Performance marketing, and brand image. How to find a balance between the two?

How much money should be spent on brand marketing versus performance marketing? This is a question that has bothered many in the marketing industry for years. The answer is not clear-cut and depends on a number of factors, such as industry, company maturity and market competitiveness. However, there are many studies and expert opinions that can help us get closer to the optimal answer. 

If you want to be successful in reaching your audience, you need to find the right balance between brand marketing and performance marketing and understand how to effectively apply both strategies. To do so, read this article!

What is performance marketing?

Performance marketing, also known as performance marketing, is a marketing strategy that focuses on triggering specific actions and measurable results, such as clicks, lead acquisition or increased sales. Performance marketing often places a strong emphasis on immediate return on investment (ROI), and performance specialists always aim to maximize the number of leads and conversions while minimizing costs.

Performance marketing campaigns usually run over a relatively short period of time (e.g., a month or a quarter), and the goal is most often to reach an audience and generate sales from people who are interested in a particular product or service.

Types of performance marketing

The most important types of performance marketing are:

1) Pay-per-click 

In this case of PPC (Pay Per Click) ads, a fee is charged each time an ad is clicked. The method is used on search engines, social media platforms and other websites. It’s an effective way to attract targeted traffic to a specific landing page, but it’s important to manage the cost-per-click to ensure a positive return on investment.

2) Affiliate marketing

It involves working with affiliates who promote products or services on their own websites, blogs or social media. Your affiliates get paid for each conversion using a specific link or code assigned to them.

3) Social media advertising

If your brand has a presence on social media platforms, such as Facebook, Instagram, LinkedIn, TikTok or X (formerly Twitter), you can take advantage of advertising right there. Social media is one of the most common performance marketing channels for companies.

4) Email marketing

Mail is another popular performance marketing channel. It includes sending out your own newsletters, but it also includes partnering with an individual, company or institution that has an existing email list and inserting your products or services into their newsletters.

Performance marketing challenges

Well-run performance marketing efforts certainly bring the expected results, but focusing too heavily on this strategy also comes with challenges for companies.

1) Rising costs of acquiring new customers 

Customer acquisition cost (CAC – Customer Acquisition Cost) through performance marketing is steadily increasing. Factors such as increased competition, more informed customers and changing algorithms can all increase ad spending. Nowadays, it is necessary to be very creative in order to catch the attention of customers and get them to take a certain action.

2) Evolving consumer behavior and privacy concerns 

Consumers are becoming more cautious about sharing their data, and with greater awareness of privacy, there are stricter regulations on the types of data that advertisers can collect.

3) Restrictions on demand that can be used

Performance marketing allows you to tap into existing demand, meaning people who are currently looking for your product or service. However, it is not very effective at capturing future demand, meaning building an emotional connection with potential customers. This is a problem because future demand represents a much larger and untapped share of the market, so by focusing solely on performance marketing, you lose a larger share of potential customers.

Tapping into future demand requires a long-term marketing strategy, and this is where brand marketing comes in.

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What is brand marketing? 

Brand marketing (brand marketing) focuses on building and promoting a brand’s key messages, such as its identity, reputation or values. Its main goal is to build strong and lasting emotional ties with the brand’s target customer base. Unlike performance marketing, which focuses on immediate results, brand marketing relies on long-term activities and creating brand value over several months or even years.

Types of brand marketing 

A brand marketing campaign can take different forms and be implemented on different channels, such as: 

1) OOH advertising 

Conducting an OOH (out-of-home) campaign on billboards or posters to increase brand awareness is a form of brand marketing when the goal is not to get people to buy immediately, but to increase consumer awareness for a future time.

2) TV advertising 

Although there are many television commercials (TVCs – television commercial) that exist solely to promote sales, it is more typical to use longer forms of video content to build an emotional connection with viewers. The benefits for brands will not be immediate, but will help strengthen relationships with potential customers.

3) Radio advertising 

Radio advertising (radio advertising) is similar to TV and OOH in that it reaches a mass audience. This form of brand marketing to increase brand awareness and consideration often uses storytelling through word of mouth.

4) Influencer and brand ambassador marketing + community building

In order to promote your brand, you can also partner with influencers who agree with your values. Influencers can help reinforce your brand messages and reach new audiences, while building a community around your brand creates a group of followers who are engaged and interested in what you do, and pass that information on to others.

5) Social media marketing

As with performance marketing, you can use social media platforms to support your brand efforts. However, in addition to product ads or those that include CTAs, your brand initiatives here should be more focused on storytelling, engaging content and building meaningful relationships with your audience.

6) Public relations

PR is about shaping your brand’s public image and increasing brand awareness through press releases, interviews, crisis management and frequent media appearances. 

7) Event marketing

It involves showcasing or sponsoring events to promote a brand’s products or services and to connect with customers and industry professionals.

Why developing your brand is so important? 

Branding (brand building) takes time, and measuring the results of a brand marketing campaign is not as obvious as with performance marketing. However, when done properly, brand marketing can have a profound impact on your business’ reputation, customer relationships and bottom line. Why? Answers below.

1) Builds trust and emotional connection with target consumers

People perceive strong, enduring brands as more reliable, consistent and trustworthy. Since customers are more likely to buy from companies they trust, having a solid brand can give you a competitive advantage.

2) Helps with loyalty

A strong brand is also memorable. A proper brand strategy creates an identity of sorts, sinking into the minds of consumers. This makes it easier for customers to remember your brand when they are ready to make a purchase, and promotes long-term loyalty.

3) Allows you to set higher prices 

One of the most powerful but underestimated effects of building a strong brand is the ability to offer higher prices. Studies show that strong brands are able to charge a premium for their products and services, which means higher profit margins and increased revenue compared to competitors with weaker brand recognition.

Performance marketing vs. branding 

Returning to the difficult title question: what is the right ratio of spending on performance marketing and brand marketing? Your budget allocations for branding and performance will vary depending on factors such as your available budget, the maturity of your business and your industry. Nevertheless, marketing performance experts Les Binet and Peter Field recommend the following split:

• in the first year of operation: 65% on performance marketing, 35% on brand marketing,
• early growth stage: 43% on performance, 57% on brand,
• mature brand: 38% on performance, 62% on brand,
• market leader: 28% on performance, 72% on brand.

In other words: a good starting point for companies is to spend about 40% of the budget on performance marketing, and the remaining 60% on brand marketing.

Les and Peter have analyzed thousands of cases and found that companies that allocate their budgets in this way are more likely to achieve a sustainable marketing approach that delivers both short-term results and long-term brand growth.

How to calculate the ideal allocation? 

Marketing is part art and part science, so these numbers can vary. How do you find the balance for your brand? Start by defining your short-, medium- and long-term goals It is also useful to analyze and understand the activities of competing brands. Be sure to consider your budget and determine how much you are able to spend on your marketing and advertising campaigns.

To make these steps easier, you can use Tracksuit, a marketing budget calculator that uses Binet and Field’s 60/40 methodology. All you need to do is enter information about your market (category, sales channels, price), and the tool will generate the best budget breakdown. 

Always monitor results 

Markets never remain static, so it’s important to constantly track and measure your activities. Your strategy is likely to change over time, so be flexible and prepared to adjust your marketing efforts accordingly.

How to gain approval for both types of investments? 

Performance marketing and brand marketing require very different approaches, so your strategy for gaining approval from business leaders, such as your CFO, will vary depending on what you want to implement. Here are some tips on how to get approval for both types of marketing investments:

1) Strengthen your relationships with your CFO and stakeholders

Talk the language of your CFO and show how brand investments can lead to improvements in KPIs that interest them, such as revenue growth, Customer Lifetime Value (CLV) or market share. Consider preparing case studies to present to decision makers and show how branding aligns with the company’s financial goals.

2) Combine performance marketing and brand marketing strategy 

Take a holistic approach and find ways to combine your performance and branding efforts. You can show that having a strong brand can lead to a higher return on your performance marketing investment, as customers are more likely to click on an ad if they recognize the brand.

3) Use evidence to provide credibility

Present data-driven evidence to your stakeholders on the effectiveness of performance marketing and branding. Use case studies, market research and industry benchmarks to show that your proposals have a basis in reality.

4) Explain why both types of investment are equally important

Present to your stakeholders a comprehensive picture of why performance marketing and brand marketing are equally important to the long-term success of your company. Explain that brand marketing builds relationships with customers and increases loyalty, while performance marketing generates immediate ROI and focuses on conversions.

5) Be willing to make compromises 

Learn to be flexible in your budget allocation decisions. Be open to suggestions from others and ready to adjust your strategies depending on changing market conditions or company needs.

Remember that marketing budget management is an iterative process, not a static strategy. Regularly review your performance and make budget allocation decisions based on the available data and your company’s business goals.

Make sure to review your results regularly.

Performance marketing and brand image – summary 

We presented different approaches to allocating marketing budget between brand marketing and performance marketing, and showed that the right balance between the two depends on various factors, such as the industry and stage of development of the company. The recommended budget proportions suggest a flexible approach to achieve harmony between short- and long-term marketing goals. We also emphasized the need to gain acceptance for both types of investments through data presentation or flexibility in decision-making. Now it’s time for you! We wish you the best of luck in growing your business and building a lasting brand.