Konstantinos Spetsaris, Senior Vice President, Analytic Partners
We know that many CMOs are under pressure to cut marketing budgets in 2023 – our own research even suggests this is the case for 1 in 3 of the Fortune 500.
This pressure often manifests as demands to shift budget from brand marketing to performance marketing to combat short term sales target pressure.
Protecting brand investments is often difficult. Typical attribution data – especially when relying on last click – skews minds in favor of performance marketing, and drives decisions in the wrong direction.
Marketers know that this is not the whole picture and that these sort of short-term budget changes will ultimately lead to decreased returns. Brand marketing’s breadth of value makes it an essential, and ideally substantial, part of the mix. But how can you prove it?
Evidence that investment in brand amplifies performance
The most indicative example of brand marketing’s value is this data from one of our customers.
A 72% increase in spending on brand activities year-on-year led to a proportionate 76% increase in profit. That’s not entirely surprising. But what was remarkable was the disproportionate impact this increase in investment had on the ROI of performance tactics –performance marketing spend was only boosted by 35%, and yet the client saw a 48% increase in return.
And the reverse applies too. Another customer shifted 61% of brand’s share of the marketing budget to performance marketing, and saw a 22% decrease in performance ROI and a 16% decrease in total marketing ROI.
Brand spend drives more than simply top-of-the-funnel, brand-related results. As these examples showed – and many others that both presenters had encountered – brand’s role in reassurance, communicating values, and building engagement on an emotional level creates the valuable halo effect that has an undeniable and disproportionately large effect on performance marketing results.
The ideal budget mix
But how does an individual business find the mix of brand and performance – or as it often referred to, “persuasion and precision” – that is right for them?
Companies need to move away from over-simplistic, often inaccurate, purported cause-and-effect relationships between activities and outcomes that are not holistic and don’t consider the bigger picture.
Instead, companies must make a determined effort to unearth and examine the indirect impact of brand marketing on short-term sales, measure its halo effect, and build a clear, quantified view of brand marketing’s synergistic impact on short-term outcomes such as ROI or conversions.
From this view and understanding, the optimal balance between persuasion and precision can be determined – and most importantly, defended.
As a guideline, we tend to see that the most impactful strategies dedicate no less than 50% of investment to brand.
The paradox of efficiency
During tough economic times, it is tempting to place too much focus on short-term goals and quick wins. This urgency and the survivalist mentality is understandable, especially if being misled by last click attribution, but ultimately CMOs and their leadership teams need to be aware of the payoffs involved.
At the time, short-termism feels like efficiency – it appears that resources are being directed to where impact will be most immediate. But it is likely to lead to over-investment in lower-funnel activities that, while certainly driving sales impact quickly, in fact suffer from the lack of brand activities’ halo effect and ultimately do not deliver the greatest impact they could. And longer-term business growth suffers.
Get the complete picture
The bottom line is this: our analysis consistently shows that brand marketing and messaging typically outperform performance marketing, in fact doing so 80% of the time.
Cutting brand activity budgets hamstrings performance marketing and longer-term brand equity – resulting in a negative impact over both the short and long term.
But when marketers are under pressure to do more with less, they cannot make this argument if they are relying on a fragmentary, oversimplistic view.
In the meantime though, while that view may be being built, use these stories and data points to defend your brand investment from short termist budget cuts!
Brand marketing drives sales, ROI and even performance campaigns. Don’t cut it!
An Analytics Partners ROI Genome Flash – quickly consumable insights drawn from the world’s largest dynamic performance benchmark datasetRead the Flash