Brand vs performance spend: Where should the pendulum swing?

Claudia Sestini

Claudia Sestini

Global CMO

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How much budget should be spent on brand and performance advertising is a debate every marketer is familiar with. It can be thought of as a pendulum, which swings between the two extremes of brand and performance.

In our experience, there are three factors that determine the pendulum’s resting position:

  1. Structural factors, such as a brand’s sector, cycle, business model or strategy
  2. The extent to which a brand thinks the impact of brand spend is more challenging to determine than the impact of performance spend
  3. The extent to which a brand has a short-term mindset and a focus on short term results.

In addition, brands typically ask the following three questions:

1. What happens when you take a brand off air?

If brand spend is cut, there can be a short-term improvement on profitability. However, in the longer term we’ve seen profitability turn into a loss due to lost sales outweighing the cut in costs. One of our clients saw a short term $0.4m gain turn into a $1.1m loss.

The erosion of brand metrics follows. We’ve seen clients whose brand metrics have declined for at least three years following a cut of brand advertising. It is harder and takes longer to recover from this – for one client, we quantified a negative effect on sales of 20%.

So, while this approach can be appealing to hit short-term targets, it can be hugely damaging in the long run. This leaves one asking: is it worth it?

2. What happens when you spend heavily on brand?

Some businesses will invest significantly in brand for a specific purpose, such as building awareness or telling stories to keep the brand feeling relevant and alive for customers. This type of investment can be a brave decision for marketers without appropriate measurement, as there is unlikely to be an immediate sales result.

One of our clients invests significantly in their brand advertising throughout the year. They view this as crucial to maintaining their strong brand position in the market and place importance on tracking brand metrics to measure its impact. They also see this spend build sales in the long term. To balance out this investment in brand advertising, they use performance campaigns to ensure they are also meeting sales expectations in the short term.

3. What happens when you spend heavily on performance?

In some clients, we’ve seen a move towards heavily investing in promotions. Unsurprisingly, this shows immediate uplifts in sales and profit. As well as producing seductive metrics, it can also be very attractive from an investment point of view. There’s nothing inherently wrong with that as everyone needs to drive sales. However, taking a longer view, we’ve seen clients where significant spending on price and promotions created a negative impact on the brand and value for money metrics.

What’s the solution?

Defining and implementing a holistic measurement strategy is an important first step. This allows brands to quantify the impact from their marketing and make the best data-informed decisions about where investments should be made that will accelerate growth for the business overall.

Download Measurement Strategy: Getting to Best-in-Class Effectiveness

Marketers also need to remember that accountability is key. Finding the best way to measure brand and performance spend so apples-to-apples comparisons can be made is important, particularly when it comes to discussions with finance.

Read How Marketing Can Strengthen Its Alliance With Finance

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