Warc's The Multiplier Effect - A CMO’s guide to brand building in the performance era
A new report, The Multiplier Effect- a CMO’s guide to brand building in the performance era, helps marketers better understand how to deliver high-impact advertising.
Based on insights and data from a coalition of marketing effectiveness experts, the report - published by Warc in partnership with Analytic Partners, BERA.ai, Prophet and System1 - makes a data-driven case for effective advertising.
Backed by evidence, it argues that many businesses are missing out on significant revenues and profits through an incomplete approach to advertising.
It offers advice on how advertising can deliver the best possible returns by building equity for tomorrow while driving sales today.
David Tiltman, chief content officer, Warc, says that for this new research, they joined forces with other leading experts in the field of marketing effectiveness to set about answering two big questions:
- Can we identify US-based evidence to prove how investment in advertising can be the most effective?
- How can CMOs apply this evidence to their initiatives to supercharge commercial impact for their businesses?
“The result is The Multiplier Effect, a ground-breaking report demonstrating how the biggest returns come when marketers see brand equity as an accelerant of commercial performance.
“Although the research is US-focused, the findings are relevant to many marketers around the world," says Tiltman.
Key insights
Key insights outlined in The Multiplier Effect study are:
- The rise of the “doom loop”
Over the past decade, advertising investment has increasingly become focused on performance advertising due to the rise of digital-native businesses, a bumpy economy, a fragmented media landscape, and the related shifts in consumer media consumption.
Performance advertising holds out the promise of immediate returns and near-endless optimisation.
However, misleading metrics and diminishing returns mean marketers in many organisations risk diminishing the impact of their advertising by over-investing in performance and entering the “doom loop” of slow growth and declining effectiveness.
- Performance and brand advertising combined deliver greater returns
Research by Analytic Partners reveals the greatest payback comes when performance-led and equity-led advertising are both part of the mix.
Moving from a performance-only to a mixed approach can improve total revenue ROI in the range of 25% to 100% – with the average uplift coming in at 90%.
Moving to a performance-only approach from a mixed approach, by contrast, results in an average decline in ROI of 40%.
Equity building affects people who are not yet in-market, increasing the chances that they will consider a brand when the time comes to make a purchase.
System1 found that 92.1% of strong equity-building ads with impactful creative performed well in the short-term, too.
These ads created both demand among consumers who are ready to buy as well as building long-term equity.
Prophet’s survey of 300 leading marketers in North America further reinforced the need to do both performance and brand advertising in a holistic way.
Its survey identified the qualities which set over-performing companies apart – and it was not their spending patterns, which remained largely even across the “winners” and “losers”.
Ninety percent of "winning" companies were at least somewhat integrated when it comes to connecting brand and demand.
Introducing the Multiplier Effect
The evidence shows that the key to unlocking the power of brand building is to move away from conceptualising brand and performance as separate activities (brand + performance), and instead basing advertising efforts on the fundamental codependency between these tasks as part of an integrated growth strategy (brand x performance).
This leads to The Multiplier Effect.
Equity-led advertising can help drive sales today as well as in the future.
And performance advertising can reinforce the brand while operating as efficiently as possible.
How to harness The Multiplier Effect for success
Marketers wanting to consider the implications of the codependency between brand and performance on their advertising and benefit from The Multiplier Effect should consider some of the following best practices:
- For budgeting purposes, CMOs should be allocating at least 30% to equity-driving ads, or the “brand baseline”, with 40% to 60% a typical “best practice” range.
- Search investment will vary by brand and category, but, for most brands, spending more than 25% of budgets on search should be a red flag. This is called the “search ceiling”.
- Avoid thinking in silos when campaign planning; instead, think of full-funnel creative platforms, where different types of assets reinforce each other. The ideal is to “go deep” by integrating all creative assets within a platform.
- Performance-led techniques, such as promotions, should still tie back to the core brand idea.
- Build a “measurement stack” that can identify a brand’s “baseline” revenues and the incremental impact of advertising beyond it.
Ann Marie Kerwin, Americas editor, Warc says, “As we look to continue the project through further rounds of research, there are still several questions to answer, such as how does advertising combine and align with other forms of activity to build equity, how do advertisers optimise creativity and how do marketers present this argument to the CFO.
"Ultimately, we need a model for building brands that is fit for the future of marketing. Recognising the Multiplier Effect is an important first step.”
The Multiplier Effect report can be read in full here.
Two webinars and a podcast series will follow deep-diving into the findings of the report.