In the 1960s and 70s, when they wanted to sell a soft drink or a sedan, companies leaned on mass-media channels like TV, radio, print ads and billboards, mounting relatively one-size-fits-all campaigns with very limited segmentation and personalization. Everyone was basically watching the same ad, so a brand had to commit to one big, overarching story that defined the brand’s whole vibe. In the 2000s, the advent of the internet, social media and data analytics helped to reach specific demographics with tailored content, to track consumer behavior, and to adjust strategies in real time for better efficiency and engagement.
Yet, in today’s far more complex marketing landscape, companies are navigating tightening returns, cookie-less measurement challenges and a fragmented marketplace. These pressures have driven boards and investors to prioritize quick wins and rapid profits, often leading to an over-reliance on performance-based channels. While this approach can deliver a head-rush of short-term gains, an inevitable hangover looms: namely, escalating costs, declining efficiencies and diminishing returns from subdividing into narrow segments diluting your brand equity influence.
An Over-Reliance on Performance Channels
News headlines often warn us about the allure of easy profits and the inertia of the status quo. Many companies heavily invest in performance marketing channels such as paid search and social media advertising, which provide measurable outcomes but with a narrow focus that can create a vicious cycle. This strategy worked because Google and Meta provide conversion metrics in their platforms which helped brands directly tie back sales to paid media in these platforms. The problem is that these conversions were duplicated across platforms and attribution started to become difficult with cookie deprecation and the loss of identity. Many companies took advantage of leaning into search and social and built their businesses this way. For example:
- Blue Apron (basically, they are known for spending heavily on digital ads to quickly scale its subscriber base and then struggled to overcome churn and drive awareness…ended up in endless decline)
- Casper (Early heavy investment in Facebook, Instagram, and podcast ads generated widespread recognition but failed to deliver long-term profitability…their reliance on paid marketing without strong brand differentiation left it battling to regain investor confidence.
The primary goal of performance marketing is to drive quick conversions and sales. While this boosts short-term revenue, it often neglects the broader aspects of brand health and customer loyalty. Over time, companies see sales spikes but might struggle to maintain this momentum without continuous heavy investment in these channels. As more brands compete for the same marketing space, the cost of acquiring new customers through these channels increases. Pay-per-click costs can skyrocket, making it harder to achieve the same ROI without significantly increasing budgets.
It may seem counterintuitive, but the more a company invests in only the lower funnel, the harder it can become to achieve the same level of results as the market becomes more crowded and audiences become less responsive to repetitive messaging.
The Importance of Brand Investment
Brands that stand the test of time know how to nurture their image. Brand investment is too often sidelined in favor of performance-focused marketing, but its role in differentiation and long-term growth cannot be overstated. Building a strong brand foundation provides a buffer against market fluctuations and establishes a loyal customer base that drives sustained growth.
From the user-experience messaging of Apple to the “Just Do It” encouragement of Nike, the most savvy and enduring brands stand out in a crowded marketplace, attracting customers through emotional connections and consistent value propositions. Brand loyalty is the secret sauce that fosters repeat purchases and word-of-mouth referrals, which is key to healthy mix of organic engagement and sales in addition to sales from paid media.
Investing in brand building nurtures customer trust and credibility. When customers trust a brand, they are more likely to choose it over competitors, even if the price is higher (think Tesla or Patagonia). This translates into the Holy Grail for professional marketers, long-term customer relationships, brand loyalty that can lead to advocacy, creating new generations of buyers.
A Balanced Marketing Strategy
The key to avoiding the diminishing returns trap lies in a balanced marketing strategy integrating both performance and brand building efforts. This helps companies achieve immediate results while laying the groundwork for long-term success.
- Integrating Brand and Performance Efforts: Clearly, what works best can’t be determined overnight. It’s important to spend enough time to determine the best mix. Some reliable elements might include influencer marketing, content marketing, public relations, social media engagement and traditional advertising, alongside performance marketing tactics.
- Holistic Measurement: To execute a balanced strategy and for better decision-making, it’s essential to measure both short-term performance metrics and long-term brand health indicators. This involves tracking brand awareness & lift, customer engagement metrics, customer sentiment and loyalty in addition to conversion rates and ROI.
- Investment in Creativity: Creativity plays a crucial role in both brand building and performance marketing. Unique and engaging campaigns capture attention, evoke emotions and promote water-cooler conversation. Building a strategic media plan and investing in high-quality creative content ensures that companies cut through the clutter and make a lasting impression.
- Adapting to Market Changes: With brands like Toys “R” Us and Sears serving as a warning, companies must remain agile and adapt their strategies in light of changing consumer behavior and advancements in technology. This includes staying updated on the latest trends, leveraging new platforms and continually optimizing marketing tactics to reach new audiences.
It’s understandable: quick wins are tempting. But companies must resist the urge to over-rely on performance channels at the expense of brand investment. A balanced marketing strategy that integrates both is critical to avoid the diminishing returns trap and nurture sustainable growth. In the words of one successful company with six-decade longevity: Just Do It.
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Josy Amann, Co-founder of Ars X Machina (AXM)
Josy Amann is Co-founder of Ars X Machina (AXM), formerly known as Media Matters Worldwide, a San Francisco-based media agency pioneering agile and data-driven media solutions. Specializing in meaningful media at the intersection of human ingenuity and advanced technology, AXM has been recognized with numerous industry awards, including being twice named Ad Age Small Media Agency of the Year.