A Founder’s Framework for Understanding Performance vs. Brand Marketing for Your Startup

Startup marketing experts Sarah Emmott and Holly Chen share a multi-step process for how to craft a brand and performance marketing strategy, including how to set goals, allocate the right budget, and measure success.

Outline

This article is by Sarah Emmott and Holly Chen. Holly runs ExponentialX, a marketing and growth collective that advises SaaS companies like Miro, Loom, and ServiceNow. She was previously Global Head of Digital Marketing at Slack, Head of Growth at Google Store, Head of Google B2B Websites, and guest lectures at Berkeley and NYU on advertising and marketing strategy. Sarah is Atlassian’s Global Head of Brand for the work management portfolio, previously at Square, and went in-house after years at agencies doing award-winning creative, content and campaigns. She advises on brand and marketing for SaaS, FinTech and HealthTech companies and regularly speaks in podcasts about marketing.

On the heels of a surge in earnings earlier this year, Airbnb gave credit to a surprising superhero — their shift in spend from performance marketing to brand marketing. This is a rare statement in tech companies – which most often credit product-led growth and spend the bulk of their marketing dollars on the quick and measurable returns of performance marketing to help fuel the pipeline.

BRAND VS. PERFORMANCE: UNDERSTANDING THE CRITICAL DIFFERENCES

Before diving in, let’s first define what we mean by Brand and Performance. In this guide, we have primarily honed in on the 'Advertising' portion of 'Brand and Performance,' rather than the broader definition of 'Brand Marketing and Performance Marketing,' mainly because advertising is often the biggest line item on your marketing budget.

But first, a quick caveat here: It's not about one being better than the other but recognizing when and how to use them effectively.

Unpacking the Ins and Outs of Brand

The concept of a Brand is multifaceted and extends beyond mere aesthetics or a logo. A brand encapsulates everything that a company or product stands for; it's the customer’s entire perception. Take, for example, Apple. Its reputation as a strong brand isn't solely about the products themselves but the emotions, values, and experiences that they evoke.

Brand Marketing is a comprehensive approach focused on building awareness, identity, and positioning. It may include a mix of campaigns, creative, public & analyst relations, social media, and content marketing. These functions help to shape the perception and understanding of what the brand represents.

Then there's Brand Advertising, one of the essential tools in brand building. Brand advertising uses paid media to drive brand awareness and education. The channels employed can be traditional ones like TV, audio, print, and out-of-home advertising like billboards and bus station wraps, and it can also include digital channels such as streaming audio, connected TV, social video, programmatic display ads, and more if their goals are driving brand awareness. These mediums serve to etch the brand into the public consciousness.

Simply put: brand aims to build awareness, affinity, and perception — fostering consideration and education about a product or service.

The Performance Perspective

In a broader definition, Performance Marketing is all about driving user conversion, whether it's a purchase, a sign-up, or a demo request. This could include tactics like SEO, CRO (conversion rate optimization), affiliate marketing, direct mail, digital ads, and more.

In a narrower definition, Performance Marketing is often used to refer to Performance Advertising, or Direct Response Advertising, specifically to advertising aimed at driving user actions. Typically, this includes channels like digital advertising on search ads, display ads, and paid social ads. These targeted strategies ensure that marketing budgets are spent on creating direct, tangible results in terms of user growth.

Performance advertising is laser-focused on conversion. The primary goal is to drive a customer to purchase, sign up for an account, or talk to sales. It's about action and response.

BETTER TOGETHER: THE SYMBIOTIC RELATIONSHIP BETWEEN BRAND AND PERFORMANCE

Brand and performance marketing are not opposite sides of extremes. While they have important distinctions, brand and performance marketing are best utilized in harmony to achieve 1+1>2: their combined impact is greater than the sum of their individual effects.

From a consumer standpoint, every interaction and every touchpoint is a brand experience. In parallel, from a company's perspective, every advertising dollar invested must perform.

While it’s tricky to track a direct attributable click from brand advertising, the stimuli often nudge potential customers to type the company name into search. The ripple effect? A tangible uptick in direct and organic brand search traffic and a spike in website conversion rates, courtesy of the brand trust that’s been cultivated.

Take, for instance, when Duolingo launched its whimsical brand campaign featuring its quirky owl mascot, the product’s performance ads experienced a significant uptick in user engagement. The brand became synonymous with fun language learning, and app downloads soared.

WHERE BRAND AND PERFORMANCE EXCEL (AND WHERE THEY FALL SHORT)

Understanding the distinctions between brand and performance is essential for any marketing strategy. It's not about one being better than the other but recognizing when and how to use them effectively. A balanced combination of both brand and performance advertising can create a powerful marketing strategy that not only supercharges brand loyalty but drives immediate conversion.

Here are a few of the differences between the two approaches:

Messaging: Connecting vs. Convincing. Brand advertising typically zeroes in on building an emotional connection, trust, and intrigue. Performance advertising takes a different tack, emphasizing value and utility.
Optimization Goals: Reach vs. Conversion. Brand advertising focuses on driving more reach while performance advertising concentrates on conversions.
Channels and Placements: Broad vs. Targeted. Brand advertising often uses broad channels, whereas performance advertising leverages targeted digital ads that can be bought programmatically.
Creative Styles: Emotion vs. Information. Creatively, brand ads often lead with a striking image that evokes emotions, while performance ads focus on feature benefits.
Call-to-Action: Intrigue vs. Act. Brand advertising typically doesn’t have a call-to-action; meanwhile, performance advertising urges immediate action.

WHEN TO INVEST IN BRAND OR PERFORMANCE (OR BOTH)?

Deciding when to invest in brand or performance media is a delicate dance depending on everything from the product itself to the market and the specificities of the company.

Here’s our framework to examine these critical dimensions:

1. Product Considerations

Type of Product: High-ticket items usually require heavy investment in brand marketing, whereas products with lower barriers of entry tend to leverage performance marketing.
Audience: The approach shifts according to the breadth and nature of the audience.
Product Maturity and Lifecycle: A focus on brand equity should be established from day one.

2. Market Considerations

Macro Factors: Economic conditions can influence the marketing strategy.
Competition: Highly competitive markets demand a blend of brand and performance advertising.
Market Maturity and Readiness: Brand marketing is vital for educating the market for startups that are pioneering new concepts.

3. Company Considerations

Resource Allocation: Performance marketing can be more accessible while brand advertising requires a significant commitment.
Objectives: Strategic objectives might necessitate investment in brand advertising alongside performance advertising.
Company Maturity and Scalability: The balance between brand and performance marketing may shift as startups grow.

Putting it all together for the business

Now, let’s put both brand and performance ads in a broader marketing strategy context across four phases:

Initiation: Focus on building your brand identity.
Pre-PMF: Focus on organic growth channels; minimal performance ads.
Post-PMF: Accelerate acquisition by scaling SEO and performance ads.
Mature Stage: Keep up ongoing performance ads and potentially shift more heavily to brand ads for education and new product launches.

UNRAVELING SPEND PATTERNS:

Understanding spend patterns is vital.

Brand Ad Spend Patterns

Pattern 1: Seasonal Spikes: Brand ad spend often aligns with product lifecycle and market dynamics.
Pattern 2: The "Oops...OK..." Cycle: Initial experimentation often leads to disappointment, but companies may restart with bigger budgets after slowing growth.

Performance Ad Spend Patterns

Pattern 1: Gradual Uphill Climb: Companies should start small and gradually expand performance ads post-PMF.
Pattern 2: Exponential Growth: Startups may still use performance ads to test market interest before reaching PMF.

Combined Spend Pattern

For B2B, companies may settle into a combined pattern of seasonal peaks and consistent performance spending.

How do you actually allocate the budget in your next fiscal year planning?

Allocation is multifaceted; it should take into account recent market activity and internal needs.

HOW TO MEASURE: TRACKING IMPACT THE RIGHT WAY

KPIs for Brand Ads

Metrics like reach, brand awareness, and brand affinity.
Use brand tracker surveys, search console impressions, and channel partner views.

KPIs for Performance Ads

Focus on conversions, payback window, and LTV:CAC ratio.

WRAPPING UP: THINKING DIFFERENTLY ABOUT BRAND AND PERFORMANCE

Brand marketing should reflect unique company values and set expectations for product representation. It’s about creating a perceptual thread that binds marketing efforts with the product itself, fostering a cohesive brand experience.