Brand and performance ads create multiplier effect for business growth

Diminishing performance advertising returns and online safety concerns are fuelling a return to brand and marketing fundamentals as CMOs pursue greater effectiveness and business growth.

WARC (World Advertising Research Centre) Asia Pacific senior vice-president Edward Pank

Businesses are missing out on significant revenues and profits due to an incomplete approach to advertising that ignores brand marketing and overvalues performance, according to a “first-of-its-kind” report from a coalition of marketing effectiveness experts.

The Multiplier Effect report combines insights and data from WARC (World Advertising Research Centre), Analytic Partners, System1, Prophet and Bera.ai, to deliver a data-driven case for effective advertising that proves advertising is most effective when brand and performance marketing are fully integrated.

The report reveals businesses that over-invest in performance advertising can reduce their return on investment by between 20 to 50 per cent, however, shifting from a performance focus to a balanced mix of brand and performance-based marketing can lift ROI by between 25–100 per cent, with an average lift of 90 per cent.

To achieve this multiplier effect, marketers should allocate between 40–60 per cent of their budget to brand marketing, or what the report refers to as “brand equity-driving”, while maintaining performance advertising activity to reinforce short-term goals.

While this idea of “bothism” is nothing new, the report provides new data and research from the US that demonstrates how brands can achieve this, said WARC Asia Pacific senior vice- president Edward Pank.

“(The report) shows that it’s not about brand plus performance, it’s brand times performance,” Mr Pank said. “And if you integrate brand with performance in the right way, then you get an exponential effect through your business results.”

The report reveals that 90 per cent of brands that outperform the competition have completely or mostly integrated brand and performance advertising.

Using research and business examples, the report highlights the need for chief marketing officers to abandon the separated silos of brand and performance teams and integrate the two techniques to achieve both short and long-term impacts. It demonstrates that brand, or “equity-led” advertising can drive short-term sales as well as in the future while performance advertising can reinforce the brand while operating efficiently.

“It goes back to the short term versus long-term argument that a lot of brand marketers struggle with,” Mr Pank said. “But, what we see in The Multiplier Effect, is that it is both, and it’s not treating brand and performance as silos, but really properly integrating them.”

Mr Pank, who is regarded as a global authority on marketing trends, spoke to The Growth Agenda ahead of his keynote address at a conference for CMOs in Australia this week, where he will share the new research and urge marketers to reclaim the fundamentals to unlock business growth.

“There is a growing need to reclaim marketing and reclaim the four P’s (product, price, place and promotion),” he said. “Pricing is often an overlooked element of the four P’s of marketing and there is an opportunity for brands to make pricing a marketing KPI. We’ve seen how a 1 per cent price increase can actually constitute an 8 per cent increase in profits and the businesses that spend more on advertising, have a greater pricing power.”

Mr Pank argued that even in tougher economic situations such as the current cost-of-living crisis, marketers had an opportunity to use price to drive growth.

“Pricing is a strategy in itself, and if you do the research and you have a good fundamental understanding, it can be a big driver of profitability, even in a downtown. Increasing prices just a little bit, can increase your profitability, but obviously you need a strong brand to be able to justify that premium.”

Mr Pank said marketers needed to gain more control of brand elements such as customer experience, which represents a significant growth opportunity for businesses.

“There’s an opportunity to make customer experience a core brand driver,” he said. “Brand experiences are not just about the media or advertising, but it’s also about the total brand journey. Yet, around 40 per cent of CMOs don’t manage or have strong influence on the customer experience. Marketers need more control of that experience to ensure the brand promise.

“CMOs need to think about how to better connect the customer to the C-suite, because there is currently a massive disconnect, and that’s an opportunity for marketing to grow its influence within the organisation by owning the relationship with the customer.”

Mr Pank also said that CMOs needed to start looking for new opportunities beyond social media platforms, which were becoming increasingly unsafe for brands, despite still attracting the lion’s share of global ad spend. Last year, Alphabet, Amazon and Meta attracted 44 per cent of global ad spend, however, marketers are increasingly concerned about brand safety in the wake of changes to fact-checking policies and DEI initiatives.

“The big social media players are very seductive because of the first party data and the end-to-end solutions that they provide, but with that comes lots of brand safety issues,” Mr Pank said. “It’s an easy spend and it’s too easy to ignore the issues, but, potentially, they are going to increase if a lot of these issues are left unchecked.

“It’ll be interesting to see what brands do with their spend moving forward. However, there’s a massive opportunity out there with other channels and with other partnerships to get your message to customers in, what we call, the age of media abundance.”

The Inside Effectiveness event, which is hosted by Advertising Council Australia and the Australian Association of National Advertisers aims to provide local marketers with the insights and tools to seize opportunities to boost business results.