The debate over whether to prioritize Brand Building or Performance Advertising has led to siloed thinking and disappointing results. A successful marketing strategy requires the synergy of both. However, the next question is how to combine them in a way that maximizes benefits for the brand in both the short and long term.

More than just sharing useful reports, Data Station is a series of in-depth interviews that explore research findings from the insiders' perspective, offering profound insights and highly actionable recommendations for your upcoming marketing strategy.

Recently, WARC and a coalition of partners introduced 'The Multiplier Effect' report, showing how integrating brand building with performance marketing can significantly amplify marketing outcomes. In our conversation with Stephen Whiteside, Head of Content Americas, WARC, Brands Vietnam delves deeper into these insights to guide effective advertising strategies.

* First, could you share the key milestones that have led more brands to focus on performance marketing today? Additionally, what risks are associated with allocating the majority of a brand’s budget to performance marketing?

In the report, we highlighted three major trends underpinning what we call the “performance era”.

The first was the rise of digital-native companies – for instance, direct-to-consumer brands and software-as-a-service providers – that took a data-driven approach to advertising premised on quick customer acquisition.

Such organizations emerged in tandem with the growth of data-rich tech platforms and vendors. These platforms and providers promised to deliver easily measurable outcomes with advertising solutions that could be optimized over time. That had utility for smaller, fast-growing enterprises, but also had profound limitations in terms of reflecting how advertising actually works.

The second trend we pointed to is that legacy businesses have faced substantial pressure to maintain growth even as they dealt with consistent economic upheaval and the splintering of the media landscape.

Often, they responded by adopting strategies that were associated with tech-led disruptors. But that frequently meant thinking short term, focusing on quarterly returns and using performance tactics that were, incorrectly, perceived as being more measurable and more reliable drivers of demand than building equity.

Thirdly, consumer media usage has shifted dramatically to digital spaces. The big tech companies-built platforms capable of holding attention, and which commonly tied advertising solutions to immediate commercial outcomes. They attracted money from marketers under the proviso of presenting granular insights into how their advertising was working using short-term metrics - say, cost-per-click.

Marketers are increasing budget allocation for performance-driven activities.

The expansion of retail media, AI-driven ad platforms and formats like connected TV could extend this kind of mindset into newer channels unless marketers carefully consider what “success” really means.

When it comes to the risks, a core issue is the dependence on performance metrics that give an incomplete or inaccurate view of advertising outcomes, while simultaneously neglecting the need to build brand equity.

Brand equity is sometimes – wrongly – seen as “fluffy” or difficult to measure. It is, in fact, both measurable and the critical driver of advertising impact in the short and long term.

* What does the term “Doom Loop” mentioned in the report mean? Why does an overemphasis on optimizing performance advertising metrics eventually lead brands into a Doom Loop?

We define the “doom loop” as a negative spiral that takes shape when marketers begin optimizing their expenditure using inadequate data and metrics.

Once brands start optimizing against the wrong things, they end up having to spend more and more money just to get the same returns.

Entering the “doom loop” is typically a consequence of relying on attribution-based measurement that overstates the contribution of channels near to the point of purchase - for example, paid search - and fails to provide a holistic view of advertising effectiveness.

One common example is last-click attribution. This gives credit for an action – like a purchase or signing up for a service – to the final touchpoint a consumer interacts with before taking this step. But it essentially ignores all the other advertising touchpoints someone has been exposed to or engaged with on their journey to this point.

The reliance on performance metrics can lead to an overestimation of the role of marketing channels that are closer to the point of purchase.

Such an outcome hurt many scale-up brands that originally tapped performance optimization to grow, only to reach a plateau where their performance metrics dropped off and they maxed out easy wins in terms of customer acquisition.

But established businesses suffered from this problem, too, as they followed the performance-led playbook.

* After lots of debates, experts seem to agree that brand building and performance marketing must go hand in hand. How does this integrated approach benefit brands as “The Multiplier Effect” mentioned in the report?

Moving away from a performance-only approach to a combined approach encompassing brand building and performance has clear advantages.

Performance advertising is primarily geared towards encouraging purchases among the smaller percentage of category buyers who are in-market at a given moment. It does so by reminding them of reasons to buy a brand and directing them to places they can do so.

Equity-building ads, by contrast, seek to foster positive associations with the much larger audience of potential category buyers so that, when they are in-market, a brand easily springs to mind.

And our study demonstrated that equity-building ads drove sales in the short and long term, all while enhancing the impact of performance advertising. The median uplift in revenue ROI when switching from a performance strategy to a combined strategy that deploys equity building and performance was 90%.

A lot of components are at play here – including the benefits of a diversified media mix, the greater emotional impact of equity-building creative and the deeper understanding that is achieved when using holistic forms of measurement.

One especially important consideration is the timeframe of effects. The combined approach still pays off in the short term. But, unlike performance-only strategies, this approach has an impact over a longer period, too, and is less likely to see diminishing returns.

Put simply, the half-life of the combined approach is much longer.

* How can brands design an advertising strategy that fully leverages this synergy, especially considering the messy, non-linear customer journey? Specifically, how can they engage both “out-of-market” and “in-market” consumers to drive sustainable growth?

An essential task is breaking down the silos that exist between “brand” and “performance” advertising.

For a lot of marketers, the knowledge they have to reach out-of-market consumers, on the one hand, and in-market consumers, on the other, prompted the introduction of separate workstreams – and, indeed, separate metrics, strategies and teams.

That can lead to brand teams becoming associated with the “upper funnel”, softer metrics and “long-term” demand rather than a tangible commercial impact; performance teams, on the other hand, get associated with immediate returns, but are not required to protect or build equity.

This split makes brand budgets harder to justify. And the dividing lines advertisers place between these disciplines does not reflect how consumers make purchases – not least as shoppers today can jump straight from a social post to a purchase and get same-day delivery.

The Multiplier Effect argues that a better way to think about advertising is not to separate brand and performance, but to see them as two elements of an integrated growth strategy led by the Chief Marketing Officer. Marketers must recognize that brand advertising impacts performance returns and that performance advertising impacts brand equity.

Within that, brand equity is the main source of success, as it drives short- and long-term sales, has benefits across the entire traditional purchase funnel, and has a favorable impact on pricing power.

Performance advertising undoubtedly has its role, too, but it cannot take the lead. 

When it comes to the work, our report suggests that advertisers avoid standalone “brand campaigns” that are not connected to an organization’s commercial agenda or to performance advertising.

Instead, they should leverage creative “platforms” that use a range of executions for different goals, some leaning towards building equity and others towards performance, and which are all linked to each other.

The messaging in these communications should tie back to an overarching proposition and make use of the same distinctive brand assets. Ideally, every “platform” from the same brand will have a shared guiding principle to ensure consistency and, potentially, yield a halo effect between these efforts.

Looking at Airbnb, it announced a few years ago that it would place more emphasis on its brand having previously relied on tactics like paid search. Since then, it has used a full-funnel approach that puts its brand front and center.

Airbnb has regularly discussed the results of this approach, like increases in direct website traffic and improved performance advertising returns. This helps demonstrate how stronger brand equity has a positive impact across a range of touchpoints.

Finally, all performance work needs to reinforce brand equity, and all brand advertising has to be measured for its commercial impact.

* How should today's media measurement frameworks capture cross-channel influences? For example, the report shows that 30% of clicks from search are driven by other marketing activities —with TV playing a major role.

Media investment is usually “double duty”, meaning it has short- and longer-term effects. This media multiplier varies by channel, of course, but is generally between 1.1x and 2x.

Media channels typically have both short-term and long-term impacts.

Most media channels thus have an impact on equity and sales outcomes. Relatively simplistic measurement techniques – such as last-click attribution – cannot capture those effects in a comprehensive way as they do not address how media channels work together.

30% of search clicks are driven by other marketing activities.

Marketers will intuitively understand how an engaging TV and video ad might cause a consumer to search for a product, either as they watch or at some later time. Attaching hard numbers to that is complicated.

The report suggests constructing a “measurement stack” with several components.

From a media perspective, one recommendation is making sure that all touchpoints are included within a single framework. This is not easy given the fragmentation of the media environment, but is essential if marketers are to get away from siloed, platform-specific metrics.

Marketing mix models are a feature of the measurement stack at many organizations, and can be useful in determining media interaction effects and the impact of paid media on commercial outcomes.

Randomized, controlled experiments – comparing audiences who are, and who are not, exposed to ads – can be used to test scaled shifts in media spend. But these have to be implemented with due caution, as a lot of experiments are contaminated by inaccurate or misleading data.

Instead of focusing on media effects in isolation, which is always a temptation when talking about advertising, the Multiplier Effect encourages marketers to adopt a business-first mindset.

It is, for example, important to prove how paid media drives incremental sales as part of a wider set of contributors – including baseline sales, pricing decisions, operational factors, omnichannel availability, and so on.

* How can brands effectively allocate their budgets to optimize ROAS while balancing both short-term returns and long-term brand growth??

There is no single formula for allocating budgets to brand and performance.

Every brand is starting from a different point and has to take their own unique position – and their own equity level – into account.

Our report did contain some guidelines, though. A minimum 30% of spend should be directed to equity-led executions – this is what we described as the “brand baseline”. For most marketers, that figure is closer to 50%; for many, it’s nearer to 70%.

Another useful indicator is to review how much money is being invested in search. There is significant variation between categories, but spending over 25% of budgets on search is usually a warning sign.

But this is not only a numbers game. Making sure their brand and performance are funded at the right level obviously matters. But marketers need to ensure these activities are rigorously integrated to maximize the payback from their investment.

* Thank you for your valuable insights.

View the full The Multiplier Effect report here.
The Multiplier Effect study was based on US data, WARC will be publishing in April a study focused on advertising effectiveness in Asia, and which will provide insights and best practices based on a large body of case study evidence from the region.