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How to spend your marketing budget
We’re finally at the fourth principle of effective campaign planning.
And it's about our favourite subject.
The typical approach to budget planning is to have something for everyone.
It doesn’t work as well as we think.
Compromise leads to mediocrity.
And try as we might, the end result is too much of one thing or not enough of either.
Good thing we know that advertising that drives quick response (response marketing) doesn’t work well at creating future demand (brand marketing).
The latest data on this is only a couple of weeks old.
Thankfully, the answer isn’t just more brand marketing.
It’s doing both properly by balancing your budget across brand and activation.
That's the fourth principle of effective campaign planning.
Earmark separate budgets for brand and response.
Our starting point is Les Binet and Peter Field’s 60-40 Rule.
The rule says that a 60/40 split between brand and activation delivers the best effectiveness.
The idea behind this rule is simple:
Too much brand marketing and you miss out on capturing the demand you create.
Too little and you fail at building Mental Availability – and future demand.
Since brand campaigns are the most effective at building future demand AND short-term sales, brand marketing gets the biggest share of the budget.
Beyond that the 60-40 Rule changes by industry…
A great place to start is keeping an eye on how your competitors are investing.
After the budget comes channel selection.
Effectiveness can improve by 2.6x when channel selection is based on campaign goals.
And going from one to two platforms can increase ROI by 19%.
Sidenote: Before going any further, let me say this. There’s no such thing as Brand vs Activation channels. It’s true that some channels are better at targeting and some deliver wider reach. But what a channel does for your campaign depends on your strategy. That’s why your advertising strategy MUST BE channel agnostic and your media plan channel specific.
For example, Search and Social can build long-term ROI but they’re more effective at short-term activation.
On the other hand, TV and online video are more effective at driving long-term effects.
How well your budget split and channel selection works also depends on the duration of your campaign because:
Changes in pricing and volume effects occur over different timescales
This means that your advertising can get people to buy more (Volume effect) a lot quicker than it can successfully convince them to pay more (Pricing effect).
Pricing and volume effects occur over different timescales e.g. Short-term campaigns (3 months) don’t report major pricing effects.
And after 3 years the percentage of campaigns reporting strong price effects is still increasing.
And this difference in the time scale has a lot to do with budgeting.
Because the bias for activation campaigns comes from looking at wrong time frames for measuring brand effect.
The brand-building part of your budget should be evaluated over a period of at least 6 months.
And you can keep measuring the activation elements over 12 weeks.
That sums up the 4 basic principles for planning effective advertising campaigns.
I want to end with this quite because it does a great job of narrowing down on what effective advertising is all about.
The most important metrics to look at first are financial and business metrics… If you got a strong brand, you will see it in the financials. If you’ve got a weak one, you’ll see it in the financials.
Principles of effective campaign planning:
Set clear and specific targets for your advertising campaigns: The most important sign that your campaign is going to be successful is not your budget, it’s the work you put into setting specific goals for your campaign.
Spend more than your current market share: Besides media selection and creativity your advertising spend relative to your competitors is a key driver of brand growth.
Reach everyone in your category: Advertising campaigns that drive more light category buyers to your brand or successfully get them to buy more often are more effective at growing your brand than campaigns only targeted towards a narrow group of heavy buyers.
Balance your ad spend across branding and activation: The rule of thumb suggests a 60/40 split in the favour of your brand. Even though the ratio differs by industry, investments in upper funnel campaigns outperform all other types of campaigns in the long run.
I’ve also put them together into a guide over here.
I’d love to hear your comments on how the guide can be improved. And don’t hesitate to ping me if you have any questions.
Have the best week!