November 10, 2022
Can you do one without the other? It's harder to stand out these days as products and services become more and more similar. Yet, you mostly see ‘performance marketing or brand marketing’. It's often one or the other. In this article, we'll take a closer look at Performance vs Branding and how it affects your business.
Marketing revolves around two principles, brand and performance. Brand marketing creates brand value. The focus is on the reputation of your company. However, this is a long-term process that will pay off in the future. In short, you could say your “branding” is what people say about you when you are not in the room. Performance marketing on the other hand, focuses on immediate, short-term results. It converts brand value to achieve results. Effects of these efforts are almost instantly visible in sales or leads. This means that performance marketing is all about conversion, using digital ads.
When we talk about branding, the billion-dollar company Apple is not easily dismissed. Apple was founded by two students who did not finish college. In addition to the equipment Apple sells, it also has no less than two extensions, Apple Pay and iTunes. Apple's branding strategy has always focused on emotion. That is, feelings should be released while buying, discovering and using Apple products. It also emerges that Apple is focusing on lifestyle. As a result, there is huge hype surrounding the releases of Apple products.
What exactly does the 60/40 theory mean? According to Les Binet and Peter Field -- aka ROI gurus -- the ideal ratio on average is 60/40, with 60% brand marketing and 40% performance marketing. They based their conclusions on a study, conducted on more than 600 companies in a timespan of over 15 years.
However, when looking at today's stats, significantly more time and money is being spent on performance marketing. This reflects the fact that many e-commerce companies still don't want to develop their branding, can you believe that?!
Two well-known examples of companies which almost perished because of this phenomenon are Adidas and Ebay. Having a budget ratio of 10% brand and 90% performance marketing, Ebay barely managed to turn things around.
Adidas’ and Ebay's focus on short-term thinking led to problems with consumer confidence and brand differentiation. Upsides led to less conversion in the longer term. Adidas was convinced that performance marketing was the biggest driver of e-commerce, when in reality brand marketing was responsible for most of the sales on their web shop. The companies eventually applied Binet and Field's 60/40 ratio and well, look at them now. Without jumping to conclusions, these examples show that there’s still a lot to be said for Binet and Field’s theory. Although it could be a challenging move for first-time entrepreneurs, in the longer term it might just be everything you need.
One form of marketing is not better than the other - on the contrary! To reach your entire potential market and to realize long-term growth, you should use both forms of marketing. Or at least try them!
Performance marketing is suitable for an adequate response to existing demand, while brand marketing is here for finding and expanding new and current target-audiences, and to stimulate needs and future demand on the go.
We ourselves primarily focus on combining branding with performance. As a start-up, we recommend working on your tone-of-voice, to communicate your company values, be true to yourself, create a clear corporate identity and, ofcourse, always bring your A-game. In other words, just selling a product isn’t enough anymore. Let your proposition come forward: what does my brand and essence stand for and how will it make your (the customer’s) life better? Share your story as part of your branding, and see how your brand will perform!