Balancing your budget between brand building and performance marketing has never been more important

2 December 2022

In our work with clients we see that there’s an increasing focus on effective, goal-oriented marketing communications. Data dashboards that show ‘more conversions’ and ‘more sales’ at a glance are preferred when reporting to the boardroom. But this carries a risk too. It might be a good time for brand managers to ask themselves: are the most obvious tactics also the most impactful ones?

person typing

During and after the pandemic we've seen attention and budget move more and more from brand investment to performance marketing. From brand to activation. From measuring brand equity to bottom-funnel metrics. From long-term strategies to short-term tactics. It became increasingly important to measure and report the impact of marketing efforts, both to demonstrate its value and to gain better insights into its effectiveness.

Although these choices may seem logical and pragmatic in economically uncertain times, it is important to understand that this does affect a brand in the long run. If you do not invest in long-term brand building, a brand will lose its place in people's minds and hearts - making way for its competitors.

Brand building “versus” performance marketing

Most managers who are in charge of their brands' marketing spend have typically done their research on “what part of our resources should we dedicate to brand awareness and what part to conversion-based performance marketing?” A highly popular term in search engines is “brand building vs. performance marketing”. However, this apparent contradiction is deceptive. They can’t do without one another - and therefore shouldn’t be stripped apart.

Brand building

In essence, people chose a brand based on their brand promise. This can be a functional promise, such as convenience (“I want my need for groceries delivered to my home fulfilled more easily”) or it can be a promise on impact and intrinsic values (“I want to associate myself with a brand that stands for gender equality”). That promise can vary depending on the time, the need, and the brand. The question then is: have you built your brand in such a way that people understand how you differ from others? That you sparked their interest in what you have to offer? And to what extent are you top of mind for when someone might actually need you? It is brand building that creates that awareness and builds an emotional connection with your audience.

Performance marketing

Performance marketing focuses on measurable outcomes such as engagement, leads and sales. It is a very effective way to drive results and grow a business. One of the biggest advantages of performance marketing is the ability to measure the return of the marketing investment. By analysing the campaign data, marketers can measure its effectiveness, optimise accordingly and justify their expenses with great precision.

Complementary, not competitive

The alleged contradiction between brand building and performance marketing often results in trade-offs such as “Do we invest in highly creative, emotional campaigns - that take a lot of time, patience and courage to create - to connect with our audience on an emotional level OR do we choose to invest in pushing ad messages on the market, continue with the best by means of multivariate testing, and leverage our marketing yield this way?

The point is: the day you only focus on advertising on a tactical level with functional messages, you will not make an emotional connection in people's minds. Your performance will simply collapse and you’ll need to keep pumping media spend. On the other hand: if you only connect with your target group in an emotional way every now and then, people will eventually forget you. You won’t be top of mind at the right moment, the right time.

Brand building that strengthens your marketing performance: a real-life example

For a Dutch brand in the electric mobility industry, we developed a brand awareness campaign with mastheads on YouTube accompanied with a television commercial. A week after launching the television commercial we saw a huge increase in Brand traffic (Organic 300%). But what's more interesting is the better performance from Facebook and Display (DoubleClick) advertising. Without having changed the creatives or any settings, the CPC's decreased by 30 - 45%. This illustrates that part of the budgets that have been put into the branding and awareness phase are recouped in the performance phase because CPC’s drop so much and the organic search volume for the brand name rises enormously.

sessions per medium
source campaign

The need for finding the right balance in the coming years has never been greater

The combination and interplay of performance marketing and brand building isn’t new, but the importance for the right balance has never been more important. Now that we are facing upcoming socio-cultural and economic challenges, brands may have the tendency to cut the brand building investment as the easiest option and develop a laser focus on short-term marketing ROI. However, if you only focus on performance marketing - your current target group and your known segments - you will miss out on a very large target group that you have not yet identified. It is performance marketing that captures the demand that exists today, but it is brand building that assures you the demand for the future.

Brand building fuels first-part data strategies

In 2023, there is another particular development that accelerates the importance of brand building for the next couple of years: the shift towards first-party data.

Data has been the foundation of successful marketing strategies for years and the deprecation of third-party cookies in 2023 will undoubtedly have an impact on short term conversion campaigns. Brands need to make the fundamental shift towards building their own audiences rather than relying on anonymous segments. The influence of brand building on performance marketing is twofold here.

Firstly, scale is important. Collecting enough data to fuel marketing activities is only possible if you can build large, steady, and meaningful audiences. With performance marketing, you target people based on characteristics and behaviour you know is appropriate for your intended audience. With brand building you go beyond the target audience that is already in-market today, and reach people that might be interested tomorrow - or in a couple of years.

“With performance marketing you reach the potential of people who are in-market today. With brand and awareness you work on the demand of tomorrow.”

Jacob Eeckhout

Jacob Eeckhout, Center of Excellence Leader Marketing iO

Secondly, branding is critical to establish a relationship with your audience in which they trust you with their personal data. To build trust with customers and prospects, your brand messaging needs to be authentic, contextually appropriate and genuine, aligned with your brand and core values.

Prepare your brand for the future: combine short-term thinking with long-term thinking

The exact, right ratio of activities to build the brand in the long term and encourage sales in the short term will vary depending on the industry and company goals. The real challenge is to tie those two together: be original, emotional and creative in your communication while focusing on consistency, repetition and reach. A successful brand is one that generates quantifiable growth through distinctive campaigns.

Whitepaper: 15 tips to make your marketing and digitisation budget for 2024 smarter

Checklist: 15 tips to make your marketing and digitisation budget for 2024 smarter

Now that you have a better idea of which benchmarks are the norm in terms of marketing budgets, and budget distributions, it's time to roll up your sleeves and get to work. We are here to help you with that too. Download our checklist with "15 tips to make your marketing and digitisation budget for 2024 smarter". This checklist with an inventory of cost items and templates that you can use, you’ll be off to a flying start.

Related insights on budget determination

Stay informed. Subscribe to our newsletter

iO respects your privacy. You can unsubscribe at any time.