Should All Marketing Be Performance Marketing?
Should all Marketing be Performance driven? Given the current uncertainties in the market for pretty much any industry, companies tend to lean towards safety.
Marketers are looking for the best use of their fluctuating budgets and understandably would like to have great value for money, guaranteed availability and convenience in advertising. In our blogpost we share with you why it's extremely dangerous to focus solely on performance marketing and what you should do instead.
The Concepts of Performance and Brand Marketing
Before we dive deeper into the question of how much performance driven your marketing ideally should be - let’s first have a look at some definitions. Yes, this might sound boring - but bear with and keep on reading. It will help you to understand where your business is currently at and how well you actually understand the concepts of performance and brand.
For starters, why is performance marketing actually so popular? Because it seems incredibly easy to track and evaluate the results. Afterall the whole intent of performance marketing is to use digital channels to generate a measurable (trackable) desired interaction with a user. This can be a click-through to your webpage or a conversion in your online shop among other metrics. Further, you decide upfront to pay literally based on the performance of your ads - be it pay per click or pay for a certain amount of impressions.
With this, performance marketing enables you to calculate “exactly” what your marketing efforts earn for your business and seemingly enables you to plan for future results. You will see later in this blogpost why this is a dangerous concept to fall for.
What’s on the opposite end of performance marketing? Anything more ambiguous, less measurable, more uncertain but yet very useful for your business. We’re talking all things related to brand marketing!
See, branding is a very traditional marketing approach that has proven to be incredibly valuable in the long term by moving your brand to top of mind when customers make their buying decision. It includes activities such as out of home banners, print and TV advertising, PR, sponsorships and I’m sure you can think of many more examples.
The common belief about brand marketing is that it’s not measurable and really hard to tell how much exactly it contributed to the revenue.
The common belief about brand marketing is that it’s not measurable and really hard to tell how much exactly it contributed to the revenue. Just think of the popular phrase about one half of your marketing budget being wasted - you just don’t know which half… Yeah, this refers to the difficulties with measuring results which should come from branding.
Given the current geopolitical uncertainties and extreme volatility in almost all industries it’s absolutely understandable why marketers currently lean towards performance marketing - after all you can report concrete numbers and have the impression to simply buy the needed results.
Read along to see the cases for and against performance marketing as a core strategy. We share with you when to rely on it and when to rather turn to branding and even measure results coming from it.
Why a Pure Performance Strategy Is a Safe Way to Lose Revenue
As shared above, performance marketing is defined by its focus on activities with pay-per-click or pay for impressions character. It lets you allocate your budgets towards numeric goals and measurable interactions with your desired target group.
This is why it’s very common for companies to forgo brand marketing and focus on performance instead. Having ready to use reports with plain ROAS (return on ad spend) and CPC (cost per click) numbers lead to believing you have everything under control and know exactly how much your activities earn.
How well measurable is performance marketing in reality?
But how well measurable is performance marketing in reality? Platforms like google and facebook always have had and always will have a tendency to report results in their favor to make you spend even more money with them.
In addition, there is last-click attribution set as default in common analytics tools such as google analytics. The last-click methodology gives full credit for an interaction to the last touchpoint in the customer journey, completely neglecting any prior interaction your customer had with your brand through marketing before buying. Clearly, this will report wrong results leading to wrong conclusions letting you put all your precious marketing spend on sales you probably would have got anyway. This was the case with adidas who very generously shared their experience of putting too much money into performance marketing.
As you can see correct measurement is not guaranteed with performance marketing and requires further effort to make it really work for you. Working with an independent attribution vendor or software will certainly help with this.
However, there are even more things to consider when it comes to a purely performance driven strategy. You can barely scale and increase the effectiveness of your marketing since saturation effects will lead your results to drop over time. It’s not easy to activate clients without any brand preference and you certainly don’t want to settle for the type of client who only buys on sale.
Performance marketing benefits from exact targeting. Given current tracking regulations (you can read more about them here) however, targeting becomes increasingly difficult by the minute. With third-party cookies doomed to be gone by 2024 instruments like cross device tracking and retargeting become less and less available.
Therefore you really need to engage your target audience in an early stage of the funnel so that when they reach the buying decision stage, they have your products top of mind. This way you won’t have to rely on prompted purchases through ads only - instead, they become a nice add-on to sales you have been carefully nurturing upfront.
As Philip Kotler so famously stated: “If you’re not a brand - you’re a commodity. The price is everything and the low-cost producer is the only winner.”
Why Focusing on Brand Only Benefits Your Competitors
The reasoning above might sound as if you actually don’t need performance marketing at all, except when you would like to additionally boost your conversions. This is actually quite far from the truth.
What would happen if you skipped performance marketing and put all your budget on brand activities only? You would miss the chance to take advantage of seasonal effects such as Christmas and black week sales.
Even worse - you would educate all consumers on a certain subject but lose those with a smaller wallet to your competitors since they would prompt a purchase with performance advertising. See it as filling up the funnel at the top but then leaving all the warmed up prospects to be closed off by your competitors - what a shame!
Yes, your brand does give your business an identity and personality. Its intent is to build an emotional, deeply rooted feeling of trust, quality and many other desired traits for your customers. Ultimately it aims to create long term loyalty and make your products an obvious choice.
To achieve this, it needs a lot of time, PR effort, budget spend and patience. If you don’t have either of these, let's say because you’re in an early stage of building your business or you lack resources, it can get tough to generate enough sales.
How To Strike the Right Balance Between Performance and Brand?
As you can sense from this article, both performance marketing and brand marketing have their advantages and disadvantages. For truly successful marketing and the highest possible revenue, you should aim to combine both tactics and use them periodically.
During slower seasons like summertime or mid-season, you should focus on brand marketing for sure. This is a great time to educate a consumer and to let them know about your brand and why they should choose you. It’s a good time to evoke and nurture a certain desire or pick up on the needs your target audience has and put your brand in the context of those.
During busier seasons like Q4, Christmas or seasonal transition sales you should lean more towards performance activities. Those will help you to reap the benefits of your branding and close off warm prospects. If you’ve managed to build a strong brand you will multiply your results with a consistent advertising that is centered around the actual purchase.
Be careful though to not fall for any heuristics when it comes to the budget split between brand and performance. A very popular recommendation made by the US marketing guru Les Bignet is to put 60% into brand and 40% into performance.
However, this does not take into account your specific cost structure, the varying ad costs on different placements be it online or even offline. In order to make an optimal spend decision between the two tactics and further break it down into channels which are really working for you, you need to make evidence based decisions.
According to a recent Gartner survey, only 54% of marketing decisions are backed up by numbers. This is both shocking and unnecessary at the same time. Data analytics and marketing measurement have developed greatly over the last decades to enable optimal business decisions.
Performance marketing can be analyzed with the help of machine learning. This is not just some fancy engineering stuff. Well, actually it is quite fancy and it does involve engineering… But the point is with a data-driven attribution approach you get back the independence from big advertising players like google and facebook. Instead of analyzing results with last-click logic and falling for tendencies of those platforms to report in their favor, you’re able to really understand where your budget spend will generate the best results. Read more about multi-touch attribution (MTA) here.
Brand marketing can be analyzed with the help of econometric modeling.
Brand marketing can be analyzed with the help of econometric modeling - specifically called Marketing Mix Modeling (MMM). This is a technique that was formerly used in the 80s by big companies such as Procter & Gamble and has evolved even further since. With this analysis you can take the guesswork out of your brand budgets and really understand what is driving results and what you should rather stop investing into. If you have been focusing on performance only out of fear that branding is a non-measurable black box - don’t be fooled. Work with a sophisticated vendor and software and you will be able to multiply your results and report them with certainty.
To set yourself up for ultimate success, science goes even further. With a unified approach to analytics, you are not only able to analyze performance marketing and branding. Unified Marketing Measurement (UMM) enables you to see how both influence each other. Wouldn’t it be cool to know exactly how many online sales a print advertisement influenced? Or for how long a TV commercial has influenced people to come and buy at your stores? Those questions are no longer hypothetical, with the right software you can really put numbers and make your decisions evidence based.
Conclusion - Mix Brand and Performance With The Help of Machine Learning
The best conclusion for the question of “Should all marketing be performance marketing?” is - don’t put all your eggs in one basket! As stated above it’s not brand over performance and certainly not the other way around.
What you should aim for is a healthy mix of both tactics. With this you will harness seasonality effects and combine short term activation with long term stability for ultimate results.
To find out the exact mix and optimize your marketing budgets for both performance and brand activities there is machine learning to the rescue. With methods like data-driven attribution (MTA) you’re able to gain back independence of ad platforms and know exactly where to bid and where to save. With econometric modeling (MMM) you’re able to analyze your brand effect on the revenue and look not only at correlation but at causality between what you do and what you get.
Finally, we as a future-proof measurement vendor enable you to not only analyze brand and performance marketing activities but as well understand the effects both have on each other with unified marketing measurement (UMM). Curious how that works? Read more about UMM in our blogpost and our whitepaper.
Brand vs. Performance Marketing - struggle to prioritize? We are here to help!