Research from Les Binet shows that budget scale is far more critical for market share gain than campaign ROI. While ROI is important, it only explains 11% of the variance in incremental profit. The industry's focus on efficiency and narrow targeting is hindering significant growth potential.
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With AI enabling precise control over media spend, key performance indicators are changing. Brands now move beyond simple Return on Ad Spend (ROAS) to more sophisticated metrics like incremental ROAS and contribution margin, reflecting a new emphasis on profitable growth rather than just volume.
ROAS (Return on Ad Spend) is a vanity metric that can mask unprofitable customer acquisition. By focusing on POAS (Profit on Ad Spend), brands are forced to measure the actual profit generated from advertising, linking marketing directly to bottom-line health and avoiding the trap of 'growing broke'.
A low Customer Acquisition Cost (CAC) might seem successful, but it could be hiding inefficient creative. Optimizing creative strategy could dramatically lower CAC further (e.g., from $39 to $16), unlocking greater profitability and scale, especially as you increase ad spend.
Many marketers mistakenly assume performance marketing channels scale linearly. Co-founder Andy Lambert learned that simply increasing the budget doesn't produce proportional results. Instead, efficiency breaks down, and customer acquisition costs rise, highlighting an over-fixation on demand capture versus sustainable demand creation.
A study of 110 CMOs reveals a direct correlation between growth and marketing spend. High-growth firms (over 6% YoY revenue growth) invest substantially more—about 35%—in their marketing budgets, challenging the common practice of cutting marketing during economic uncertainty.
To achieve significant growth (over 10%), contractors should allocate 10-12% of their target revenue goal to marketing, not a percentage of last year's actual revenue. This forward-looking investment is scary but necessary to fund the growth you want to achieve, rather than just sustaining current levels.
Data shows that while combining brand and performance is best, adding brand advertising to a performance-only strategy provides a significantly larger ROI lift than adding performance to a brand strategy. This suggests most marketers are over-invested in performance channels.
When ad performance breaks at scale, the problem isn't your bidding strategy; it's that you've saturated the 3% of the market ready to buy now. To grow, you must target the other 97% with broader, less direct hooks and lead magnets that educate them first.
When ad spend can't increase without performance dropping, the issue isn't your bidding strategy. It's that your direct offers have exhausted the small pool of problem/solution-aware customers. Scaling requires broader hooks and funnels to engage the much larger, less-aware audience.
Marketers often equate effectiveness with ad ROI, but communications typically drive only 10% of sales. The other 90% is influenced by levers like pricing, distribution, and product performance. True marketing effectiveness requires a holistic view across all these business areas, not just advertising.
