customer they are driving, and we move money into the ones that are performing well, and pull out of the campaigns that are not," Tim Grimsditch, chief marketing officer at Thread, says.

The Gym Group

The Gym Group, a low-cost and contract-free chain of gyms, has made digital a core part of its strategy since launching a decade ago, and a central pillar of this is geolocation.

The nature of its business means that its best prospects for new customers live within a 15-minute walk or drive of one of its gyms. Therefore, it is vital that digital marketing is targeting people within the catchment area.

Social-media strategy has been devolved down to each of the company’s 160 gyms. For example, each one has its own Facebook and Instagram account, and Facebook has worked with The Gym Group to allow it all to be governed centrally.

This allows The Gym Group to post location-specific updates to social media that are ultra-relevant, and it can determine cost-per-acquisition values at a per-gym level. The Gym Group also uses the Dax digital radio network to run ads using geolocation, and messaging is adapted by gym.

Its first TV ad, which was created by Who Wot Why and launched at the start of the year, introduced a "So I can" strapline focusing on people’s varying motivations for going to the gym. It was designed with performance marketing in mind.

The creative idea can be transformed easily into performance marketing activity by being split into shorter versions, stills and gifs.

"It’s a very malleable brand idea that allows us to be super relevant and specific," The Gym Group commercial and marketing director Barney Harrison says.

Agencies

Croud

Croud has combined the gig economy with its own proprietary technology to create an ultra-flexible agency model.

Founder Luke Smith spotted an opportunity for disruption during his time running agency relationships at Google, where he saw traditional agencies struggle to adapt to the labour-intensive world of digital marketing. He and co-founder Ben Knight, a former head of search at Harvest Digital, set up the business in 2011, just as the concept of the gig economy was beginning to take off.

The agency has a "Croudie" network of performance marketing freelancers that offers advertisers a flexible, scalable and adaptive way of working. The Croudie network is now 2,300-people-strong and managed by a proprietary tech platform called "Croud Control", which it built from scratch.

Smith describes the platform as "the beating heart" of the business and every piece of work goes through Croud Control. It allows the co-ordination of the freelance network and houses all the relevant data and planning and client insight.

Croud has 170 full-time staff across four offices, who, predominantly, handle the more strategic element and client services side.

Meanwhile, the freelancers (Croudies) carry out performance marketing’s more technical tasks. The agency is in the process of building technology to automate repetitive tasks which, in turn, will then allow the Croudies to focus on the more strategic tasks.

The flexible model enables clients to boost their performance marketing rapidly. For instance, Croud runs all digital activity across 112 markets for servicedoffice company IWG. When support is needed, Croud can quickly provide extra resources. The Croudies who have worked on the IWG account in 2018-2019 equate to 47 full-time employees.

"The stuff we do makes a difference to businesses," Smith says. "I’m buying shares in all the companies we work with that are publicly listed because the difference we make changes their overall business outcomes."

House of Kaizen

House of Kaizen has evolved considerably since David Shiell and Alain Portmann founded it as a digital consultancy called Web Liquid in 2003.

Both are former directors at Omnicom-owned Agency.com who decided to go it alone because they felt the shop was still approaching the digital space as a broadcast media when there was a need for brands to engage more on an ecommerce level.

The pivot from consultancy to performance marketing agency happened in 2008 when they launched their House of Kaizen offering.

Kaizen, the Japanese concept of continuous business improvement, is the philosophy the agency lives by, according to Shiell.

In recent years, House of Kaizen has increasingly evolved its conversion rate optimisation (CRO) offering to focus more on customer experience (CX).

The agency has a full CX studio, which includes designers, copywriters, front and backend developers, a research department and conversion consultants.

The agency is broadening out from CRO to more strategic services because it believes AI-driven platforms will allow CRO to be moved in-house with increasing regularity.

House of Kaizen counts The Wall Street Journal among its clients and has worked on changing the price of its subscription services according to research on consumer a- itudinal and behavioural traits.

In 2017 House of Kaizen drove $67m in incremental revenue for The Wall Street Journal through its conversion optimisation work, according to Shiell.

"All of our activity starts with behavioural and cognitive research and that, ultimately, provides us with the insight to hypothesise why we decide to do something, and from that hypothesis comes the strategy," includes designers, copywriters, front and Shiell says.

Journey Further

The Journey Further brand proposition is built on the notion of "clarity at speed". The agency’s clients have direct access to analysts in pay per click, search engine optimisation, conversion rate optimisation, programmatic, paid social and PR.

This has been achieved by stripping out client services teams from its agency model. The concept is the brainchild of founders Robin Skidmore, Matt Kwiecinski and Chris Rowett.

Skidmore co-founded Epiphany Search, which he sold for £18m in 2014, while Kwiecinski was at Omnicom for 18 years, until he became fed up with the bureaucratic way of working and the hierarchies associated with a big agency group.

"Giving clients direct access to analysts means we work budgets harder and make more income for clients, not the other way around," marketing manager Victoria Clayton says. "Usually the layers of account management make more money for the agency. It was flipping [the traditional model] on its head, basically."

Analysts are provided with training to equip them with client-service skills. All clients have a sponsor on the Journey Further board and strategy directors Dan Peden and Chris Gorney service the biggest-spending clients.

Journey Further has grown from three people to 35 in two years, and its emphasis on culture and being a place to work that feels personal helped it to a ranking of 16 in Campaign’s Best Places to Work 2019.

It has worked with clients ranging from Sky to the aforementioned start-up Airtasker. Its work on the launch of Airtasker in the UK resulted in an 80% reduction in cost per acquisition.

The target audience was identified by profiling users of similar apps and laying over paid social activity to build brand-awareness activity, while the creation of an extensive PPC structure allowed it expand quickly to new cities beyond London. 

All this was supported by PR activity that focused on "awesome tasks" such as a Yorkshire Pudding taster.

Roast 

Roast takes its name from the mantra "return on ad spend" and was founded four years ago by Oliver Bishop, who sold his previous agency, Steak, to Dentsu Aegis Network.

Bishop and Gareth Owen, managing director at Roast and former strategy partner at Dentsu Aegis-owned iProspect, learned about the power of a network of agencies from their time at Dentsu.

They have since set up digital creative agency Kitty, voice-experience specialist Rabbit & Pork, and scalable performance marketing agency The Market, all of which complement the services of the main performance agency.

The agencies are collectively known as Tipi Group, which stands for "this is Pi". Pi reflects the ethos behind the agencies because it is both the economic symbol for profitability and an infinite number – representative of the "restless minds" of its staff.

All new junior recruits have to attend the "Tipi Academy", which trains them in all disciplines and provides them with a broad knowledge base that clients can tap into.

TIPi seeks to stay relevant by evolving its offer. Its voice-search services came from the SEO team exploring the medium and realising it would be a significant new area that warranted the launch of a specialist agency.

Dedicated work time is set aside for individuals to develop their skills, which enables Roast to offer bespoke services that clients’ in-house teams can tap into.

One of Roast’s most creative pieces of work used influencer marketing to deliver 22 million impressions for its "Escape from dull" campaign for gaming website Maria Casino.

YouTube influencer Mark "Turps" Turpin was chosen for the campaign, which featured facing the challenge of trying to get as far away as possible from the remote village of Dull, in the Scottish Highlands, with no money.

"Fundamentally, it is about people and training them well," Owens says. "Providing a very basic service that is easily replicable by an in-house team is something we want to avoid."

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