The 60/40 rule has existed for marketers for more than a decade. Brand gets 60 per cent, performance gets 40 per cent, a split rooted in Les Binet and Peter Field’s, The Long and Short of It. New Zealand marketing effectiveness expert and strategist James Hurman, who has released a new book ‘Future Demand’, thinks that number has moved.
Hurman isn’t declaring that Binet and Field were wrong, but argues that newer research consistently lands somewhere different. His book draws on a wave of post-2022 studies, all conducted after the mass rise of influencer marketing, programmatic and performance channels, and all point to 50/50 as the optimal brand-to-performance ratio for overall ROI.
Google’s Effectiveness Equation study found that companies spending roughly half on brand and half on performance saw the highest overall return on their marketing investment. Tilting too far in either direction degraded ROI.
Analytic Partners ran a similar analysis across the thousands of companies in its global database and reached the same conclusion.
“Anytime anyone’s gone into a different market and studied advertising effectiveness in this way, they’ve always found that it works just the same. Markets work the same way in every single country, and humans make decisions the same way,” Hurman told B&T.
According to Hurman, most companies are nowhere near that mix with short-termism plaguing effectiveness.
“The way that business in general views advertising means that marketers are really influenced to spend most of their budgets on chasing short-term results,” he told B&T.
“We’ve kind of optimised ourselves into a plateau.”
Performance marketing produced measurable results, whilst brand investment didn’t, at least not in ways that were easy to defend in a quarterly business review.
So in response, budgets shifted and shifted again. Each time overall ROI declined slightly and the conclusion drawn wasn’t that performance marketing was being over-indexed, but that brand must be getting less effective.
“[Three-quarters of US marketers are experiencing diminishing returns on their performance spend. Two-thirds of marketers say that campaign metrics are looking successful on dashboards, yet failing to deliver any real growth,” Hurman said.
‘Ads don’t cause sales, they win greater share’
The core argument Hurman makes in Future Demand is that this happened not necessarily because of marketers, but the CFOs and boards around them. The prevailing assumption is that advertising causes sales. You put an ad in front of someone, it persuades them, they buy.
The problem, Hurman said, is that the evidence has never supported this.
“Advertising doesn’t cause sales, but it does ensure brands win a greater share of them,” he said. “Larger brands tend to experience better advertising effectiveness. If you’re a big, well-known brand, your advertising tends to work better. Then applying creativity on top of that makes it go even further.”
His alternative model draws on a growing body of behavioural science and effectiveness research. He argued that what advertising does is ensure brands win a greater share of the sales that were already going to happen by doing two distinct jobs.
The first is creating future demand and warming up buyers who aren’t in the market yet. The second is converting current demand and getting the smaller group of people who are actively in-market right now to act on that bias and choose you.
A WPP Media and Said Business School study of 1.2 million purchase journeys found that 84 per cent of the time, people chose a brand they were already predisposed toward before they entered the market. The decision, in other words, was largely made before the performance marketing ever fired.
“There’s a very strong link between brand awareness and conversion rate. As brand awareness goes up, so does conversion rate. Conversion rate is not a factor of how good the performance marketing is. Conversion rate is a factor of how good the brand marketing was,” Hurman said.
The practical upshot is that the brand versus performance debate which has consumed marketing circles for years may be a false one. The two aren’t competing for budget but compounding each other. When you strip out the brand spend, you don’t just lose long-term growth, you make your short-term performance marketing less effective at the same time.
“The most familiar brands in the world, the Apples and the Nikes and the Coca Colas, they take the lion’s share of sales, not because their ads are more persuasive. Their ads work better because their brands are so much more familiar to so many more people,” he said.
“We need to continually be biasing people towards us, growing the familiarity of our brand and we also need to be constantly harvesting that demand. If we do too much of one or the other, we’re not harvesting as much demand as we could possibly create from the total budget that we’ve got.”
Hurman pointed to Telstra under Brent Smart and New Zealand used car retailer Turners as real-world proof the approach works.
“If you can do it for a used car company, you can definitely do it for anything,” he told B&T.
Hurman’s Future Demand is available now. The book also comes with an AI-powered app that allows marketers to interrogate its findings and generate shareable white papers and slides.
