How Building Brand Is Significant For Commercial Outcomes

In vast marketing, only about 5% of the market is actively looking to purchase your product or service and the rest are visiting, roaming, and watching the product in which are interested but not purchase. Those who purchase from our consumers can be effectively targeted through sales activation strategies, such as performance marketing, which aim to provoke a fairly immediate response ( 0-6 months) and generate a sale. This represents existing demand.

Brand-building, or creating future demand, focuses on the other 95% and involves marketing & communications designed to induce long-term changes in behaviour.

Through repeated positive experiences and associations with a brand (from 6 months to 3+ years), consumers become more likely to choose it in the future.

Short-term: drives sales as efficiently as possible Long-term: builds the brand to improve future sales.

Over time, we’ve learned what levers are likely to increase the effectiveness of brand and marketing investment. Keep in mind, the discipline is more nuanced than finance or AI, so these principles won’t apply in all situations. However, we can use them to guide decision-making when assessing how to increase sales, grow market share and profitability, or increase the return on spend. The principles apply to well-known brands, as well as new and emerging brands.

Brand-building increases overall sales and market share by building up familiarity with its brand among a large group of people. We, as humans, naturally have familiarity bias, meaning we tend to choose brands we know over those we don't. One brand that becomes familiar to large groups of consumers is more likely to continue to grow.

To support the growth trajectory, campaigns play an important role. A brand campaign is designed to deliver specific information or evoke particular behavioural or emotional responses, such as changing consumer behaviour, changing brand perception, or repositioning the brand.

A campaign can be determined effective if:

The campaign was noticed and well-received by consumers.
Consumer behaviour or brand perception was influenced in some way.
Consumers bought more or spent more. It improved sales, market share, and profitability.

However, the long-term approach is more profitable than you may think.

It is significant to mention that brand-building drives incremental outcomes over a longer period. Performance marketing, which drives short-term results today, tomorrow, this week, and it goes on. However, the long-term approach is more profitable than you may think. This is because the effects of short-term campaigns quickly decline, producing a sales spike, not a sales build, whereas long-term campaigns have the opposite effect.

So, how much should you allocate toward creating future demand?

On average, effectiveness seems to be optimised when around 60% of the budget is devoted to brand building, and around 40% to activation. This ratio varies based on factors such as category, company size, level of innovation, and others.

There are risks to underinvesting in brand-building:

Focusing solely on converting existing demand generates short-term impact but little long-term benefit.
Performance marketing is effective at triggering immediate sales, but it’s not particularly profitable in the long run.
Since only around 5% of consumers are typically in the market for a new product or service at a given time, sales-focused initiatives mainly influence this small consumer segment and neglect a future pipeline.

More than 30,000 products launch in the US each year, yet 95% fail as most don't invest in generating future demand beyond the initial launch campaign.

What's the catch?

Brand-building is a long-term investment that leads to incremental growth and competitive advantage. It influences consumer behaviour, perception, and preference over an extended period driving sales, market share, and profitability.

To brand-accountable performance marketing and firms must create metrics that measure the effects of both types of investments on a single North Star metric, brand equity. Companies are better able to make decisions that change the financial contributions of both and get them working better together.