Balancing your
branding budget

At the end of 2022, Airbnb reported its most profitable quarter ever. The secret behind those results? The homestays' company decided in 2020 to cut down its marketing budget and to invest massively in branding. Not by merely changing the logo and the slogan, but by making what CEO Brian Chesky describes as a radical switch: replacing an inefficient marketing and advertising strategy aiming only at ‘buying customers’ by a more global and ‘educational’ vision that strengthens the customer base. This led to a refoundation of the brand promise: ‘to create a world where anyone can belong anywhere’. The pure commercial strategy has been replaced by a lifestyle philosophy - and purchase becomes a natural outlet of that identity.

According to a recent survey from the Edelman trust barometer, 74% of people seek to avoid advertising online – using blocking technology, changing their media habits, or subscribing to streaming services to do so. At the same time, their relationships to brands remain important, with 48% declaring that the first interaction or purchase is the best time to earn their loyalty. To put it clearly: people love brands, but they don’t want to be pushed to buy them. An apparent contradiction that strong brand strategy can solve.

Why should working and maintaining your brand come before marketing? Because it is precisely the foundation on which marketing actions can be built.

Branding steers all the decisions related to marketing and tactics, in continuous correspondence between them, but with branding as a long-term carrier of a company’s values and promises. In this sense, last-minute branding campaigns will never be as effective as a carefully established holistic approach.

Even if advertising can still translate into leads acquisition and sales results, it doesn't compare in terms of lasting impact on the customer, such as loyalty. The budget for branding should therefore be structural and planned over the year - as is done in all companies for the marketing budget. It is the only way to keep building a strong, consistent brand that stays top of mind.

How should marketing and branding budgets compare in terms of volume? To answer that question, one must consider the effectiveness of both. A study from the Institute of Practitioners in Advertising (IPA) shows that, even though direct response efforts yield fast results and quick hits, they become less effective over time. After 7 months, a campaign already loses 50% of its activation effect. Branding’s timeline is the opposite, with a slow start in the first months but a clear growing and ‌long-lasting impact on market shares. After a year, when the benefits of lead generation have faded, the results of successful branding are still going strong.

Head of effectiveness at the London agency Adam & Eve DDB and author of ‘The Long and the Short of It: Balancing Short and Long-Term Marketing Strategies’, Les Binet has enunciated the 40/60 principle: since brand-building wins in the long run, 60% of the available budget should be fed to it, and 40% to lead generation and sales. In the past decade, companies were more likely to assign 70% or more to that second part…

Companies should not take those figures as an ironclad proportion but as a guideline, to be adjusted according to their needs and size as well as their sector of activity or the type of product they market. At Mediatel’s Future of Brands event in London in May 2022, Asahi’s head of media Ross Sergeant suggested rethinking Les Binet’s rule through further research, pointing out that for online business, the ratio might even have to be 80/20 or 90/10.

In the end, it all comes down to strengthening this relationship with the customer and keeping its attention – a notion still difficult to measure properly but nonetheless essential. Building on the value of trust, especially in service and B2B brands (but also in non FMCG consumer goods) will always win. In times of recession, brand value surpasses the price battle. And your budget should reflect this.