3 Key Rules for Allocating Marketing Budget Between Branding and Performance
There are at least three key rules for smart advertising budget allocation:
• 𝗥𝘂𝗹𝗲 𝟭: As ad spend grows, ad efficiency decreases.
• 𝗥𝘂𝗹𝗲 𝟮: The more brand differentiation in the market, the more sense it makes to invest in branding/reach.
• 𝗥𝘂𝗹𝗲 𝟯: The larger the company, the less incremental awareness is available.
Consider a small startup that initially launches in a low-differentiation market and later pivots to a high-differentiation space (real-world examples of this shift include Warby Parker, Casper, Dollar Shave Club, Allbirds).
In such cases, the optimal marketing budget allocation changes dramatically. Its reach-focused campaigns should increase from around 15% to as much as 40% of the total spend.
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