| February 05, 2020
In 2014, adidas was suffering from declining global sales and market share losses in the USA. Since then the brand has returned to growth as it focused on creating brand desire rather than the efficiency of its marketing. It is a reminder to all of us that using the right metrics to guide marketing investment is important.
In 2014, adidas had an over-supply problem, meaning its products were too often sold on promotion, thus creating price sensitivity. The business basics needed to be fixed before the brand could return to growth. Significant changes were made in terms of organisation, portfolio and go-to-market strategy, e.g. a focus on major cities and e-commerce (its most profitable retail channel).
Innovation also had an important role to play. In 2016, Adidas introduced some successful new shoes, like the Yeezy line it produced with Kanye West, and its new style, the NMD. In 2017, facing strong competition from Under Armor, a new CEO introduced organizational changes under the title “ONE adidas”, announced a renewed focus on the U.S. market and a reduction in product portfolio with the aim of increasing price point.
In the past adidas had been very focused on media efficiency over effectiveness, as a result of looking at specific KPIs and how to reduce their cost rather than what was likely to be most effective. Attribution models – Google Last Click, Google Custom, Adobe and Facebook – as well as a focus on short-term, real-time measurement, led adidas to over-invest in channels like referral sites and online display. A breakdown at Google AdWords resulted in no drop in traffic or revenue. As Simon Peel, Global Media Director at adidas noted, adidas was paying for “sales we were going to get anyway”.
By contrast, while it still identified search as an important driver of e-commerce sales, market mix modeling identified a much stronger role for video, which hadn’t shown up before because it didn’t do well in last-click attribution, as well as TV, outdoor, and cinema. This new understanding may have helped inform the media plan for the highly successful Originals campaign in 2017, which took Frank Sinatra's "My Way”, and, in collaboration with cutting edge musicians remixed it to prove that: "Original Is Never Finished".
"Original" proved to be adidas Originals' most successful campaign ever, performing well in all four key markets. Measured in BrandZ, adidas’ brand equity improved strongly in different categories and countries. Overall, adidas footwear is reported to have grown revenues by $5.8 billion since 2015, an average growth rate of 17.6 percent, whereas Nike footwear has only added $4.3 billion at an average rate of 6.8 percent, albeit from a bigger base.
It seems to me that the right strategy – creating brand desire for a product people do not buy everyday – coupled with the right metrics – focused on effectiveness not efficiency, were important drivers of adidas’ success. But what do you think? Please share your thoughts.
(This draws on third party sources, including this video featuring Simon Peel, Global Media Director at adidas, and BrandZ data.)