How much should be invested in building the brand?
This article was originally published in 2019. Industry conditions, data, and technologies referenced may have changed since then.
Marketing Principle for Growth
- GROWTH: Long-term growth is optimized by a mix of Brand and Promotional communications. 62% brand is a general benchmark, which should then be refined for each brand.
In the last 10 years, marketers have shifted budgets from brand building activities to direct response promotions. Perceived short customer journeys of ecommerce sales, the availability of response-focused digital metrics and the launch of now-unicorn DTC (direct to consumer) brands have all played a role. At points, leading marketers have wondered out loud if all ads would become direct response ads in the near future.
However, recently released research from the IPA (Institute of Practitioners in Advertising), titled Effectiveness in Context shows that the optimal mix of ad spend to drive long-term effectiveness is 62% brand building and 38% promotional ads.
It seems large tech companies realized this need for more brand investment in the last few years as brand advertising is up significantly for Facebook, Google and Uber.
Counter intuitively, when promotion is easier, brand spend should actually increase. Two types of businesses which demonstrate this relationship are Online businesses, which can immediately direct people to purchase and Subscription businesses which have recurring purchases. The path from ad to sale is shorter, hence promotion is easier and less investment is required in promotion.
Investing in your brand will increase short-term effectiveness by an average of 42% and establish it as a meaningful myth that people include in their belief system.
