How can startup brands balance performance marketing with brand building?

Industry heads weigh in on the importance that performance marketing and brand-building initiatives hold in the marketing journey of a startup.

Performance-based advertising, also known as pay-for-performance advertising, has gradually emerged in the past two decades to become a force to be reckoned with when it comes to the overall marketing initiatives that a brand drives. The advent of this form of advertising, in which a brand pays only when there are measurable results, coincides with the growing significance of the digital world. 

Interestingly, the digital world has also created avenues for new age entrepreneurs to venture in the blooming startup ecosystem of India. Startups, which are often businesses in their nascent stages, have the option to invest in performance marketing for more cost-efficient results.  

On the other hand, investing in this sees them gamble on the brand recognition, that, usually, more targeted brand-building initiatives entail. So, how can these up-and-coming startup brands find a balance between the two?

This was the question that Shreyas Kulkarni, assistant editor, afaqs!, posed to Rishabh Jaroli, VP-growth, Scaler and InterviewBit; Rohan Mehta, CEO, FCB Kinnect; Nidhi Sinha, VP-strategic planning, McCann Worldwide; and Arvind RP, CMO, McDonald's, during a panel discussion titled 'Branding vs. Performance Marketing' at the afaqs! Startup Brands. 

Jaroli shares that the edtech platform was operating on a smaller scale in its initial two years of business. Their marketing efforts during that time saw performance marketing take center stage.

"When Scaler began in 2019, we focused on performance marketing to find our product market fit. As an upskilling platform for tech professionals, our niche audience required a unique approach. We initially relied on social media testing, creating trust, and generating word of mouth. As we grew, we balanced performance marketing with branding initiatives. By 2021, we delved into branding, and in 2023, we fully embraced it."

In their brand-building efforts, Scaler focused on influencer-driven branded content dissemination and executing campaigns focused on OTT. This strategy, combined with a significant investment, resulted in a remarkable achievement: reaching 100 million ARR with a positive net income. Over time, Jaroli says the company fine-tuned and optimised both performance marketing and brand building, ensuring sustainable growth.

FCB Kinnect's Mehta advises that both elements go hand-in-hand for startups looking to optimise their marketing spends. In the early stages, performance marketing is key for startups aiming to grow revenue and establish their presence in the market, he explains

However, as their business matures, building a strong brand connection becomes essential. The right balance between performance marketing and branding is crucial for long-term success, and this balance evolves with different stages of company growth.

"For a long-term strategy, I think brand marketing is what really makes a big difference. Focusing on it will ensure that you are building an emotional connection with the consumer for your brand, which is crucial for long-term returns. However, I will not advise startups to pick up brand marketing in the initial phases of their journeys. If they have already well utilised a large portion of the low-hanging fruit, a large portion of the bottom funnel, that's when we can advise them to start focusing on brand marketing," he said.

McCann Worldwide's Sinha pointed out that legacy brands also often chase a younger audience, compromising their branding efforts in the process, in today's market. This makes the task of creating a position in the market with targeted brand-building efforts a more daunting one. However, for startups, the debate between branding and performance marketing often revolves around their marketing budgets. 

"Ideally, both are essential, but in reality, choices must be made. I firmly believe a strong brand foundation is essential to cultivating a consumer base. Once your brand essence is solid, you can adapt your strategies for different demographics and channels. To build this foundation, startups hold unique narratives. Many entrepreneurs begin as consumers, identifying genuine needs in the market. Our role as an agency is to unearth these stories, to pinpoint that single consumer tension, that singular tale worth sharing with the world," she highlighted.

Arvind RP from McDonald's pointed out that startups often begin their marketing journeys with performance marketing. But to establish a sustainable brand, there's no substitute for brand building initiatives, he opined.

"At McDonald's, we balance both branding and performance, recognising that branding requires continuous effort, not just occasional initiatives. Most customers are non-buyers or light buyers, and performance marketing targets high-intent consumers. Building connections with non-buyers and light buyers is crucial, and that's where brand building comes in. It starts with building a brand through elements like storytelling and distinctive assets, which require consistent investments from Day Zero. Performance marketing complements this effort, especially in the beginning," he added. 

He also highlighted that McDonald's has upped its investments in first-party data significantly over time. This provides valuable behavioral insights from both offline and online customers. These insights enrich strategies and tactics, allowing for a more nuanced approach to marketing for the brand.

Mehta said that first-party data has now become invaluable for analysis, cohort building, and targeted marketing. The shift away from third-party data, prompted by the sunset of cookies, has made companies realise the wealth of data they possess, he added. 

"CRM, customer lifecycle management, and retention marketing are gaining importance. While Facebook and Google's ROI may have reduced, alternatives like affiliate marketing, email marketing, and platforms like Amazon are becoming crucial for product sales."

Adding to this, Jaroli said that performance marketing, especially through channels like Facebook, Instagram, Google Search, and YouTube, plays a crucial role in the early phase. Creating a website and social media pages are also important initial steps in branding.

"For Scaler, Facebook and YouTube have been significant contributors, and while we experimented with LinkedIn, the majority of our volume comes from Meta and Google, emphasising the importance of data-driven decisions in our digital world."