How much should you invest in paid media in a content-first world? Historically, digital media planning/buying has been more of an art than a science. But marketers are starting to realize that there may be a few iron-clad, quantitative rules for distribution – rules that need to be followed to maximize ROI.
There are three rules in particular that we think are relevant today:
Rule #1: The 60/40 Rule
This rule is based on some heavy-hitting research called “The Long and The Short of It”. This longitudinal study of about 10,000 brands, examined over 30 years, grouped brands into high-performing and low-performing categories.
The study found that high-performing brands invest about 60 percent of their budget in thought leadership or branding, and 40 percent in more bottom-funnel messaging – what the researchers call “commercial activation”, and what we call “buy now!” advertising.
If you follow the 60/40 rule, you should spend 60 percent of your budget driving awareness and engagement with your “blockbuster” content, and 40 percent of your budget following up with potential buyers who were exposed to your thought leadership, raising consideration of your products and services.
We suspect that this would be a major change for most organizations. In our experience, most clients seem to be following the 10/90 rule instead, where the majority of budget goes to direct response, which may result in short-term sales lists but ultimately delivers diminishing returns compared to branding.
But we’re now starting to see the pendulum swing in the opposite direction, which is a positive trend not just for marketers, but for buyers who need your brand’s topical expertise to succeed in their careers.
Rule #2: The 10:1 Rule
The 10:1 Rule indicates that for every $1 spent on creative development, $10 should be spent on distribution. The logic behind the rule looks like this: in today’s content marketplace, where competition is infinite and no one remembers anything, it’s just not enough to have great creative.
Think back to Star Wars for a minute…
Star Wars probably has the greatest organic following of any series of content in the history of mankind. It has 100 percent brand awareness (do you know anyone who has never heard of Star Wars?) and yet, Disney spent well over $500 million advertising Star Wars, both with traditional media and push-the-envelope digital integrations, like an X-Wing picking you up with Uber. If Disney needs to spend $500 million advertising a blockbuster that everyone has already heard of, imagine how much money you need to spend to turn your unfamiliar brand into a familiar one.
We understand that “spend an enormous amount of money on media” is not a message anyone wants to hear, but unfortunately, there’s no reliable alternative if you want to break through in a world where anyone with a phone can create content.
The good news is that if you take a more focused approach to content creation – a Hollywood approach, instead of a newspaper one – you can reduce your content development costs, freeing up funds that can be used to put your content in front of as many buyers as possible.
Rule #3: The 80/20 Rule (a.k.a. the Pareto Principle)
It’s been around since 1896, when Italian economist Vilfredo Pareto first observed that 80 percent of effects tend to come from 20 percent of the causes (Pareto realised, for instance, that 80 percent of land was owned by 20 percent of the population).
The 80/20 rule has been applied to almost every business and societal distribution, most recently in the world of venture capital. VC firms know that around 80 percent of their returns will come from just 20 percent of their investments, so they invest in many different companies.
Smart marketers are now starting to apply the 80/20 rule to their media planning efforts too. What does that look like? Well, if you apply the 80/20 rule to your marketing, you’ll invest in a lot of content and a lot of channels, while keeping in mind that only the top 20 percent of those investments will deliver 80 percent of your returns. And you’ll be prepared to spend the majority of your budget on the 20% of tactics that deliver exceptional returns.
So, when working with clients remember the 3 rules of media investment: 60/40, 10:1, and 80:20.
What about you? What’s your experience with modern media investment? Do you follow set rules around performance and brand, and how do you track effectiveness of your spend on an ongoing basis?