How performance branding is reinventing marketing ROI

Thomas Bauer is a partner at McKinsey & Company.

A growing share of the marketing budget is managed according to the principles of targeted-performance marketing: personalised messages, direct impact measurement at the level of individual users, near-time optimisation, and partial automation. This is especially true for digital marketing activities that drive conversion and purchase. But what about the media spend focused on the earlier stages of the consumer’s decision journey, such as brand awareness, including traditional media or “mid- and upper-funnel” portions of digital marketing? While these investments often account for more than 50 percent of the marketing budget, they are managed with far less rigor than online spending.

CFOs are especially sceptical regarding the output of existing approaches. In a recent McKinsey survey, 45 percent of CFOs said the reason marketing proposals had been declined or not fully funded in the past was that they didn’t demonstrate a clear line to value, and 40 percent didn’t think marketing investments should be protected during a downturn.

Data-driven performance marketing, however, can now be applied much more effectively to branding and demand-generation activities. With a clearer understanding of consumer preferences and behaviour at the early stages of their buying journey, companies report marketing efficiency gains of up to 30 percent and incremental top-line growth of up to 10 percent without increasing the marketing budget. On average, the impact is significantly higher than that of established marketing ROI (MROI) methods for branding activities.

This precision in branding is particularly crucial now as companies manage the effects of Covid-19 on the early stages of the consumer’s decision journey. While much is still unknown, we believe that data-driven performance marketing will give marketers an edge when it comes to reaching their target groups efficiently during and after the pandemic. In a consumer survey conducted in the UK in June 2020, findings revealed that 71 percent of UK consumers have reportedly tried a new shopping behaviour with 37 percent of respondents admitting to having switched their “go-to” brands due to Covid-19. As these habits further evolve, granular data analysis and disciplined marketing-performance management will be essential for brands to stay in touch with their customers and drive MROI.

Core elements for getting performance branding right

The massive improvements in data-tracking technologies have made what we call “performance branding” a discipline that is as rigorous and successful as more mainstream performance-marketing practices.

One often underappreciated benefit of performance branding and demand generation is that they help companies overcome the silo mentality of the past. Until recently, different parts of the marketing organisation used different data and tools to make their cases. While digital marketers relied on attribution models to demonstrate the record returns generated by investments in search-engine marketing, brand managers cited marketing-mix models to make the case for a bigger TV budget. Performance branding, in contrast, serves as a single source of truth, and it helps companies create synergies between different elements of the marketing mix, such as online and offline, or between investments in brand perception and sales stimulation.

However, getting the full benefits of performance branding requires a fundamental shift in marketing practices toward greater precision and agility. Key ingredients of this shift include the following:

1. Good data and a single source of truth that everyone agrees on. Strong data starts with building out a customer-data platform (CDP) that incorporates data from internal sources, external partners, and third parties in a compliant fashion and at the level of individual customers and provides links to execution platforms. The CDP needs to be developed and managed by a trusted team that can oversee the integrity of the data as a single source of truth for the business. As important as developing the insight is making it available through dashboards that CFOs and P&L leaders can easily access, a crucial capability to help stakeholders develop confidence in marketing’s ability to drive growth.

That being said, as the ability to track shopper preferences improves, it’s essential that companies first need to establish and follow strict consumer-consent management approaches and tools to make sure the use of that data matches consumer expectations and is fully compliant with all relevant laws, rules, and regulations.

2. Agile operations to move quickly and learn. These allow teams to introduce more variations of creative content, make quick tactical decisions, and incorporate learnings to continuously improve offers. Marketers need to pursue a rigorous test-and-learn regime to ensure that new insights based on changes in technologies and consumer behaviour are fed into performance-branding programs.

3. Close collaboration with well-vetted agencies. Marketing teams will not solve the transition to performance branding alone. It requires them to build an ecosystem of best-of-breed partners to tap into the right data sources, use specialised technology and analytics for key use cases like data integration, cross-channel ROI and dynamic creative execution. Also, the ways of working with existing media and creative agency partners will be closer to execute changes at a much higher frequency

When first introduced, performance branding is often met with scepticism and resistance, by both marketers and agencies. But when the value of this new tech-enabled capability is clearly demonstrated, we find that companies quickly move to adopt it.

The author would like to thank Julien Boudet, Kelsey Robinson and Oliver Gediehn for their contribution to this article.

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