Yes, marketers can double down on performance marketing, but you’ll wind up spending more for less if you skip brand-building. Read Mike’s take, as shared with MarTech here or below.
By Mike Ruff
Measuring the bottom-line impact of brand-building activities isn’t easy, but every company wants — and needs — to do it. Without it, it’s difficult to spend your advertising budget effectively.
The result? Many organizations over-invest in performance marketing and spend more to achieve the same or even worse results.
Why do companies over-invest in performance marketing?
Performance marketing is conversion-focused. It’s all about that sale or lead, both easily measurable results. It’s quick and easy to see how much money was spent to achieve those sales and calculate the return on ad spend (ROAS).
Many tools have integrated attribution models so that you can understand what channel or platform led to a conversion. It will undoubtedly favor performance marketing channels.
Measuring the bottom-line impact of performance marketing is relatively straightforward, making it easier to present to leadership. Since you can quantify expected outcomes with incremental budget, it becomes a more comfortable investment for leadership to approve. However, this often leads companies to over-invest in performance marketing at the expense of brand building — a short-sighted approach that ultimately costs more in the long run.
Consider the full funnel
For this illustration, let’s simplify the marketing funnel into awareness, consideration and conversion.
- Awareness tactics make strangers to your brand aware of its existence.
- Consideration tactics involve taking those who are now only aware of your brand’s existence and attempting to drive them to seriously consider becoming customers.
- Finally, conversion tactics move those considering becoming customers into actually converting.
Performance marketing focuses on the last step: attracting potential customers and driving them to convert. It’s the last mile, and you want to finish strong there.
However, these tactics draw on those already aware of your brand through paid and/or organic channels and considering conversion. It may only be a small percentage of the total potential customer pool.
For example, let’s say you sell a piece of software. On your website, you can download a white paper if you enter your email address. You can continuously increase your performance marketing budget to double and triple down on remarketing those who have downloaded the white paper and, very likely, the more you spend there, the more conversions you’ll get.
However, as you spend more, your cost per conversion is going to increase until it gets to a point where you’re losing money on those conversions. In other words, as you hit your last mile harder and harder, your incremental conversions will be the most expensive to convert.
Another option is to target those exposed to your social media ads, for example, and drive them toward the website and white paper. It will add new prospects for your performance marketing to convert and likely increase your conversions at a lower cost per conversion. At an even higher level, you can invest in additional tactics to increase brand awareness, building the social media advertising pool and adding users to that level of the funnel.
In the end, each level of the funnel drives to the next, and there isn’t an option to go straight to conversion in most cases. Awareness tactics fill the consideration step and the consideration step fills the conversion step, ultimately bringing in revenue. Overly investing in a single step comes at the expense of increased conversion costs.
How do I get awareness investment?
Since each step of the funnel feeds the next, the only step you can expect to drive conversions directly is the conversion step. For example, if the expectation is that display ads lead directly to a software sale, you need to reset expectations.
That said, you should be able to quantify both the impact of a display ad on the bottom line and CRM remarketing on brand building. The investment you seek from leadership shouldn’t be for a particular funnel step but for a holistic marketing program.
Measure both financial return and brand equity
You need to measure both financial returns and brand equity to do this. Financial returns are pretty easy since every organization has a finance team. You may be inclined to dive into attribution (financial returns from the marketing team separated from those of the sales team, for example), but, at least initially, you might want to avoid that. It is tough to identify sales with zero exposure to marketing. Giving full credit to the sales team for those sales-only transactions will dilute credit rightfully due to the marketing team.
Take a practical approach to brand equity
Measuring brand equity is not nearly as straightforward as financial returns. You need to balance rigor and cost. You can measure brand equity with paid tools that rigorously quantify brand impact, but often at a tremendous cost.
That doesn’t mean the cost of these tools is never justified, but measuring brand equity is complex, and doing so with rigor is costly. If the full price is not justified in your organization’s case, consider partnering with an agency that spreads this cost across multiple clients.
You can also begin by measuring these less rigorously but more cost-effectively and grow into complexity. For example, you might decide to use some branded search terms in Google Trends as a proxy for your overall brand awareness looking to see these search terms increase in volume over time.
You could use a news search tool to find all the articles about your industry over a specific time, take the number that mention your brand and divide them to get a number for share of voice.
Use a unified metric to guide investment
Once you have these metrics, combine them with your financial returns to calculate an overall marketing effectiveness metric. This metric is helpful to ensure performance marketing and brand building are held accountable to financial returns and brand equity.
It can be used to quantify the effectiveness of all marketing tactics regardless of funnel level, which should make it easier to prove the performance of the full funnel and justify overall investments.
Balancing brand building and performance marketing
Understanding the distinction between brand building and performance marketing is essential for creating a well-rounded, holistic marketing strategy.
- Brand building focuses on long-term value by fostering connections and trust with consumers.
- Performance marketing is rooted in measurable, short-term results that can drive immediate sales and conversions.
While both are crucial to a brand’s success, they play different roles within your overall marketing strategy and are both worthy of investment at balanced levels.
Many tools have integrated attribution models so that you can understand what channel or platform led to a conversion. It will undoubtedly favor performance marketing channels.
Measuring the bottom-line impact of performance marketing is relatively straightforward, making it easier to present to leadership. Since you can quantify expected outcomes with incremental budget, it becomes a more comfortable investment for leadership to approve. However, this often leads companies to over-invest in performance marketing at the expense of brand building — a short-sighted approach that ultimately costs more in the long run.
Consider the full funnel
For this illustration, let’s simplify the marketing funnel into awareness, consideration and conversion.
- Awareness tactics make strangers to your brand aware of its existence.
- Consideration tactics involve taking those who are now only aware of your brand’s existence and attempting to drive them to seriously consider becoming customers.
- Finally, conversion tactics move those considering becoming customers into actually converting.
Performance marketing focuses on the last step: attracting potential customers and driving them to convert. It’s the last mile, and you want to finish strong there.
However, these tactics draw on those already aware of your brand through paid and/or organic channels and considering conversion. It may only be a small percentage of the total potential customer pool.
For example, let’s say you sell a piece of software. On your website, you can download a white paper if you enter your email address. You can continuously increase your performance marketing budget to double and triple down on remarketing those who have downloaded the white paper and, very likely, the more you spend there, the more conversions you’ll get.
However, as you spend more, your cost per conversion is going to increase until it gets to a point where you’re losing money on those conversions. In other words, as you hit your last mile harder and harder, your incremental conversions will be the most expensive to convert.
Another option is to target those exposed to your social media ads, for example, and drive them toward the website and white paper. It will add new prospects for your performance marketing to convert and likely increase your conversions at a lower cost per conversion. At an even higher level, you can invest in additional tactics to increase brand awareness, building the social media advertising pool and adding users to that level of the funnel.
In the end, each level of the funnel drives to the next, and there isn’t an option to go straight to conversion in most cases. Awareness tactics fill the consideration step and the consideration step fills the conversion step, ultimately bringing in revenue. Overly investing in a single step comes at the expense of increased conversion costs.
How do I get awareness investment?
Since each step of the funnel feeds the next, the only step you can expect to drive conversions directly is the conversion step. For example, if the expectation is that display ads lead directly to a software sale, you need to reset expectations.
That said, you should be able to quantify both the impact of a display ad on the bottom line and CRM remarketing on brand building. The investment you seek from leadership shouldn’t be for a particular funnel step but for a holistic marketing program.
Measure both financial return and brand equity
You need to measure both financial returns and brand equity to do this. Financial returns are pretty easy since every organization has a finance team. You may be inclined to dive into attribution (financial returns from the marketing team separated from those of the sales team, for example), but, at least initially, you might want to avoid that. It is tough to identify sales with zero exposure to marketing. Giving full credit to the sales team for those sales-only transactions will dilute credit rightfully due to the marketing team.
Take a practical approach to brand equity
Measuring brand equity is not nearly as straightforward as financial returns. You need to balance rigor and cost. You can measure brand equity with paid tools that rigorously quantify brand impact, but often at a tremendous cost.
That doesn’t mean the cost of these tools is never justified, but measuring brand equity is complex, and doing so with rigor is costly. If the full price is not justified in your organization’s case, consider partnering with an agency that spreads this cost across multiple clients.
You can also begin by measuring these less rigorously but more cost-effectively and grow into complexity. For example, you might decide to use some branded search terms in Google Trends as a proxy for your overall brand awareness looking to see these search terms increase in volume over time.
You could use a news search tool to find all the articles about your industry over a specific time, take the number that mention your brand and divide them to get a number for share of voice.
Use a unified metric to guide investment
Once you have these metrics, combine them with your financial returns to calculate an overall marketing effectiveness metric. This metric is helpful to ensure performance marketing and brand building are held accountable to financial returns and brand equity.
It can be used to quantify the effectiveness of all marketing tactics regardless of funnel level, which should make it easier to prove the performance of the full funnel and justify overall investments.
Balancing brand building and performance marketing
Understanding the distinction between brand building and performance marketing is essential for creating a well-rounded, holistic marketing strategy.
- Brand building focuses on long-term value by fostering connections and trust with consumers.
- Performance marketing is rooted in measurable, short-term results that can drive immediate sales and conversions.
While both are crucial to a brand’s success, they play different roles within your overall marketing strategy and are both worthy of investment at balanced levels.
[Read the full article at MarTech here.]
