New research from the IPA and Tracksuit is challenging received wisdom that startups should focus on performance marketing to grow.
Startups that invest in brand early in their growth journey drive stronger sales and profit, according to new research from the IPA and brand tracking platform Tracksuit.
The model for growth often followed by many startups sees companies concentrate almost solely on driving sales through performance marketing, the perceived wisdom being a sales-driving focus is a necessity for growth in a business’s early stages.
However, an analysis of over 2,000 advertising case studies released today (17 June) by the IPA and Tracksuit, finds investing in brand building alongside sales activation advertising is more effective at driving both profit and sales, than solely focusing on the latter.
Brands in their early stages that generate strong brand effects with their advertising see 58% higher sales value and 55% more profit than peers who focus solely on performance marketing, the analysis finds.
The 60:40 rule, created by the ‘Long and Short of It’ authors Les Binet and Peter Field, suggests brands should aim to spend roughly 60% of their advertising budget on brand building activity and 40% on sales activation. Those in small brands often rail against this rule, suggesting the logic applies only to large brand. However, this research suggests striking a balance between brand building and performance marketing is as essential to startups as it is to big businesses.
“Despite the pressures of rapid growth, brand investment lays the foundation for long-term value creation,” says IPA director of effectiveness, Laurence Green. “The idea that brands should wait until scale is not just outdated; it’s commercially unsound.”
One reason marketers in younger businesses often find themselves focusing on performance marketing is a pressure to deliver returns on smaller budgets. The research suggests one way to make the most of any budget is to take an “entertainment-led” approach.
According to Tracksuit’s index, created by surveying 20,000 consumers and analysing millions of social data points, 97% of the top 30 brands classed as entertaining were in growth, more than two-thirds of which have notched up double-digit revenue growth.
Crucially, brand must not be an afterthought. The research suggests organisational alignment behind brand across a business, from the very start, drives much stronger results than those who treat it as simply an output of advertising.
