The Question I Wish More Marketers Asked

As a data scientist in the marketing industry, I often get asked the essential question of where one should spend their ad dollars. In my experience, there is a question of equal importance that is often overlooked: “How should I be investing into my brand?”

Prior to the COVID-19 pandemic, while marketing budgets did increase year-over year (especially in digital advertising channels), the rate of increase had been slowing precipitously. And this was primarily due to increasing advertising costs and saturation rates across the available channels (think of a party that has as many servers as guests).

To combat these trends, firms needed to be savvier in their audience planning and more personable in their brand messaging. The effect therein was a healthy balance between brand investment and marketing spend. But, what does it mean to have such a balance?

Well in my practice, this means that if a firm wished to shut-down its marketing spend today, it would have enough organic activity (e.g. sales from brand-dependent, brand-loyal and word-of-mouth-derived customers) to remain afloat until a new sales and marketing strategy could be put into market tomorrow. I refer to this as “brand value”. And the pandemic disrupted this balance entirely. How so?

The chart on the left shows rough revenue attribution by various macro categories, and the chart on the right shows the relationship between the year-over-year changes in marketing spend vs changes in brand value (across publicly-traded companies that report on Sales & Marketing). In this, we can observe that a non-trivial relationship exists between broader marketing investment and brand – which seems rather paradoxical, unless we dig further.

During the pandemic, marketers had a virtually captive audience that had a growing base of savings. And rather than convert all of these savings into investments, much of America’s consumer base chose to engage with and purchase from a greater variety of brands. This change in consumer behaviour was so detrending, sudden and potentially profitable that many marketers began to nearly double-down on their pre-pandemic budgets without first formalising an audience-nuanced branding strategy. The name of the game was “agility” – to get as much product across as broad of a reach as possible.

The short-run result was a huge economic win for firms that sold shippable goods or online services – and, the walled garden platforms (e.g. Amazon, Google Ads, Meta Ads, etc.) made out like bandits. But that new traffic corridor could only hold so much for so long. And by the end of Q1 2022, brands were, again, stuck within congested marketing channels with high CPMs. Except, this time, they are without the same percentage of brand loyalists backing their sales.

Trust me, I get it – brand investment (which includes market research, communications planning, brand positioning, etc.) takes time. And it is not as quick and easy as placing an ad on Facebook or Google Search; but, it is essential for long-run, sustainable growth. And this is why more marketers need to start asking how they should invest in their brand.