How Performance Marketing Left Brand Building Out In The Cold

In the past decade, the marketing landscape has undergone a seismic shift. A revealing statistic encapsulates this transformation: according to Gartner’s Annual CMO Spend Survey, over 70% of marketing budgets are now dedicated to digital channels, with a significant portion directed towards performance marketing. 

This pivot towards performance marketing - dominated by pay-per-click (PPC) campaigns and other tactical activities - has increasingly overshadowed traditional brand-building efforts. The allure of immediate, quantifiable returns has led many brands to favour short-term gains over long-term strategy.

This article aims to dissect the underlying reasons behind the decline of brand building in favour of performance marketing and its impact - particularly on content marketing. It will delve into how the challenge of proving return on investment (ROI) for brand-building activities has driven this shift. 

About this article

To understand the magnitude and impact of this shift, we will explore several key areas. 

1. Brand building - why bother?

2. The irresistible rise of performance marketing

3. The shift from strategy to tactics and its impact (aka Why, God? Why?!)

4. Getting the best of both worlds

1. Brand building - why bother?

Brand building is a long-term strategy to create a unique identity and foster emotional connections with consumers. Brand building cultivates intangible assets like trust, loyalty, and recognition over time, enhancing brand equity and influencing consumer behaviour and pricing.

The benefits of a strong brand:

• Long-term loyalty and trust

• Premium pricing power

• Differentiation in a crowded market

• Enhanced marketing effectiveness

• Resilience against market fluctuations

• Talent attraction and retention

• Crisis management.

Sound worthwhile?

Prominent marketing experts have long extolled the virtues of brand building. Rory Sutherland, Vice Chairman of Ogilvy UK, is a vocal advocate for the enduring impact of brand strategy. In this and other videos, he argues that brand building is essential for creating a psychological framework that influences consumer behaviour in ways that are not immediately quantifiable but are profoundly effective. According to Sutherland, brands are not just economic assets but cultural artefacts that shape consumer perceptions and societal norms.

Why do brand building?

Les Binet and Peter Field, renowned for their work on marketing effectiveness, have provided empirical evidence supporting the superiority of brand building for long-term business success. Their research demonstrates that campaigns focused on brand building, while less immediately measurable, generate substantial long-term profit growth compared to short-term sales activations.

3. The irresistible rise of performance marketing

Performance marketing prioritises immediate, measurable outcomes over long-term brand development, using strategies like PPC, affiliate marketing, and social media ads to drive specific actions. Advertisers pay only for results, making it a cost-effective and accountable method.

Not only this, but machine learning and artificial intelligence have revolutionised ad targeting and optimisation. Algorithms can now predict user intent and behaviour, allowing for hyper-personalised ad delivery that maximises engagement and conversion rates. Programmatic advertising, which automates the buying and placement of ads using AI, has streamlined the process, making it more efficient and effective. These technological advancements have made performance marketing not only more accessible but also more precise, allowing marketers to fine-tune their strategies based on real-time data and achieve optimal results.

This means every pound spent has a direct, pound-for-pound ROI. This makes budget highly manageable and accountable. Turn on the tap a lot or a little and get the amount of water you expect. 

Short-term gains: the allure of immediate ROI

The primary appeal of performance marketing lies in its ability to deliver immediate, measurable returns on investment. This immediacy is particularly attractive in today’s fast-paced business environment, where stakeholders demand quick results and tangible evidence of success.

Performance marketing’s focus on measurable outcomes - such as click-through rates, conversion rates, and cost per acquisition - provides clear, quantifiable metrics that can be directly tied to business objectives. This transparency makes it easier for marketers to justify their expenditures and demonstrate ROI to executives and clients. Additionally, the ability to track and analyse data in real-time allows for agile marketing strategies, enabling marketers to swiftly pivot and optimise their campaigns based on performance insights.

With such visibility and control, the famous quote: “Half the money I spend on advertising is wasted; the trouble is I don’t know which half.” is no longer relevant.

For instance, a PPC campaign can be adjusted on the fly to increase bids on high-performing keywords or reduce spend on underperforming ones. Similarly, social media ads can be tested and iterated rapidly, ensuring that only the most effective versions are deployed. This agility not only maximises ROI but also minimises waste, making performance marketing a highly efficient approach.

Why would anyone spend a bean on anything else?!

The problem of incentives: Why marketers have stopped brand building

While many marketers believe in brand building, they hesitate to advocate for it due to the difficulty in measuring its immediate impact. In contrast, performance marketing offers clear, measurable results, aligning perfectly with the short-term focus of many businesses. This creates a significant challenge for marketers, who are incentivised to favour easily quantifiable activities to meet organisational expectations and, importantly, secure their own positions - especially when there is client pressure.

It’s hard to raise your head above the parapet and recommend something that takes ages and is difficult to prove its value, so many don’t.

This behaviour risks creating a cycle where immediate gains are prioritised at the expense of sustained growth and brand loyalty, leading to weakened brand identity and reduced customer loyalty.

4. The shift from strategy to tactics and its impact (aka Why, God? Why?!)

The trend towards performance marketing is clearly reflected in the data on marketing budget allocations. According to Gartner’s Annual CMO Spend Survey, the share of marketing budgets devoted to digital channels has steadily increased, rising from 40% in 2012 to over 70% in recent years. Within this digital spend, there has been a marked increase in allocation towards performance marketing activities. For instance, a 2023 report by eMarketer revealed that US digital ad spending on performance marketing grew by 15% year-over-year, outpacing traditional brand-building investments. The stats in the graphic above stretch to 2024.

A survey conducted by the Association of National Advertisers (ANA) found that nearly 60% of marketers reported shifting resources from brand-building to performance marketing over the past five years. This shift is driven by the pressure to deliver quantifiable results and the perceived efficiency of performance marketing channels. However, the same survey indicated that 45% of marketers expressed concerns about the long-term implications of this trend, particularly the potential erosion of brand equity.

What about the poor content creators?!

This shift of budgets towards performance marketing has had a profound impact on content creators and content marketers. It has introduced challenges such as reduced investment in long-form content and increased pressure to demonstrate immediate ROI. To thrive in this evolving landscape, content marketers have had to balance the demands of performance marketing with the principles of brand building, ensuring that their content not only drives short-term results but also contributes to the long-term success and health of the brand. Which of course is not only really easy, but super fun.

Experts say…

Marketing thought leaders have provided critical insights into this strategic shift. Rory Sutherland has been a vocal critic of the overemphasis on performance marketing arguing that focusing too heavily on short-term metrics undermines the long-term value of brand building. He says that brands risk becoming commoditised if they neglect the emotional and psychological aspects that differentiate them in the minds of consumers. The true value of a brand lies in its ability to create lasting relationships with consumers.

Similarly, Mark Ritson contends that the obsession with immediate ROI has led many companies to underinvest in brand equity “the engine that drives sustainable growth”. He points to the enduring success of brands like Apple and Coca-Cola - and who wouldn’t want the brand equity of those guys to play with?

The cult of ‘lead magnet’ marketing

In the quest for rapid growth and measurable results, 'lead magnet' marketing has emerged as a popular tactic. This approach involves offering valuable content or incentives, such as ebooks, webinars, or free trials, in exchange for potential customers' contact information. 

While effective in generating leads, this method has often been promoted as a standalone strategy, promising marketers that they can bypass the arduous process of brand building. Instead, it suggests that success lies merely in reaching an audience and presenting products directly.

Lead magnet marketing offers a compelling promise of immediate audience reach and conversions, but it can’t replace the foundational work of brand building. The key is to view lead magnets as a complement to, rather than a substitute for, robust brand-building efforts.

Find out more about lead magnet marketing.

5. The consequences of neglecting brand building

• Reduced long-term benefits

• Loss of trust in the brand

• Decreased brand distinctiveness

• Reduced customer loyalty

• Longer-term marketing costs:

• Higher customer acquisition costs - As brand equity diminishes, the cost of acquiring new customers may increase because the brand lacks the inherent appeal and recognition that can drive organic growth.

• Increased reliance on paid media

• Constant promotional activity - reliance on discounts and incentives to drive sales

• Neglect of strategic development - preventing the brand from establishing a strong, cohesive identity

• Lower lifetime value (a weakened brand results in lower customer lifetime value, as customers are less likely to remain engaged and loyal over time)

• Increased price sensitivity (brands with diminished equity often face increased price sensitivity among consumers, making it harder to maintain premium pricing)

• Focusing solely on immediate results can stifle innovation, as there is less incentive to invest in new, long-term marketing initiatives that might take time to show returns

• Weakened market position

• Competitors who invest in brand-building will gain a competitive edge

• Employees are often more engaged and motivated when they feel connected to a strong brand with a clear identity and values.

The truth: brand impacts PPC [insert ‘shocked’ emoji]

Brand equity enhances the effectiveness of performance marketing. When a brand has strong equity, consumers are more likely to recognise it, trust it, and engage with its marketing messages. Click. This recognition and trust can significantly boost the performance of performance marketing campaigns in several ways.

Lower cost per click

Platforms like Google Ads and social media advertising algorithms take into account the relevance and quality of ads when determining CPC. Brands with high recognition and positive perceptions often achieve higher click-through rates (CTR) because users are more inclined to click on ads from brands they know and trust. 

As a result, these platforms reward high-performing ads with lower CPC rates. Essentially, better brand equity can lead to more efficient spending on performance marketing campaigns, as each click costs less due to the increased likelihood of user engagement.

Higher conversion rates

When consumers encounter ads from a well-known and trusted brand, they are more likely to convert - whether that means making a purchase, signing up for a newsletter, or completing another desired action. This is because established brand equity reduces the perceived risk associated with engaging with the brand. 

Consumers are more confident in the quality and reliability of products or services from brands they recognise and trust, making them more likely to follow through on calls to action.

Other metrics

• Higher engagement rates on social media

• Better email open rates

• Increased effectiveness of retargeting campaigns.

6. Brand: Don’t you, forget about me…

To achieve sustainable growth, companies must integrate brand building and performance marketing into a cohesive strategy. This integrated approach leverages the strengths of both disciplines: the long-term emotional connection and trust fostered by brand building, combined with the immediate, measurable results of performance marketing. By aligning these strategies, brands can create a holistic marketing plan that drives both short-term sales and long-term loyalty.

A successful marketing plan begins with a well-defined brand and marketing strategy. This foundational strategy should clearly articulate the brand’s values, mission, and unique value propositions. This strategic groundwork ensures that all marketing efforts, including performance marketing, are aligned with the overarching brand objectives and contribute to building and maintaining brand equity.

Once the brand and marketing strategy is established, performance marketing tactics can be effectively integrated to support and amplify these efforts.

Just make sure you have the horse before the cart.

PS: Let's face it. I could sum this article up with the following meme...