Finding the Right Mix of Brand Building and Activation for Your Brand

On our path to a 10-figure IPO, one of our biggest failures in the early days was massive over-investment in bottom-of-funnel direct response marketing.

We spent more to grow our business, and yet we never got profitable. Even worse, we were fully dependent on the direct-response powers that be of Facebook and Google.

This led us to instead shift our focus in line with the “60/40” rule.

Read on to learn:
1. What the 60/40 rule is, and
2. How to adjust for digital-first brands

First - What is the 60/40 rule?

Popularized by Les Binet and Peter Field’s book, the Long and Short of It, the 60/40 rule is a framework for marketing investment.

Binet and Field’s research found the ideal marketing budget allocation was 60% towards brand building, and 40% towards “activation” (DR spend, plus any marketing spend you are allocating in-store to drive conversions)

Second - How can we reframe for digital DTC brands?

It’s critical to understand that Binet and Feld come from more traditional marketing backgrounds, and studied more traditional brands at large scale with high volume in offline retail and established distribution networks.

Given the way that digital has reshaped the retail and marketing landscape, and the fact that most small digital brands are not currently massively distributed, it makes sense to think about how this might be different for digital-first brands:

💡 Vs. our wholesale business, our direct business has higher margins. Typically on the order of 20% or so higher. This 20-30% buys us distribution, conversion on our products in their stores, fulfillment, and returns. In an ecomm world, we pay for all of these ourselves

💡 In DTC ecomm, we aren’t spending money on in-store marketing - but we are spending money on conversion rate optimization (CRO), pop-ups, landing pages, web merchandising, the storefront in general, etc - this would all be in the activation budget

💡 In my experience, the net of these two factors generally shifts the digital makeup from the classic 60% brand, 40% activation to the inverse - 40% to brand and 60% to activation

So now we have the two poles - 60% to brand/40% to activation in a wholesale-driven business, and the inverse for DTC ecomm only.

Hoping you read my post on Why brands should absolutely be pursuing an omni-channel strategy (link in comments below), I’ll assume that many of us are on a journey from DTC-ecomm only to a more diversified business.

So as you expand from DTC ecomm focus to more omni channel, you can expect to gradually progress from 40% brand → 60%, and from 60% activation → 40% over time.

What do you find? Have you played with your ratios here? Feel free to give thoughts and feedback below if you've got a sec.
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