When you are launching your business, the only person who gives a sh*t about your brand is you (and maybe your grandma.) Sure, get out there and tell your story, but don’t spend more than the bare minimum on your brand.
Deliver a fantastic product and spend all your marketing resources on activation. The runway is short, and investing in the brand is a great way to piss your money away.
But as an established business, solely focusing on activation is a risky strategy. You need to build your brand to deliver more growth.
Finding the right mix is tricky. The idea is to create a marketing strategy that harnesses the power of both, and it will depend on the maturity of your business.
What is the difference between brand and activation spend?
Brand-building encompasses efforts to shape and strengthen your identity, reputation, and visibility. It helps people become aware of your business and make it more appealing. The outcome is that people find and talk positively about you.
It includes brand design, content marketing, social media engagement, influencer partnerships, public relations, events, and brand tie-ups. Some call it top-of-the-funnel marketing.
Get it right and it accelerates growth, but it is harder to measure and attribute a financial return on investment. How will you measure whether your event sponsorship and speaking slot have increased sales?
What is activation spending?
This drives immediate results and conversions. It can generate sales and includes tactics such as email marketing, pay-per-click advertising, social media promotions, and special offers aimed at stimulating consumer action.
Activation is more easily measurable and tangible. You can turn it up, down, on and off. You can test, learn and iterate quickly. Some people call it bottom-of-the-funnel marketing.
How do they work?
Brand-building helps shape perceptions, foster loyalty, and establish a presence. Activation focuses on driving immediate results making it valuable for generating short-term revenue and leads.
Think of brand as earned, and activation as paid for. It takes longer to earn your reputation, but you can have greater control. In the long run, this is more valuable. It can be harder to persuade finance-focused people on brand-building activities as you can’t bank trust and credibility.
You can turn off brand spending and nothing will happen straight away. But stop your activation and conversions dry up instantly. You don’t want that.
Which is more important for me?
Going big on brand requires nerves of steel. There is no guarantee of success, and if you stop spending midway through a project you get nothing. It isn’t for the faint-hearted or anyone who lives by the sunk-cost fallacy.
Relying solely on activation leaves you vulnerable. A sudden shift in consumer behaviour or a channel failure can spell disaster if you lack a strong brand foundation.
What happens if your pay-per-click advertising - the bedrock of your marketing plan - suddenly goes haywire? Google algorithms can go awry, and competitors can blow your bidding strategy out of the water.
If you find one channel that works well, you are doing better than most. Most businesses try and implement too many, but don’t do any well enough. They can be an addiction that is hard to get away from, even as they become less effective.
For established businesses, the best solution is a combination:
Your brand and activation work amplify each other
The strengths of one mitigate the risks of the other.
Building your plan
How do you get the right proportion of spend?
1. Measure the right things.
Whilst you can’t directly bank trust and credibility, you can measure customer loyalty. Lifetime Customer Value (LCV) is a good measure of the strength of your brand. It helps you understand the value of your customer relationships.
Monitor performance so you can review and update your plan. However, don’t have too many metrics otherwise you might lose focus. Cost Per Acquisition (CPA) looks at the effectiveness of your spend.
Calculating Lifetime Customer Value
Work out the average value of each purchase made by a customer. You can divide total revenue by the number of purchases made. This is the Average Purchase Value (APV)
Determine how often, on average, a customer purchases within a given time frame. You can divide the total number of purchases by the number of unique customers. This is the Average Purchase Frequency (APF).
Calculate the average number of years a customer engages with your business. This is Customer Lifetime (CL).
Lifetime Customer Value (LCV) = APV x APF x CL
Calculating Cost Per Acquisition
This shows how much it costs to acquire a new customer. It is a critical measure of the effectiveness of your combined brand and activation spending in a specific time:
Identify all expenses related to marketing. This is your Marketing Cost (MC).
Count the number of new customers acquired.
Calculate your Cost Per Acquisition (CPA) by dividing your Marketing Cost (MC) by the number of New Customers (NC). CPA = MC / NC
2. Get activation firing first
If you haven’t yet found a form of activation that is smashing it, keep testing and iterating until you do. If you are not sure, you haven’t! Once you have one working well, optimise it as far as you possibly can.
When you are getting decreased marginal returns from increasing spend, start looking at testing and iterating a second channel.
3. Then commit to a level of brand spending
To take a longer-term view, measure the success of non-financial outcomes first, and then try and link it to Lifetime Customer Value.
Be consistent and hold your nerve. It is the easiest thing to cut when you are under financial pressure, but your future self will not thank you.
Start by carving out 20% of your planned marketing spend to put into brand. As your business matures, you can increase this to up to half of your spending, but be wary of going higher. If your brand projects are going to take this level of investment, you’ll need to be very confident in your business model.
Getting it right
Every business is different, and if you are an established business looking for marketing-led growth, you’ll need to balance the need for short-term revenue with long-term growth.
Don’t be fooled into thinking brand building can’t be measured. If you know the biggest blockers, you can tailor your plan accordingly and ensure that you can keep your marketing engine working smoothly whilst setting yourself up for the future.
