Performance Pays the Rent

Definition: Performance marketing is a digital strategy aimed at prompting specific customer actions, with payment only required for successful outcomes such as leads, sales, or clicks. Common channels include pay-per-click advertising, affiliate marketing, email campaigns, and SEO.

Performance marketing resembles paying rent; it delivers immediate results for ongoing financial commitments. The funds invested yield quick returns through measurable actions like clicks and sales, providing reassurance to founders and CFOs regarding their marketing expenditures.

However, there’s a caveat: ceasing to invest in performance marketing often results in a rapid loss of those results. For many small businesses, especially in e-commerce, this can lead to abrupt declines in performance once funding halts.

Branding Pays the Mortgage

Definition: Brand marketing focuses on building and nurturing a brand’s identity, culture, values, and promises to its audience. Typical channels include content marketing, public relations, sponsorships, social media, and experiential marketing.

In contrast, brand marketing is akin to paying a mortgage. It involves long-term investment in an asset that, with consistent effort, will ultimately belong to you. This type of marketing requires substantial time and resources to cultivate brand awareness and loyalty, often presenting itself as informative or entertaining content rather than direct advertising.

Although its effects may take longer to manifest and are harder to measure immediately, a well-established brand becomes a significant asset. It grants businesses a competitive advantage through audience recognition and loyalty, much like owning a home that secures your financial foundation.

To Rent or to Buy

While I strongly advocate for brand marketing, I don’t suggest it should be the sole focus. The choice between performance marketing and branding often depends on your current stage and circumstances.

In the early phases, performance marketing serves as an effective way to gauge product-market fit and optimize conversion rates. Once you’ve established traction, integrating brand-building strategies tailored to your audience becomes crucial. Over time, a solid brand will reduce reliance on performance campaigns, leading to sustained success.

A notable case study is Airbnb’s approach during the 2020 Covid-19 pandemic, which exemplifies this strategy.

Reflecting on the Encounter

As I conclude this discussion, I can’t help but revisit that awkward moment with the inquisitive founder. How I wish I had the chance to express the clarity of this analogy instead! Though our paths may never cross again, I find comfort in sharing this insight.

So, to any founder questioning the value of brand marketing, I respond: “Why choose to pay rent when you could invest in a mortgage?”

Did you find this article helpful?

If so, please give it a clap and follow me on Medium—I would greatly appreciate it! 😀

You can also connect with me on Twitter → @NB_Branding 👋