The battle between brand marketing and performance marketing has been going on for quite some time and there is no indication that it will end anytime soon.
To ensure that we are all on the same page, let me share my definition of both brand marketing and performance marketing. Brand marketing aims to build brand equity among its target audience. Typical KPIs are brand awareness, brand attractiveness, purchase intention, etc. Meanwhile, the goal of performance marketing is to drive certain actions among consumers. Actions can include purchasing, signing up, website visits, searching, and others.
I’d like to think that brand equity is the stock of brand value. For example, Coke, as a brand, is believed to worth $70 Bn. Every marketing initiative will increase or decrease brand equity. To drive better performance and lower CPA, I believe that a brand must achieve a certain level of brand equity. The required level of brand equity can vary based on the category or stage of a brand.
If a brand focuses only on performance marketing without building any brand, the ROI of the performance will start to saturate at some point. This phenomenon is currently taking place at many DTC brands. Initially, they gained momentum via Facebook CPA-based ads. However, to grow into mainstream players, they all started spending money on TV ads and building brick and mortar stores.
Vice versa, if a brand has a huge amount of brand equity but is not spending any money on performance marketing, it’s not fully unleashing its potentials. That’s why P&G spends a huge amount of money on in-store promotion.
Due to the strong pressure to drive ROI, more and more brands are starting to focus on performance marketing instead of brand marketing. In my opinion, this is short-sighted and will damage the long-term success of the business (of course, it’s less relevant if you have a new CMO every three years).
TV is a passive medium. As a result, it is good at building a strong brand and reaching lots of people at the same time. Most digital media offer lots of interactive experience. In addition, a brand can run hyper-targeted ads on digital media. This makes digital media perfect for performance marketing. For this reason, I think that every established brand needs to have a healthy balance between its TV and Digital budgets.
Credit Suisse predicts that, in 2030, most of the brand-building ads will still be on TV. Most of the digital ads are for calls to action.
A brand marketer once told me that his brand was not growing at the pace he wanted (2-3% per year). Based on the attribution report from CPA-based digital media, the ROI of each campaign looked great, so they kept adding more of their budget to digital media. However, revenue did not grow at a faster pace. Then he started to cut the digital budget and reinvest in TV and other traditional media. He tested in two DMAs, and it worked. Then, he expanded to the entire US. As a result, the revenue grew by double digits that year without a change in the total marketing budget. In this case, the company had been under-invested in brand building. Simply by boosting brand equity to the right level, they were able to make their performance marketing much more effective.