When should marketers start investing in brand as well as performance marketing?

Grace Kite, Founder of Magic Numbers
Read time: 4 minutes Dr Grace Kite is a business economist and the incredibly lovely founder of magic numbers –  a company full of data people who have excellent people skills.  In this session, Grace investigated the tipping point between performance and brand spend, to provide us with all important case studies to show when […]

Read time: 4 minutes

Table of Contents

Dr Grace Kite is a business economist and the incredibly lovely founder of magic numbers –  a company full of data people who have excellent people skills. 

In this session, Grace investigated the tipping point between performance and brand spend, to provide us with all important case studies to show when we should be investing in both. 

Read on to find out:

  • 🔛 When you should switch on both brand and performance (Backed up by data from well-known eCommerce companies).
  • 💬 How you can communicate this point to your team and leadership.
  • 🕵️‍♀️ And, how you can then prove that it is all working.

Watch the full webinar back below, or read on for the key takeaways.

🕢 Time to change

Smaller businesses get high ROI using performance media

If you sell online, it’s likely that your growth during the start-up phase will be powered by the online advertising tools that the major ad platforms (Google, Meta) provide. These work really well when you’re small. You can switch on paid ad tools, and you’ll grow. So why change anything as you get bigger?

Data from the Arc database

When you’re a small business you can grow a lot via your own ‘demand pool’.

For most small businesses – paid search and social are the right places to be focused. Because when you’re small, you can grow a lot via your own ‘demand pool’.

The ‘Demand Pools’ model is a way of categorising purchases that might happen in the category.

Paid social strategies work like the right hand arrow. They find potential customers who are ready to buy and they bring them to your site so they can purchase. Things like paid social strategies are ‘demand-harvesting’ activities. When they work, they tend to work pretty quickly.

The left arrow is powered by activities that fill up your demand pool. So brand building activities like online video, TV, OOH posters etc.

Search and social are great at converting interested customers, so it’s a very worthwhile strategy to go fishing in your demand pool in the early days. If you’ve got a good product offer and a well-targeted message, you can convert those people to a customer very cheaply and very easily. 

Your pool of demand can be ‘fished’ more or less (depending on how much you spend).

As you increase the amount of brand harvesting that you’re doing, your number of conversions should increase. 

Spending more means reaching more of your pool.

But as you spend more, you’ll start to reach the people who are harder to convert. So with all that extra spend, you won’t necessarily see that many more customers. As you reach more of your pool, eventually you’ll have reached almost everyone and the remainder are those that are least likely to convert. So, you can increase spending on demand harvesting for longer, if your pool is bigger. You will spend more quicker, if your pool is smaller, either because your product is niche or because the world is changing in ways that make your category smaller.

The pool can also shrink in ways that are not in your control.

This year, energy and food prices have been going up and that has caused many demand pools to shrink. Currently,p eople have to spend more on the necessary things so they have less left over at the end of the month. We are seeing consumers delay purchases of luxury items. When demand for the category falls, it can have a knock-on effect on your pool of demand. In these situations, your marketing strategy might be the same, but you could get less customers for the same spend on search and social and you’ll reach the point that your pool is overfished, quicker. 

What does it feel like when your pool is overfished?

A typical stage in the life of an online born business

(It’s a consequence of success, when you’ve already reached everyone that’s easy to convert).

It makes sense to fish your demand pool first – convert people who are warm before doing harder marketing tasks. But, once the business reaches a certain size, growth will stall and your previously fruitful demand harvesting won’t work anymore. At this point you have overfished, and there’s not enough demand to harvest. You have reached the performance plateau. 

The solution? You need to fill your demand pool back up again with more people. You need to reach people who are not ready to buy right now and stay in their minds until they are. So, you need to do activities with wider reach and richer creative on attention-holding media channels. Enter brand building. Grace explains how with brand building activities you will be able to break through that performance plateau.

Demand building advertising fills your pool (producing new demand for your social and search to harvest)

Brand building activity fills your pool up – it makes people aware of you, and it allows prospective customers to start their journey to purchase. 

⛔ BUT – what if there is resistance?

You reach the moment in the company’s life where it does seem like the right time to investigate demand building, but there’s a problem. The chances are, you’re going to come across someone in the business who thinks like this: 

This is something that marketers encounter quite often, especially when the stakeholder has operated in environments where they just put money into marketing, and get money back. This kind of marketing feels very transactional but we do know that in the early stages of demand pool fishing, it can work very successfully. We also know that this type of growth doesn’t last forever. Feeding the pool is necessary.

So we need to show the right evidence to the right people that brand building is worth the investment. In many businesses, the person that needs to be brought on board, is the person who has been involved with performance marketing for a very long time. 

Demand building is for the performance marketing team too.

What these people need to know is that when you do demand building/brand building it will make that ‘£1 in, £50 back’ equation work for longer. It is easier to harvest demand if there is more to harvest. 

Demand building makes your search work better

(It improves click through rates on paid search)

As a brand’s reputation grows, so does the click-through rate on paid search and this is important because the algorithm responds to click-through rates. Brand building has an indirect effect on making paid search ads more clicked on and cheaper. Which is really good news for the performance marketing team to help them get over their resistance to brand.

Grace then went on to share a brand case study about Airbnb and their early development. You can watch that back from 21:30. 

❓ Is brand the only way?

Another way to get off the plateau is to widen your range (to access adjacent pools and so continue to use demand harvesting tools for growth)

There is another way of getting growth at this point. If you know that you’ve overfished your pool and you’ve reached everyone that wants the thing you sell, another route is to widen your range so you can access adjacent pools of demand and continue to use your search and social to fish that other pool. This can create additional growth. When you take additional products to the existing demand pool, because there are people out there that want it, the second product will grow faster. Mature ecommerce businesses have products at all stages. Some in the high growth phases, some in the plateau stage, and some below it. So introducing new products can work really well, as long as you’re aware that eventually there may not be enough adjacent demand pools to grow into. Your range might start to reach maturity, or it might become confusing to consumers what you stand for.

Finally, Grace shared a case study about ASOS and how they haven’t committed to brand building and where that has left them in 2023. Watch from 27:00.

🧠 Learn more about Dr Grace and the work she does at Magic Numbers – and sign up for their next training cohort here.