Direct-response “performance” marketing is essentially a powerful tool for efficiently harvesting existing demand. It converts people who are actively looking for a solution and are ready to buy immediately. It’s a godsend for early startups, allowing them to surgically target early adopters while keeping their marketing spends really low.
But for any grown company (in VC language, think Series B and later), a crucial limitation emerges. For every known type of product or service, most of your potential buyers are out of the market right now. They don’t need the product immediately, they’re overwhelmed with other concerns, and won’t click on your ad or even read the impressive list of your benefits—they’re simply not responsive to performance marketing. The bad news is that for most B2C and B2B categories, the in-market segment constitutes only about 5-15% of all potential buyers.
This limitation is not just theoretical. The world’s leading performance agency, Jellyfish, has worked with so many companies experiencing this that they even coined the term “Performance plateau”: acquisition costs higher than ever, previously good ROI plummeting, everything becoming inefficient. And almost no company could accurately diagnose the problem: they had outgrown the existing demand in their market.
The good news is that there is a proven method to create future demand, called brand marketing. Good brand marketing uses emotion to break into the inattentive minds of out-of-market consumers, creating a memory association between the need/category and the brand, often many months before the purchase. When a buyer finally enters your market, 95% of them subconsciously choose brands they already know. This subconscious effect is highly predictable, making brand marketing a main driver of brand and category growth, but also a key driver of pricing power and thus profits (recall Airbnb’s success).
For scale-ups and big brands, brand marketing and performance marketing work perfectly together: the former creates demand, and the latter harvests it. Les Binet has been a pioneer in the econometrics of an ideal brand vs. performance split. It’s possible to calculate the optimal ratio for your business, but typically it’s somewhere around 60-80% of the marketing budget for branding and 20-40% for activation.