Brand building or performance marketing: Which is the better bet?

The world of advertising has changed. The shelf life of an ad is now less than a week. Companies are spending on performance marketing rather than investing in brand building since their focus is on ‘selling’. These were some of the observations made by seasoned ad maker Ram Madhvani in an informal chat with HT recently. However, Madhvani, best known for his award-winning TV commercials for brands like Happydent White and Airtel, and the feature film, ‘Neerja’, was quick to note that performance marketing is equally important and instead of lamenting the change, we need to adapt.
With the explosion in consumption of digital media, performance marketing budgets of brands have risen. According to estimates, the split between performance and brand marketing is 70:30 respectively across product categories. Though it’s the new, online brands emerging from the start up ecosystem which spend between 80%-90% of their marketing money on performance, over the years, traditional offline brands too have increased their spends on digital ads if not specifically on performance.
Performance marketing is defined as data-driven digital advertising where the goal is to get clicks, leads, conversions and sales. It allows advertisers to measure results and target a specific audience. Brand building, meanwhile, focuses on brand’s identity, reputation and emotional connect with the consumers.
“Performance marketing builds businesses and brand marketing strengthens brands,” said Oindrila Roy, managing director at Publicis India. While start ups have been disproportionately focused on performance marketing, even traditional companies are required to put money into it as all of them are selling on e-marketplaces. “In performance marketing, you can drive traffic to such sites,” Roy said.
Performance marketing caught on because of the kind of data available and the kind of consumer targeting it has made possible. “The more the data gets refined, the more business people see coming, the more important it will become,” said Roy
“Google and Meta have huge learnings from the extensive tools they use and the deep data analytics that is given on these platforms. Their learnings and their scale deliver performance,” added Neena Dasgupta, CEO, Salt Inc.
D2C firms cut brand spends when their funding is down or revenues get hit. Similarly, large FMCG firms cut back on brand spends when their P&L (profit and loss) is under pressure. “They reduce their advertising and promotion expenditure and double down on trade spends like discounts, incentive for channel partners and sales people which gives immediate results much like performance marketing in digital space,” said brand marketing expert Shahbaaz Mohammed.
Mohammed, however, believes that brand marketing must also deliver in terms of growing revenue. “If it doesn’t, then brand marketing isn’t working because there is nothing called perception building without a business consequence,” he said.
Consumer perception of a brand is driven not just by one brand campaign but by its everyday communication online. According to Dasgupta, each creative, whether for brand building or performance marketing, builds a perception about the brand. When the emphasis is on an action with the message focused on hastening a decision, it may be misleading and can have a contrarian brand impact. “The balance of the message and the performance expectation is critical,” she said.
Gradually, even the new-age brands are realizing the need to spend on brand building to lower their cost of customer acquisition. “Despite spending on Meta and Google, acquiring customers isn’t becoming cheaper. There are too many brands selling similar products and chasing the same customer. What is needed is organic traction which comes only when you build a brand,” said Mohammed.
Airbnb, for instance, has moved all its money from performance marketing to brand building. “It is invested in the brand that offers great experiences and not just discounts,” he added.
So far, in India, digital media has been consumed on the small mobile phone screens. Now more Indians are buying smart or connected TVs (CTVs). The country will have 45 million CTV or internet-enabled smart TV homes by the end of the year. “The advantage of CTVs is that they have large screens and digital technology which allows geo-targeting where ads can be served based on pin codes. With this, you will see brands being built on digital media.” Roy said.