Brand vs. Performance Marketing for Startups and Scaleups

It’s still the evergreen, almost existential marketing question for founders and start-ups: 

‍<span class="richtext-line-highlight">How much should I spend on brand marketing vs. performance marketing? </span>

I don’t think there’s a single magic number (although I’m not violently opposed to Les Binet’s oft quoted 60:40 in favor of brand), but there’s likely a range that’s appropriate for your category as well as stage in funding lifecycle. 

‍[Category considerations]

1) Volume of available / active buyers in your category: E.g. for certain B2B categories, buyers may only be in-market once every 2-3 years.

2) Need to build equity, trust or differentiation: This is obviously high for luxury or enterprise brands, but also inversely for many commoditized FMCG categories. 

[Funding considerations]

The key question is whether you have a short vs. longer term orientation.

Are you trying to prove your idea is an investable business that warrants additional capital to scale impact? Or do you have the financial flexibility to build a business over time vs. capture low hanging fruit? This may not be a binary decision, but a continuum that adjusts to evolving priorities over time. 

    1. Pre Product Market Fit / Seed / Pre-seed: 

• Minimal paid marketing spend at this stage, the primary focus should be on building the foundations - developing a product & value proposition, understanding your audience and attaining product market fit. 
• Recruit your initial users / customers via word of mouth, warm referrals or organic channels (social, communities) and focus on driving satisfaction & engagement with this group. 

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2. Post Product Market fit / Series A 

• As you need to move from initial traction to proving scalability to meet investor expectations, acquisition should be the primary focus. 
• Ideally, spend ~70-80% of marketing spend on performance marketing. Prioritize high intent channels where you can capture and convert demand efficiently without wastage. Here are some pre-conditions to get right before you start.
• Balance spend on select brand / engagement campaigns: ideally focus on testing channels you’re already seeing organic success with e.g. social or UGC/ community based platforms.
• [Bonus] Invest in CRM infrastructure so you can start to manage newly acquired users and nurture prospects. 

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3. Series B

• This is an important turning point because you’ve cleared the first hurdle and proved commercial potential. 
• Marketing budgets should grow considerably from Series A, enabling you to consider mass / broad reach media that typically require a higher threshold for effectiveness [e.g. minimum reach x frequency to drive brand lift scores] and plan for the future.  
• This is the right time to invest in full-funnel marketing i.e. a healthy balance across driving awareness, consideration and action. ‍
• Recommendation: 40-50% across brand/engagement and 50-60% performance. 

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4. Series C + 

• At this stage, you likely have a high volume user base,  multiple products / services in your portfolio and plans for further market expansion. Brand marketing (particularly at the company or corporate level) can be an efficient connecting thread given the scale/ breadth of the business and can serve as the halo for new product launches. 
• Recommendation: Spend ~70% on brand and engagement campaigns (company & product related as relevant) to maintain Share of Voice (SOV), preference and reputation, with ~30% on performance. 
  • Focus Performance spend on higher value users - either acquiring fresh users or reactivating churned users you can’t win back via your owned channels.  Leverage first party data for lookalikes & activate data signals to ad platforms. 
  • Why is Performance spend only pegged at ~30%? Will this hurt sales/ revenue in the short term? Not if you’ve effectively invested in brand-building over time. 
  • What are a few signs of brand investments paying off? 
    • Increases in searches for your brand keywords that you can capture organically, direct traffic to your website, higher opt-ins to email communications, inbound leads to sales teams, steady word-of-mouth or referrals. 
    • This should all lead to a significant number of free users and lower overall Customer Acquisition Cost (CAC). Except they’re not really “free”, you’ve invested to build the relationship over an extended period of time unlike Performance which is a short-term lever. 
    • Think of it this way: you started this journey by preaching primarily to the choir, but now you’re finally seeing the congregation on your side. 

Notes:

a) Use the above as a high-level framework as you plan your business, however as your marketing scales to full-funnel and becomes more fragmented (5+ channels), I'd recommend the trifecta of measurement (Multi-touch attribution, Marketing Mix modelling and Incrementality tests) for final channel allocations,

b)The % allocations are primarily for 'media' spend - they do not include required investments for Content, MarTech or other non-paid activities.

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