Small thinking, small profits: Les Binet warns marketing is shrinking itself

The marketing industry has a problem: advertising is becoming more efficient, but less effective.

That was the warning from effectiveness heavyweight Les Binet, who used a Google event to argue that marketers have become too focused on small tactics, narrow targeting and short-term ROI at the expense of scale, profit and long-term brand growth.

“We’ve become obsessed with the small,” Binet said.

“We love clever little tactics and creative little stunts, and we’re all trying to do more with less. I think that’s killing our industry.”

Binet said the latest data shows advertising efficiency, measured in profit ROI, has risen 4% since Covid. But over the same period, advertising effectiveness, measured by the incremental profit generated by ads, has fallen 11% in real terms.

“The good news is that advertising is becoming more efficient,” he said.

“But the bad news is that advertising is becoming less effective.”

For Binet, the issue is a growing obsession with ROI as the main measure of success.

He said a survey of 500 CMOs found marketers believed ROI was twice as important as budget in driving profit. But analysis of actual business outcomes showed the opposite.

“The main driver of profit is not ROI, it’s the budget by a factor of eight or nine to one,” Binet said.

“Budget is nine times more important than ROI, and that suggests that the most important decision in marketing is actually how much to spend.”

That is uncomfortable for marketers and CFOs, but Binet said it is central to avoiding what he called a “death spiral”.

Tight budgets and a focus on efficiency push marketers into smaller targets, narrower media plans and heavier reliance on digital performance. That may improve efficiency, but it reduces effectiveness, leading to falling sales and profits, followed by further budget cuts.

“Effectiveness is largely about scale in marketing,” Binet said. “Brands that think small eventually become small.”

He argued that marketers need to spend more time on budget setting, including share of voice, advertising-to-sales ratios and proper financial modelling.

That means moving beyond clicks, awareness and intermediate metrics, and building business cases around sales, cash flow and profit.

“If you want to convince your CFO to release extra budget, then you need a proper financial model,” Binet said.

That includes econometric modelling or marketing mix modelling to understand the short and long-term impact of advertising on total sales, cash flow and profit.

“Maximising ROI is not the way you grow,” he said.

Binet also returned to the long-running brand versus performance debate, arguing that marketers need both.

Performance marketing, or sales activation, works quickly by targeting the small percentage of consumers in-market at any given time. Brand advertising works over longer timeframes by building memory, consideration and pricing power before people are ready to buy.

“It’s not an either or, you need both, because each enhances the other,” Binet said.

He said analysis of thousands of campaigns suggests the optimum split is typically around 60% brand and 40% activation, although that varies by category, context and life stage.

Newer brands may need to lean more heavily into activation first, while mature brands generally need a stronger brand weighting.

But Binet said most companies still underinvest in brand.

The broader warning was blunt: as costs rise and consumer confidence remains fragile, marketers should not respond by cutting blindly or shrinking their ambition.

Instead, Binet said brands should use econometrics to forecast how cuts will affect sales, cash flow and profit, avoid cutting too deeply, look for media bargains and maintain a balance between brand and activation.

“Big brands work differently,” he said.

“Big brands need big budgets, they need big media plans, and they need big campaigns. If you think small, you’ll become small. So think big to stay big.”