Shining Light on the Upper Funnel: Avoiding the Cobra Effect in the Era of Cherry-picking

Pay-for-performance is an attractive model; CEOs and their finance teams can be assured of a certain number of new customers at a predictable customer acquisition cost (CAC). However, we find ourselves with a “Cobra Effect” in digital advertising—when a solution to a problem actually makes the problem worse, named after an incident where a bounty on cobras led to people breeding them for the reward. We now face an abundance of “cherry-pickers” waiting at the end of the funnel, taking a large share of economic rent.

While many marketers know this is the case, proving it to finance has been difficult or impossible. In this presentation, we detail techniques for putting upper funnel (demand creation) channels on an even footing with lower funnel (demand capture) channels. Specifically, we recommend breaking demand capture’s contribution into three buckets—incremental, cost-of-doing-business, and inefficient. Inefficient spend can be reallocated to demand creation, driving superior ROAS.