What Percentage of Marketing Budget Should Be Spent on Brand Building?

by David Lawrence on 
May 29, 2023 | 
Digital Marketing Strategy
David Lawrence

Quick answer, you should be spending approximately 60% of your marketing budget on brand building (and I’ll tell you why later).

But don’t worry, I know you're almost certainly not spending as much and the good news is that neither are your competitors. The even better news is that your boss probably doesn’t want you to and convincing them that you should is actually riskier than doing the right thing, so no pressure there either.

Let’s take a step back

We’d all love marketing to be simple. Run an ad, measure the ROI, compare it to another ad and go all in on the winner. Then rinse and repeat, test audiences, test creative, obsess over data and keep hustling (and hopefully growing). 

It’s a very appealing and very simple view of best-practice performance marketing. You get regular wins (hopefully) and there are plenty of activities and reports of impressive numbers to show-off around the office. 

I genuinely understand why a technically-focussed digital marketer could make the mistake of confusing these sorts of tactical activities for a marketing strategy. I also understand why a non-marketer in a position of power (i.e. a decision maker) could lean in to measurable and real-time results over the vaguer and more traditional approach of brand-building. It all seems so modern and impressive and there are plenty of thought leaders and digital marketing agencies pushing this view to the extremes. Unfortunately, it’s not how the world works, and the research has been done which more than proves it. 

Here’s what I’d love to see

I want to rally marketers and non-marketing decision-makers to think big, to think long-term and most importantly to think in a financially responsible way. 

Going all-in on performance marketing is something I come across regularly, and it’s not healthy. Likewise, turning your back on performance marketing because you believe exclusively in the long-term value of brand building, means you’re leaving a lot of money on the table. 

This is not just an article about how much you should be spending on brand building versus performance activities. It's also not an article on how to write a digital marketing plan. It’s a reminder of the critical role of strategy and why dominating a single marketing channel, mastering ChatGPT or even beating last month's return-on-ad-spend isn’t going to transform your business in the long run.

What is the difference between brand building and performance marketing?

When I talk about brand building (or long ads, if ads are what you’re doing) I am referring to marketing activities and strategies aimed at creating and enhancing a strong brand identity and perception in the minds of consumers. Brand-building activities focus on establishing a positive and recognisable image for a company, product, or service. The goal is not necessarily to drive short-term sales today, but to influence sales in the future. It’s typically broad reaching and targets an entire category.

On the other hand, performance marketing (or short ads), is a marketing approach that focuses on driving specific, measurable actions or outcomes, such as conversions, sales, leads, or other desired results. Performance marketing is typically data-driven and aims to optimise marketing efforts based on the performance and effectiveness of various campaigns and tactics.

Which wins: brand or performance marketing?

It’s all too obvious, but an effective marketing strategy almost always consists of both brand building AND performance marketing activities. Don’t you hate how so much of the world’s wisdom feels like a middle-of-the-road compromise?

Rely on performance activities alone and you’ll be powering the hamster wheel and not meaningfully moving the needle in your favour in the long term. You’ll get results, but if you stop spending on performance activities, such results will stop. Doing more performance marketing over time also doesn’t change the long-term success of your marketing or the value of your brand, the tendency is to flatline or get worse as competition and cost ramps up. You’ll almost certainly fail to ‘performance market’ your way to sustained long-term success.

Lead generation's effect on profit image

Performance marketing over time will deliver results when you’re spending, and nothing when you’re not. Credit: ForbesBaxter.co.uk

Don’t get me wrong, performance marketing is excellent as it keeps you in the conversation with those ready to buy right now, but you have to accept you’ll be competing with a whole bunch of other advertisers and buyer options. Rely too much on it and you’ll be in the same position next week, next month and next year. Hence the hamster wheel. Performance marketing is heavily reactive, you’re waiting for someone else to do something. The reality is only a small % of your market is ready to buy at any point in time and performance marketing ignores all those who aren’t.

At the same time, brand building activities on their own, as powerful as they are for creating differentiation and distinctiveness for your brand in the eyes of your customers, will fail to capitalise on opportunities as your customers are inevitably exposed to your competitors when they are close to making a buying decision.

Brand building's effect on profit

Brand building's contribution to profit builds slowly and creates residual value which continues after a specific campaign is stopped. Credit: ForbesBaxter.co.uk

Brand building and performance marketing both have a critical role to play in marketing strategy. Not only are they designed to do different things, but they have the effect of boosting the effectiveness of the other.

combined activities effect on profit image

Brand building activities lift performance campaigns. The highest level of success comes when you mix both performance and brand building activities. Credit: ForbesBaxter.co.uk

Don’t take my word for it

Les Binet and Peter Field suggest that on average brand building should consume 60% of your budget and performance marketing the remaining 40%. The exact ratio can vary, but the idea that it’s a balance, is consistent.

Brand building ration chart per sector

The ratio differs by sector as well as other factors including time. Credit: thinkingunstuck.com

Brand building has another potentially important advantage

Mark Ritson and others make the excellent point that when it comes to ads, long ads (brand building) can also generate sales in the short term. Performance ads will only deliver sales in the short-term and will have no meaningful impact on your long-term brand. 

That’s a very powerful proposition which truly combines the best of both worlds. Be warned though, it’s not easy, and if you get it wrong you might end up with an ad that’s poor at brand building and poor at performance.

What's the right marketing budget ratio for your business?

If you’re primarily spending your money on performance right now, then switching too quickly to a more long-term strategy is going to leave a hole in your short-term sales. You need to consider the short and the long term when deciding the right mix for you now and in the future. Like everything strategy related, the big decisions are hard and critically important.

Don’t forget, best practice is rarely right for anyone in its pure form. The only way you’ll know the best mix of long and short activities is through experimentation.

Here at Rocket, we like to think we have an excellent balance in terms of what we do for clients (and for that matter, for our own marketing). We do award-winning brand building and performance work in PPC, Social, SEO, Email and Creative.

You can contact us on 1300 059 620 or by leaving us a message. We’d be only too happy to talk you through what we’re seeing working right now and how it might help you get the balance right.

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David Lawrence Featured Image
David Lawrence
Co-Founder & Managing Director | Rocket Agency

David Lawrence is the MD and Co-Founder of Rocket, an award-winning Australian digital marketing agency. He is also the co-author of the Amazon #1 best-selling marketing book 'Smarter Marketer'. David has presented at several events including Inbound, Search Marketing Summit, Mumbrella360, CEO Institute and a variety of seminars and in-house sessions.

David has built his expertise from a diverse career, starting with an economics degree before jumping into all things web in the late 90s.

Today, David is Rocket's Managing Director and is known for his ability to find clarity in the bigger picture. He is highly respected as a digital marketing authority, sharing his expertise with an extensive network here in Australia and around the world.

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