Saturday Thought: The 60 / 40 Rule

Another rainy Saturday, another Saturday thought from yours truly.

I think I owe Jimmy Fusco one more newsletter ad, so here’s to Jimmy.

He works at NCM, home to in-cinema advertising.

You might have been to the theater recently to see Taylor Swift’s movie.

Hit up Jimmy and you won’t be disappointed.

Come advertise with me. Venmo $5.34 to @danny-weisman.

Onto to today’s thought…

Saturday Thought

I love analogy strategy.

Or, when you use real-world examples to explain marketing phenomenon.

For example, I once had a client that ran a Super Bowl ad.

They were bummed that they saw a lot of site traffic, but no conversions.

I told them (with the help of Barry Dan) that building a brand is like losing weight.

And the Super Bowl ad was like eating one salad.

Sure, it felt good. And it was a pretty expensive salad - sweetgreen on steroids.

But it was merely step 1.

You don’t just lose weight from eating one salad.

You need a routine, a regiment, and months of hard work.

That clicked instantly for my client.

And thank god Ozempic wasn’t around then, or he’d be asking for the marketing equivalent of that miracle drug.

But it’s a good segue to this article today from the Wall Street Journal.

Investors are having a hard time making money in this economy, because an age old investing formula isn’t holding up.

It’s the formula to put 60% of your investments in stocks, and 40% in bonds.

The 60 / 40 rule.

Because the two historically diverge - when stocks go up, bonds go down - it’s supposed to allow you to reap the benefits of growth, and then when the economy is rocky, the benefits of safety.

But it’s not holding up in 2023. Stocks and bonds are moving together in tandem.

Both have been losers for most people, and haven’t been producing their typical 5-6% returns.

At risk of sounding intellectually lazy, marketing has its own 60 / 40 rule.

And it’s…somewhat similar.

Les Binet and Peter Field’s The Long and the Short of It claims that the optimal budget mix for any brand is 60% in brand building, and 40% in sales or activation media.

Or, 60% of your budget should be to create mental availability and long-term brand benefits to spur future growth, while 40% of your budget should be used to sweep up current demand for immediate sales.

A portfolio approach that manages long-term growth, and short-term safety.

Sound familiar?

But in 2023, this marketing portfolio isn’t really working either.

The economy is not created equal for all brands right now.

Some, like travel, are doing quite well. Others, like DTC, are struggling.

And in some categories, there is both long-term outlook concerns, as well as struggling short-term demand.

The 60 / 40 approach isn’t producing results in the short-term, and it’s unclear how it’s influencing the long-term.

So, what to do?

A few things.

First, think of your media budget as an investment portfolio.

Making that connection and using that analogy will be helpful to people like the CFO, who speak in that language, and who you need on your side to get decisions made and opportunities unlocked.

After all, marketing is not entirely just for business success - it’s for investor return. The people loaning the money - whether it be outside investors, or just internal stakeholders - want something in return.

And they want an investment portfolio built to those needs.

Second, recognize that if you’re advocating for brand budgets right now, it’s like telling an investor to buy growth stocks during a market downturn.

It’s an uphill climb, and you should prepare accordingly.

Third, recognize that the 60 / 40 approach only works in a normal, functioning economy.

Both the 60 / 40 Wall Street rule and Binet and Field’s research works from historical examples, when the economy was presumably functioning in a way in which stocks went up, and bonds went down, and when brands actions could be explained consistently.

But 2023 is different. COVID, inflation, etc. has thrown things out of wack.

60 / 40 might not be appropriate for the current climate. It could be more, it could be less, and it might even be 0 / 0. But it’s worth it to have those conversations with your team and your clients.

Fourth, never forget the economy when preparing client budgets.

As much as the 60 / 40 rule exists, there is never one size fits all approach.

And your brand can only function as well as the people out there buying the product are willing to buy.

So, as you prepare for 2024, understand if the category you’re playing in is growing or shrinking.

To get ahead, you don’t need to light the world on fire - you just need to understand your share of market, and pace meaningfully ahead of it in share of category media spend to make up ground.

And finally, understand that clients probably don’t want 5-6% returns.

The last few years, they’ve been hooked on 20% growth, 30% growth, etc.

Especially for early stage companies.

The 60 / 40 approach is one for safe returns. 5-6% growth.

If that’s not what your client is looking for, then that’s a conversation you should have.

But they and you should know you are opting for riskier investments - ones with outsized return potential, but ones may be unproven and may not go boom.

So, as you move into 2024 planning, think of your media budget as an investment portfolio.

And understand if you’re playing in an environment where age-old rules, like the 60 / 40 rule apply.

Or if you’re operating in uncertain times.

If it’s the latter, be open and honest about the type of investments you need, to make good on the returns people seek.

Stay thinkin,

Danny