Balancing digital marketing spend and brand building

Balancing digital marketing spend and brand building

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The Tortoise and the Hare — which one of them do you want managing your marketing budget? Do you value the slow, steady success of brand building or the speedy impact of digital marketing?

In Aesop’s fable, the tortoise eventually wins the race, but in ecommerce there are no guarantees of long-term success if you can’t get results quickly. A gradually-growing brand will burn through its cash reserves if it can’t bring in sales at the same time. And with no finishing line to reach, you can be overtaken at any point.

The hare gets off to a rapid start but ultimately runs out of steam. Convinced that it’s on the way to victory, it doesn’t pay attention to what it needs to do to maintain its early successes. It’s similar in digital marketing, where rising cost-per-clicks and customer acquisition costs make it hard to sustain a business fuelled by paid ads alone.

Why not offer both the tortoise and the hare a job share in your marketing team? You can balance your digital marketing spend and brand building to get the best of both worlds. And get more from your marketing spend to boot. This is called hybrid marketing.

The case for hybrid marketing

In hybrid marketing, you’ll find what the title of this blog post refers to: a balance between digital marketing spend and brand building.

Even Meta, which is reliant on paid advertising for its revenue, pushes its advertisers towards a hybrid approach. It ran multiple brand lift studies to measure the impact of campaigns that combined short-term sales activation with long-term brand growth. The studies found that building brand within performance campaigns generated a 10.9% brand awareness lift, 12.5% increase in ad recall, and a 5.3% lift in familiarity. On top of those brand-led benefits, 94% of advertisers had an uplift in conversions.

Similarly, McKinsey says that combining performance marketing tactics with brand-led creative can create incremental top-line growth of up to 10% and efficiency gains of 30% without increasing marketing budget.

Those are some of the results businesses see when they strike the right balance between brand and demand. But what does the situation look like when your marketing budget is weighed too heavily towards digital marketing?

Overlooking brand growth in favour of more direct traffic

We’ve had a tortoise and a hare, so why not throw a hen into the mix? When you ignore brand growth, you’re putting all your eggs in one basket. Paid ads are undoubtedly the quickest way to get customers and build sales, but they’re also expensive (and getting even more so).

What happens when the cost-per-click wipes out your margin? Or what if you hit cash flow problems and can’t pay for ads? If you’re not growing your brand at the same time, the moment you switch off the ads you have nothing left.

Take the example of interior design marketplace Laurel & Wolf. The site secured a $20 million venture capital investment after launching in 2014 but shut down in March 2019. An over-reliance on paid media was a big factor in that. Its customer acquisition costs soared to $1,500 — for products that usually cost a few hundred dollars (out of which a big chunk would go to designers and makers).

In addition to being financially unviable, the addiction to ads prevented any sense of community building.

“We had to continually resell the product again and again to new customers,” explained Laurel & Wolf’s former vice president of engineering, Dave Arthurs. “We couldn’t build any momentum, because every single month we had to start fresh, marketing to a new audience.”

Dropbox narrowly avoided similar problems when it launched paid ad campaigns in 2009. Its CPA was between $233 and $388 for a paid product it was offering for $99. The cloud storage giant was saved by the fact that its results were so bad it didn’t pursue PPC over a sustained period.

Instead, it built a community based around a successful referral scheme, social media shares, and a product that delivered sufficiently to encourage word-of-mouth recommendations from customers. As it grew from 100,000 registered users in September 2008 to 4 million in January 2010, 35% of signups came from the referral scheme.

Top mistakes of an unbalanced marketing budget

There are tell-tale signs of an unbalanced marketing budget. The same mistakes are repeated time and again, usually with the same results:

  • Ever-increasing PPC spend
  • High customer acquisition costs
  • Low customer loyalty and lifetime value
  • No organic growth

Let’s look at some of the mistakes that create those outcomes.

Not building community

The Dropbox example shows the value of a brand community. Community members become loyal customers and brand advocates who go out into the world to spread the word on your behalf. This helps to build customer lifetime value while also cutting acquisition costs.

Not building a community leaves you in a position like Laurel & Wolf: high CAC and nothing to show for it when the budget dries up.

Not committing to SEO

SEO is hard work, and it’s time-consuming. But putting in the effort brings gradual, long-lasting, and scalable growth. Even relatively simple measures, like correctly formatting URLs, adding alt text to images, and improving page speed can soon get results.

If you don’t work on your SEO, you’re costing your business money in the long term and maintaining your reliance on a big variable cost in the form of paid marketing.

Not answering your customers’ questions

At its most basic level, content marketing is giving customers the information they want. Creating content that answers questions gives you the opportunity to bring free, organic traffic to your site. You can then point this traffic towards your products and bring in sales with a very low CAC.

Not engaging with potential customers in this way means leaving money on the table and giving a competitor the opportunity to share their wisdom instead.

Not developing a social following

Social shares were key to Dropbox turning a corner — and they can also be important for your business. Organic social media content allows you to reach customers where they’re already spending time. Your followers can engage with and share your content.

Your social accounts are also a place to gather and share reviews and user-generated content. This makes it a key aspect of community building.

Key financial KPIs in performance marketing

You’ll be familiar with the main metrics in performance marketing. Most of them feature prominently on our Google Ads and Facebook Ads dashboards. Things like:

  • Click-through rate (CTR)
  • Customer acquisition costs (CAC)
  • Return on advertising spend (ROAS)
  • Lifetime value of customers (LVC)
  • Share of the market (SOM)

It’s all about hard data that shows how successfully your ad drives people to your store and how much they spend once they’re there.

Key financial KPIs in brand marketing

One of the reasons less budget is spent on brand marketing is that the data is softer. It’s not as instantly compelling as the performance marketing KPIs. Nonetheless, financial KPIs are hugely important when it comes to measuring your brand.

You can measure your brand using lift studies (like the Facebook ones we mentioned earlier), focus groups, surveys, and sales data. KPIs could include:

  • Brand awareness
  • Number of significant brand events
  • Brand affinity
  • Net promoter score (NPS)
  • Share of voice (SOV)

You can also dig into historical financial metrics, such as:

  • Market share
  • Profitability
  • Revenue
  • CAC
  • Customer retention
  • LVC

By comparing these KPIs before and after increasing brand marketing, you can measure the impact of your branding. This helps you to put a financial value on your brand and justify continued investment.

Striking the balance in your business

Investing too heavily in either demand-based digital marketing or long-term brand building puts your ecommerce business at risk of stagnation and, ultimately, failure. Focus too much on performance and you’ll never achieve the foundation for long-term growth. Ignore performance in favour of branding and you’ll never get going in the first place.

The answer is to strike a balance between the two that works for your business. You can achieve this by:

  • Adopting a hybrid marketing approach that combines performance and branding
  • Investing in community building, SEO, and social media
  • Measuring key KPIs in all areas to make sure you’ve got the balance right

Discover more ways to grow your brand

If you’ve found these tips useful, you should definitely check out our other articles. Head over to our blog to read our latest blog posts.


Balancing digital marketing spend and brand building
Juni
Financial platform

Juni is the financial platform built for ecommerce. We give you a unified view of your finances, with cards, mulitcurrency accounts, and banking, accounting and advertising integrations - all in one place. We can even help boost your cash flow with working capital, cashback and more.

Download our free whitepaper and gain important ecommerce and marketing insights, directly from Juni.

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