ROI GENOME FLASH
Brand marketing drives sales, ROI and even performance campaigns. Don’t cut it!
CMOs are under pressure to cut budgets to protect their firms against economic uncertainty, without any corresponding drop in the requirement to deliver results. This can too easily lead brands to shift to a performance-marketing-led strategy, focused on short term sales results. This is often done at the expense of brand marketing, which, at first glance, with its soft KPIs and perceived difficulty in measurement, appears on the surface to be less impactful.
However, our research consistently demonstrates that brand marketing and messaging almost always outperforms performance marketing, doing so 80% of the time. In addition, we have also seen that brand marketing must be awarded some of the credit for any performance marketing success.
Brand marketing is an absolutely essential part of any marketing mix. Channelling budget away from brand marketing and messaging to performance marketing and messaging will negatively impact both the short and long-term success of your business.
The allure of performance marketing
Performance marketing, with its perception of easily tracked results, is appealing and reflects a broader instinct to focus on immediate, short-term results. During difficult economic conditions, this is amplified by an even stronger need than usual to identify and quantify whatever impact can be provided immediately. However, by its nature, performance marketing has only a very short-term effect which is almost always over-emphasised and overstated. Metrics such as last click and simplistic attribution models, usually used to measure the outcome of performance marketing, are very binary tools that don’t take the impact of other marketing and non-marketing factors into account. In fact, the concept of incrementality isn’t factored in at all in these cases.
Instead, there’s a common assumption that any increase in clicks or search during a performance marketing campaign reflects simple cause and effect, encouraging marketers to celebrate performance marketing as a sales driver.
The reality is very different. Our research shows that 30% of paid search for example is driven by, and directly attributable to, other forms of brand and upper funnel marketing, with another 30-60% driven by non-marketing factors such as seasonality, loyalty, or category trends. This means that last click and simplistic attribution metrics overstate the role of clickable activities by 2-10x, on average, and understate the role of non-clickable or non-user-level activities (e.g. video) by just as much or more.
Which means spikes in clicks and conversions may be the result of specific performance marketing campaigns, but these are impacting the timing of a purchase, not the core decision-making and have much less of an incremental effect on a brand’s success. Correlation between performance marketing and purchase may be high, but it is in fact other factors that are driving the commitment to purchase.
A recent example of the impact of increased brand spend
Brand marketing – the unsung hero
Outperforming 80% of the time in terms of sales and ROI, brand marketing is hugely powerful. What makes it so effective? It’s the consummate high-achieving multi-tasker – a good brand campaign is multi-pronged, driving greater new customer acquisition and stronger sustained behaviors. Most notably, it works across products and services and leads customers to purchase or onboard products or services they may not otherwise have chosen (or searched for, or be retargeted from).
It does this by enhancing the awareness, visibility and desirability of brands. Brand marketing’s strength is in communicating what the brand stands for, and when executed well, creates emotional engagement that initiates a relationship with the customer of loyalty, connection and advocacy, ultimately changing behavior – search activity, word of mouth, consideration and, finally, conversion. As a result, brands that reduce their investment in brand marketing see an overall reduction in marketing ROI across all metrics.
A recent example of the impact of reduced brand spend
Brand marketing tends to be focused on upper funnel tactics and channels (vs performance marketing which tends to be focused more on lower funnel tactics), making it more difficult to measure. But, across customer types, geographies and market conditions, upper funnel tactics are 60% more effective over the long term than lower funnel tactics and only 25% less effective in the short term. The key is really to leverage both to balance success this week, this month and beyond by delivering stronger repeat purchase and sustained behaviors that are built from a position of strength.
The long term impact of short termism
Between 2020-2022, the impact of brand marketing and its outperformance vs performance marketing remained consistent, notwithstanding the challenging market environment. In fact, brand marketing performs consistently higher than performance marketing, with digital tactics naturally performing well and also benefiting from increased consumer demand as a result of brand investment.
How some brands are adjusting their spend
Impact on 2023 budget considerations
Our recommendation is that organizations must avoid relying on last click or other similar simplistic measurement tools in budget allocation decisions across tactics and formats as they do not represent the true impact of marketing – neither from a brand or performance marketing standpoint.
For marketing teams considering their marketing budget allocations going into 2023, the most impactful investment strategies for both the short and long term would assign at least 50% of budget to Brand. Or to put it another way, no more than 50% of budget to Performance activities.
Brand marketing’s outperformance and support of other marketing activities makes it an absolutely crucial part of the marketing mix that you simply cannot afford to underinvest in, or even worse, cut outright.
About Analytic Partners
Analytic Partners is the leading cloud-based, managed software platform which provides adaptive solutions for deeper business understanding and right-time planning and optimization for marketing and beyond. We turn data into expertise so that our clients can create powerful connections with their customers and achieve commercial success.
Analytic Partners ROI Genome
For over two decades, Analytic Partners has collected vast quantities of marketing intelligence across more than 750 brands, 45 countries, and hundreds of billions in spend across industries. ROI Genome presents that intelligence to help marketers understand the tactics, channels, and strategies that drive ROI and performance.