Here's the uncomfortable truth facing CPG finance leaders in 2025: customer acquisition costs have risen 222% over the past decade. Your Meta CPM increased 12% year over year in 2024. Google's average cost per click jumped from £3.48 to £3.84. TikTok CPC skyrocketed 150%, from £0.33 to £0.82.
Yet according to Nielsen's 2024 Annual Marketing Report, 70% of marketers plan to increase performance marketing spend at the expense of brand building. We're pouring more fuel on a fire that's already burning through budgets.
CFOs already know performance marketing works. What they should be asking is why it's becoming exponentially more expensive to achieve the same results.
The Law of Diminishing Returns
“Les Binet and Peter Field's research, based on analysis of nearly 1,000 advertising effectiveness case studies spanning 30 years, established what they call the 60:40 rule: 60% brand building, 40% performance activation.”
Their data showed this split optimises both short term sales and long term profit growth. The market has moved in precisely the opposite direction.
- Marketing budgets have declined from 11% of revenue pre pandemic to 7.7% in 2024
- Only 55% of marketing leaders allocate 60% or more to long term brand building (down 4 percentage points)
- Performance marketing effects have declined by 62%
- Brand campaign effectiveness has nearly doubled (WARC 2024)
We're spending more on the channel that's working less.
The Brand Premium: Quantified
Here's where the finance argument becomes compelling. Nielsen's 2024 cross channel effectiveness study found that brands with high consumer awareness achieve 2.5 times the conversion rates of low awareness competitors. This advantage persists across search, social, display and video channels.
WARC's 2024 analysis of UK and US campaigns showed brands with established awareness achieve 30% to 50% lower customer acquisition costs compared to unknown competitors. McKinsey's study across US digital campaigns found that moving from low brand awareness (under 20%) to moderate awareness (40% to 60%) reduced cost per acquisition by an average of 35%.
“Brand building doesn't compete with performance marketing. It makes performance marketing cheaper.”
The Middle Market Collapse
CPG brands face a structural challenge that makes this balance even more critical. The middle market that once powered CPG growth is collapsing. For decades, mainstream products priced between value and premium represented 60% to 70% of category volume. That reliable centre is now under siege.
- Private labels growing from 18% to an anticipated 30% market share in the US
- Represents an £82 billion threat to CPG toplines
- Premium own brand offerings further squeeze the middle
- When competing primarily on price, private labels will always win
Brand building is what creates the pricing power that protects margins.
The Failure Rate Reality
Nielsen's BASES research found that 95% of new products continue to fail. The difference between the top 20 US food companies (24% failure rate) and the bottom 20,000 companies (88% failure rate) was "the apparent lack of research and strategic marketing" done by smaller players.
Too many emerging brands squander resources on unsustainable offers and incentives, eroding profits whilst trying to buy market share they can't defend. The Ehrenberg Bass Institute's research shows that if a brand stops advertising, its sales will fall 16% after one year and 25% after two years.
The CFO Perspective
- 79% of CFOs state there are no reliable metrics to clearly tie brand marketing to revenue growth
- 81% of CFOs believe optimum ROI measurement period is under 12 months
- Brand marketing typically requires 12 to 18 months to demonstrate returns
This measurement gap creates a false choice. CFOs see performance marketing as accountable and brand building as speculative. The data shows the opposite: brand building is what makes performance accountable. Without it, you're simply paying rising rents to platform owners for access to an audience that doesn't know who you are.
The Allocation Answer
“As brands mature and categories become more competitive, the optimal allocation shifts toward brand building, not away from it. Yet most CPG brands are doing precisely the reverse.”
Binet and Field's updated research shows the optimal split varies by business stage. Mature brands should allocate 62% to brand building and 38% to performance. Early growth stage brands need 57% brand, 43% performance. Even first year businesses benefit from 35% brand allocation alongside 65% performance to capture existing demand.
The Bottom Line
Your performance marketing budget works fine - you're just asking it to do a job it can't do alone. In a saturated market where digital CPMs are rising 20% to 25% per year and the average brand loses £24 for every new customer acquired, efficiency comes from brand equity, not better targeting.
You already know you can afford brand building. The real risk is finding out what happens when you don't.