Research Shows 60 Percent Of Digital Advertising Investment May Be Wasted

The prominence of digital in the advertising industry is undeniable, but its effectiveness may be in question. A survey by global consulting firm AlixPartners has found that of the $79 billion spent globally on online advertising and trade spending—everything from ads on Facebook and YouTube to digital coupons and discounts—more than 60 percent, or approximately $47 billion, failed to deliver an observable and positive return on investment.

The firm surveyed 1,110 executives across China, France, Germany, India, the UK, and the U.S., who are or have been decision makers for digital transformation in consumer products companies. Each participant represented an organization in either the food and beverage, household products, or health and beauty sectors. Respondents were asked to rate their organization’s digital proficiency as being either leading, developing or emerging.

The survey showed that no matter where consumer-products companies are on their digital journey, barriers to successful digital transformation still exist. Views inside companies differ on where they are on that journey, with those executives operating in functional areas of their businesses viewing the process as lagging versus the views of their more-senior colleagues, such as those at the C-suite level.

As to the impediments to success, lack of talent (cited by 39 percent of all respondents on average as a top-three barrier), lack of funding (35 percent) and an unwillingness to experiment (34 percent) were raised across the board. Notably, those respondents who consider their organizations leaders in digital transformation identified culture as a key factor, with 34 percent rating that as a top-three barrier, in contrast to those identifying culture as being a top impediment in developing (12 percent) and emerging (10 percent) companies.

“Technology has fundamentally changed the way companies operate and has migrated from a back-office function to the commercial front end, disrupting the relationships between manufacturers and suppliers and reinventing the entire business model for consumer products companies,” says Brian Major, a managing director in the consumer products practice at AlixPartners. “For many large, traditional consumer goods companies, their long-established brand and channel strategies, a legacy core strength, make it difficult to pivot to digital. Many have innovated quite well at a micro level but find it challenging to apply those changes across the whole organization, as their sheer size and complexity make cultural change difficult. Ultimately for digital transformation to be successful, company leadership, starting with the CEO, must shatter traditional cultural, organizational and structural silos that are frequently the most intractable impediments to change.”

Andy Searle, a managing director at AlixPartners, adds: “Many companies, in an effort to chase the promise of growth through digital, have simply thrown money at the problem, leading to billions in wasted investments. However, digital for the sake of digital will serve no one, and as our survey shows, there are many expensive mistakes being made in pursuit of digital nirvana. Success is achievable over time by using more precise and targeted methods, which have greater opportunities for consumer engagement and data analytics. Those who are lagging need to catch up, and fast, as now is the time for rapid transformation in pursuit of a share of the available prize.”

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