Why advertising is broken & how to fix it - Tom Goodwin

0:28Ladies and gentlemen, welcome back to John Sensor CMO. because he comes with such a different perspective on our industry. He's always fresh, always relevant, and always sees the world in a slightly different way that makes me think. So I was delighted when Tom agreed to be guest number 200. We had an amazing conversation, and here it is. This is a very good time to talk about what's going on in marketing. Isn't it? Yes. There's a lot going on. Well, let's start with advertising. Yes. How do you view the state of advertising today? I don't want to be dramatic here, but I think everyone's completely lost.

1:00Like unbelievably lost. I think every single person in the entire industry is either lost or they kind of think they're not lost because they've got metrics or a target in mind, and they're probably wrong. We're at this really weird point in time, I think, where we probably have the best tools we could ever have in this industry. We've got the best data. We've got the best technology. We have more understanding than ever before. And then we're also at a time where brands are unbelievably important. There are popular people who go around saying otherwise. I think they're catastrophically wrong.

1:33Brands help us with abundance. They help us make decisions. They make us feel better about the decisions that we make. They're reassuring. We're in an era of absolute abundance, but we're also completely overwhelmed. And brands are actually entering more and more facets of our life, whether it's condo buildings that are branded, whether it's dental offices, veterinary surgeries. So we're at this really amazing sort of opportunity where these things are all coming together. But actually the kind of the lived experience of being a consumer is bizarre these days. I mean, it's like everyone in advertising completely sort of gave up.

2:10You know, you watch TV and you see, I think they're called CTV ads, you know, sort of connected TV ads, and half the inventory hasn't been sold. Many of the ads sort of presume they know a lot about you and are ultra sort of targeted and they end up being completely wrong. You know, I get car dealership ads in Spanish for car dealers 750 miles away selling cars that I'm not remotely interested in. I think it's the only industry that's got worse over the last 20 years. And you wonder what the fuck is going on, to be perfectly honest. And what do you think is going on? Because, you know, you said it at the top there, like that we've never had more data and evidence for how marketing works.

2:49We've never had more technology at our disposal. there's plenty of great creative agencies out there people willing to help so what is it we're missing as an industry that stops us moving forward i mean i kind of want to know as well because we we don't acknowledge quite how terrible everything that we're making is that people actually see you know you will talk to a lot of cmos and you'll talk to a lot of agency people who make beautiful ads and it'll be the super bowl and we'll make fantastic ads and it'll be the Oscars and you'll see wonderful ads. And it'll be a can and we see things that are crafted.

3:22The majority of time, those are ads that I've never seen in the wild. The majority of time, the ads that I actually see are in Instagram, they're on Facebook, they're scattered around the internet, and they're absolutely dire. And I kind of think some things happen that we're not talking about enough, which is there are essentially two tribes of advertising. And I don't like these words, but there are essentially sort of brand types of advertising and there's performance. Increasingly, the average advertiser has gone from a company like HSBC or McDonald's or Samsung or Apple, you know, to a direct to consumer brand that sells sort of, you know, llama socks or something.

4:00So the average advertisers become a lot smaller. Contemporary advertisers have become obsessed with sort of measurability and short termism. And I think the entire industry has sort of shifted not on brand, but on performance. and the tools of performance are targeting, the tools of performance are attribution. The kind of hack book to performance marketing is obsessed with short-termism. Money's moving closer and closer to the point of purchase, not because it's more successful, but because it's easier to demonstrate success. And therefore, I think a lot of really good marketers are faced with this dilemma that you can do wonderful things that look great, that seduce everyone, that make you feel proud, that create a generation of people that know about your product.

4:46Or you can put money closer and closer to the point of funnel, micro-target to death, re-target to death, and come up with a spreadsheet that shows a return on ad spend of 60.2. And I think a lot of CMOs are choosing that playbook because it's more defendable. So I think we're completely obsessed with measuring things which are preposterous and wrong. I think the entire industry has fallen into a trap of vast amounts of fraud. And hopefully we'll talk about that a bit more later on. But insane amounts of fraud, money wasted all over the place, sort of fakery all over the place, and a mass loss of competence.

5:24And everyone's kind of OK with it because it looks pretty good in the spreadsheet. The quote that springs to mind is, I can't remember who said this originally, but not everything that matters can be measured. and not everything you can measure matters. And I think that's part of the problem, isn't it? Because certainly in my career, we've become more and more and more short term. And we want more and more data. Now, wanting data is not a bad thing intrinsically, but if you're looking at the wrong data and everyone becomes obsessed about what did I sell today, you're not thinking about what can I sell tomorrow.

5:54And I know I probably parrot this on the podcast too much, but the old Ehrenberg Bass 95-5 rule, which is most people are not thinking about buying you. Like we're putting so much money into converting the demand that exists today. No one's focusing on the future. And I think the brands that are going to win are the ones that are going to play the long game. And so I suppose, you know, the opportunity out there for brands to think differently when everyone's racing to the performance, you know, bottom of the barrel is those that build brands and, you know, do that kind of brand building are going to win big time.

6:24I think this has happened because there's been a huge sort of swing in the pendulum towards technology people. You know, digital advertising is basically now advertising and digital advertising is run by tech companies. And tech companies are people like Elon Musk, who don't understand how weird people are. I mean, he of all people should. They don't understand how sort of magical, but also how kind of weak advertising is. Like advertising isn't logical. We don't really know sort of why brands work. We don't really know how advertising works. And for a long time, we were quite comfortable with that ambiguity.

6:58and now we're kind of expected to sort of know things and measure things and prove things. It just doesn't really work like that. And a lot of the logic that people are following is wrong. I saw Elon Musk the other day talk about the sort of role of advertising is to find people who want your product and to sort of reach them. That's not true at all. The role of a BMW advert is not to find me when I want a BMW and claim credit. The role is for me to wake up as a seven-year-old one day and stick a picture of a BMW on the wall. We have expressions like half the money I spend on advertising is wasted.

7:30I don't know which half. Now I think that 95 % of our money on advertising is wasted and people don't want to know about it because it seems to work in the spreadsheet. I think we've fallen in love with everything we can measure. And at the same time, everything that we can't measure, we presume is entirely irrelevant. And that's really weird because, again, if you're launching a sort of shampoo subscription service, and I'm open to sponsorship, You kind of want to track everything. You've got no money. You need to spend your money incredibly efficiently. Most clients that we work with are McDonald's, it's Burger King, it's Apple, it's Samsung.

8:09It's a car. I've been doing a lot of work recently with Stellantis. They track everything that people do online and they obsess with how long you spend on the website, where you click, did you phone, closing the loop. and they forget that actually sort of 99.999 % of the marketing that goes on with a car is something that you'll never be able to know. It's all of the actions that happen that you don't have a data trail for. And it's one thing to only focus on what you can, but it's unbelievably fucking stupid to just completely discount the stuff that isn't immediate and isn't with a sort of data trail.

8:46And what's tending to happen is we're getting so obsessed with taking credit for stuff that we're actually completely forgetting that our job is to create the success, even if we don't know how. Yeah. And particularly over the measurement window as well. Because I saw, I mean, Les Burnett did this study, even with Meta, right, which must be the most performance, you know, channel that exists. Even in the research he did with them, 60 % of the benefit of a campaign happened outside of the window people were measuring it. So even in the most performance circumstance, you're still missing most of the benefit just because you're not measuring the right kind of window or not.

9:21I mean, the most wonderful thing about advertising and marketing, and there are many, is that we're all people and therefore we all instinctively understand it. And there are two things that I'd love people to do. You know, one is, you know, you probably are already blocking ads. Just don't block them. You know, just have a day of looking at ads and have a day where you pay a bit more attention to what you're watching on TV. And actually have a think, you know, are these products that look like someone cared? Like, is this ad that's been served to me, Like, what's going on there? Why am I getting ads in Cantonese for fire extinguishers?

9:53You know, why am I getting ads for, you know, bras for sort of oversized women served to me? I mean, maybe I'm waking up in the middle of the night and doing strange things. I don't know. But the whole industry is entirely wrong. It is spectacularly wrong in everything it's doing. And then the other thing I want people to do is look around their house or look at their sort of receipts online or look at their phone and have a bit of a think, you know, why have you got an HSBC bank account? You know, why is it that you're flying with Virgin Atlantic? You know, look in your grocery cupboard. You know, why have you got Pedigree Charm?

10:29Why have you got Heinz Beans? And have a think about all of those things and why you bought that stuff. And you will realize that the stuff that could have happened through digital media could have been amazing. You know, we have unbelievable data, unbelievable powers to persuade. We can tell these miraculous, sort of wonderful, seductive, crafted stories. And now we've got AI, like everyone can kind of do this. And instead, you know, I can't think of a single brand that's been built in the last 10 years. Big brands are losing market share in many categories because they don't know how to advertise in the current era.

11:06And I'd love sort of every CMO to take a bit of a step back and to have the confidence to accept that our playbook at the moment is wrong. Like a lot of what worked in the 1950s, 60s and 70s still works. The amount of change that there is in what we should do is remarkably small. It's very important, but it's remarkably small. You know, we do need to make the logo bigger. We do need taglines. We do need jingles. We need to stop fucking changing the logo every time we get bored of seeing it in the canteen. We kind of know what we're doing and everyone's completely lost their minds. And they're sort of chasing the metaverse ads and they're chasing the press release with AI.

11:42and they're doing something, you know, with a new DMP that no one even understands, but it seems to set money on fire. You know, let's go back to the basics and let's be really confident in our sort of conviction and our instinct. Yeah. I mean, picking up on a point you said about being the customer, like, I think we should just, like, ask ourselves a question, what would a normal person do? Yes, yes. Because sometimes we go into marketing and we forget how, like, most people, what they think of advertising and what they think of your products. You know, it's amazing. I remember once I had customer service reporting into me.

12:15I think every flipping marketer should have customer service reporting into you. Because when you're on the phone with an upset customer that can't work your thing, or the cap doesn't go on the bottle properly, or it exploded in the fridge, boy, do you pay attention to it and, you know, realize how people actually think. We talk a lot about customer centricity and how businesses need to be customer centric or how they need to have conversations with customers. Marketing is the only function in a company that faces the customer. And therefore, it's pretty much, you know, you can go all cotter on this.

12:45It's pretty much the only role in a company that really matters. I think marketers should be taken a lot more seriously. I think they need to do a better job. I think they need to be a bit more informed, a bit more serious and proper. But they should be pretty much the most important person in any company. They should be in charge of the product roadmap. You know, they should be making air fryers, you know, the second that Rory Sutherland starts talking about them. They should be listening to all of their customers. We should start seeing customer service as being a part of the marketing function and an investment rather than a cost center.

13:17I don't know. I'm sort of talking quite passionately today because I think we've got amazing jobs and I think we have amazing tools. And I think we're really good at what we do naturally. But somehow we just need to figure it out and do things better and make better ads and do customer service in a better way. It's never been cheaper. It's never been easier. It's never been more accessible. So what's stopping us? Yeah. I was doing a talk in Germany yesterday, in fact, and one of the points I was making to them is, I think I was borrowing a Ritson quote, which is, your number one job is to represent the customer where decisions get made.

13:50Yes. I love that quote because it's like, and also how empowering is it? A, like you might know the answer, but B, who can tell you you're wrong? If you go into a board meeting and go, this is what our customer is telling us, it gives you enormous kind of credibility, doesn't it? Rather than just going, oh, I made this up five minutes ago. The entire company is there because of the customer. You know, like you could go all sort of Amazon and say that there should be a seat at the table that's empty to represent a customer. You know, I'd love there to be customers in Cannes. I'd love there to be customers in ad tech events.

14:22And just to ask them, you know, is this true? How do you feel about it? I mean, do you think I'm sort of wrong with much of what I'm saying? Like my understanding of where we are? Like, would you agree with that? I think it's spot on. we've sucked up too much of the performance drug, which is dangerous because what happens is the more we focus on performance, the more we focus on short term, we don't get the long term gains. And what happens then is, you know, budget gets cut because you're not growing. And if you're not growing, then you're in a kind of a shrinking, you know, shrinking budget line, which isn't helpful.

14:53And as marketers, the thing that markets, so I think marketing is both a leadership function and a service function, but we treat it as a service function. We should be treating it as a leadership function, which is, what does my consumer think? Where do I want to take them? What are the strategies that are going to get me there? What do I have to do? How do I bring the business on the journey with me? And the thing with the CMO role is pretty much the only forward-looking role. I mean, some companies have like a CSO, right? So you might have a strategy person, which is nice. But most companies, it's the only one that's looking more than how's this quarter looking?

15:24How's this week looking? How's today looking, right? And your job is to look ahead, look at the horizon? What are the big, you know, consumer trends? What's happening on innovation? You know, how's my brand equity? How are we going to grow, you know, and beat our targets in five years or 10 years, you know, not just in the next five days. And that I think is what marketers don't lean into enough. And I think if they can lean into that rather than optimizing bottom of funnel, which you don't get thanked for that, because, you know, at the end of the day, that's yesterday's results and you'll be up against that tomorrow, you know.

15:56I feel like they've got stuck in the weeds as part of this as well. You know, again, working for a car company was quite interesting because I would quite often say to people in the room, you know, have you tried to buy one of our cars recently? Because everything about the process is awful. You know, 79 % of people shop for cars based on a monthly payment. And yet you can almost never see the monthly payment. You know, every dealer website will have a chatbot, despite the fact that the chatbot will annoy each and every single one of you. So by putting on our human being head and taking a step back, you can kind of see everything really clearly.

16:34And you can see the stuff that's really important. And you can see what matters for the future. And I would sort of present these findings to people. And I could tell they found them really enlightening. But also their head was sort of full of the urgent priorities. And the urgent priorities would be, you know, to do with a data list that they needed to cleanse or their urgent priorities would be down to an AB test to test the Pantone reference on the website. And, you know, the reason why I can be quite lucid and clear, and if it doesn't sound too arrogant, quite often entirely right about the future, is just because I can take a bit of a step back about it.

17:13And I can sort of focus on the things that are important. And I don't understand why marketers are not able or they don't free, they don't feel uh free to do that i i think i discovered one of the reasons why so years and years ago um i came up with this idea i was working at britwick soft drinks and my idea was basically to create a business unit dedicated to innovation because what we were doing innovation is we would launch it alongside the core range and we'd give it about three weeks of attention right so for three weeks this new innovation you know one example which i really love was we launched a natural cola called pepsi raw uh of nat you know made from natural sugar cane it tasted amazing it looked really cool the advertising is brilliant do you remember yeah it was one of those things that you really should have worked and actually didn't i won't go into the reasons why it didn't work but anyway um but he got about five minutes of fame and that was it and then the business rolled on to the next month's priority and then so on anyway so my idea going back to the kind of long and the short of it was to say what if we took innovation outside the organization created a team.

18:14My insight was this, right? There were seven different departments involved from creating the idea to putting it on shelf. And so my idea was to take those seven departments and smash them into one, right? So you had one team had accountability for both all the way from the idea, like the design and the look and the feel and the formulation and how it got made through to what it looked on the shelf with all the point of sale that went with it, right? And therefore I could decide where do I put my resource? Is everyone talking to each other? And it was like a, you know, horizontal alignment, right, you know, rather than vertical alignment.

18:46And it worked really well. But what was interesting is I then got asked by people, this is amazing. How have you created all this change in the organization, right? So a couple of people said, oh, could I mentor them and help them through it, right? And it was really interesting what happened because when I tried to mentor other people with their ideas, they'd always go, but John, I'm too busy. I've got these short-term KPIs. I've got to hit this. I haven't got time to like do the business case, go and do the research. And so basically what the advice I gave them is you have to make a short term sacrifice to create a long term gain.

19:21And unfortunately, I remember this weird moment where I actually had to go and apologize to a whole set of senior stakeholders and go, I'm going to let you down in the next three months. You will thank me later. Now, I got told afterwards I almost got fired for doing that. But I think the thing in most corporate cultures is you have to create the vision for what needs to happen, bring the evidence, but you need to then get senior stakeholders involved so that you always get permission not to do the short term, you know, short term job to win your freedoms, do the long term thing. but that's hard right because you've got to put you know put your reputation on the line you've got to get everyone everyone aligned to it but i think most marketers like don't invest enough in that internal kind of engagement because you've got to win the internal argument before you can win the external one so i think i think all of this explains very well the context in which what's happening is happening where people are happy to spend a ton of money on fraudulent activity as long as it looks good in a spreadsheet and they're happy to be sort of busy all day And this is not said with judgment, it's said with empathy, because you need to understand why things are the way they are.

20:27But everyone's sort of busy doing the things which are essentially sort of distractions, just because the reputational risk from saying no, or I'm going to do something else instead, or actually it doesn't matter. It's too great. But I do sort of wonder, you know, how can we create a culture where it's not seen to be risky to stand up for decisions that you believe to be true? because I would hope that we're in our jobs because we're really good at what we do and we got them and we got promoted because people trusted us. So at some point, I would hope that people are given the freedom to just say, this is a good idea, you know, trust the decisions that I'm making.

21:03Well, also, your definition of madness, isn't it? If you keep on doing the same things and expect a different result, and actually the risky thing is not to do what we're talking about. Actually, the safer thing is to do what we're talking about and accept the known risks of doing that rather than continue repeating the same. You mentioned fraud there. And without getting all Bob Hoffman, which is always the danger. I'm happy to get Bob Hoffman. How Bob Hoffman do you want to be? But this is something that we have talked about for quite a long time. A lot of people have tried turning off, you know, search and all those different things and, you know, not seen any difference.

21:39Why are we not talking about this kind of stuff? It feels significant. We're spending a lot of money and we're not really digging into whether that money is being well used. I mean, again, I kind of want to get your opinion on this as well. My sense is that it's kind of fine for everyone. I mean, you know, we are in a culture which I call the kind of arithmetocracy, where work is measured on a spreadsheet. And as long as the numbers seem OK, people don't really want to know. To some extent, it's not really anyone's problem that money is wasted. Like power comes from having a budget. You know, I think fraud is a sort of bucket that includes everything on a spectrum.

22:17You know, there's everything from just not really doing your job that well and kind of, you know, spending a little bit too much money on search terms, which are pretty ineffective. You know, like buying your own name, for example. You know, if you look at ROI, buying your own name on Google seems to be the best advertising you could ever do. So there's sort of like, you know, poorly done jobs. And then in the sort of middle, you've got kind of working with tech vendors that are kind of, you know, helping you learn how to play golf or, you know, giving money to the sort of car dealers, nephew to the social media.

22:44And then sort of over here, we've got sort of, you know, funding terrorism and, you know, child pornography or something probably, or, you know, the Illuminati. And I think most of it's sort of towards the middle. Most of it is sort of benign incompetence. Most of it is laziness. Most of it is people being sold on stuff by people with data. You know, I'll work with clients and there'll be a lot of data that shows that chatbots are a good idea, you know, because the companies that make the chatbots can conduct surveys that show they're a good idea. And you can show that to any human on the planet and say, in this particular instance, this is not helpful.

23:19So I think it covers a sort of whole range. And I'm staggered that it's not something that's focused on more. I actually think the amount of money that's wasted in digital advertising would be closer to 75 % or 80%. And nobody seems to care. I mean, Google PMAX, I don't know if I'm allowed to be specific on this, but everything within Google PMAX is essentially saying, upload all these assets, put these sort of criteria into a black box and just trust us. We're going to take money from your account and we're going to optimize everything against these metrics. And all that's happening is the technology is doing an amazing job of finding complete suckers who click on every ad, which may end up being a robot, or they're just extremely bored people with big thumbs.

24:08and that you'll smash the clickability metrics or it'll do an amazing job of finding its way into purchases that were already going to happen. It's incredibly sort of sneaky and sinister technology. But again, no one seems to sort of really care about this stuff at all. It's not seen as being a sort of minor inconvenience. And I can't help but take a step back and think none of this needs to be that difficult. I mean, if you are in the business of, I don't know, selling a beautiful Samsung TV, you know, how much data do you really need? You know, to what extent do you need to upload a customer data list and do a lookalike audience sort of search?