When brands are scaling their advertising, they go through five stages of growth. In the end, the brands are working towards creating a mature advertising program that drives consistent top-line revenue and scales the brand to new heights.
Here’s how we define the five stages and what we recommend our clients do to quickly move through them.
- Stage 1: Reaching product-market fit.
- Stage 2: Building brand awareness.
- Stage 3: Starting to scale paid advertising.
- Stage 4: Growing brand awareness.
- Stage 5: Consistent growth & scale.
Stage 1: Reaching product-market fit.
The first stage can be the most frustrating when trying to scale. Many brands look at advertising as the silver bullet for growth. However, the reality is that without product-market fit, you’ll struggle to grow in a healthy and efficient way.
We define product-market fit for e-commerce brands in the following way: the brand has identified that consumers are willing to consistently purchase their products online with a meaningful average order value.
Common attributes of brands in stage 1.
When looking at brands in this stage, we normally see that the direct-to-consumer (DTC) website has a low conversion rate (well below 1%) and a relatively small average order value (AOV).
There’s a baseline cost to acquire new customers. In order to scale and grow, you need to be able to support that cost. Using conversion rate and AOV, you can better understand if the brand has a strong enough product-market fit to support growth.
Finding product-market fit.
Early on, it can be difficult to find product-market fit. It’s the reason why so many e-commerce brands stall at this point in their journey. Convincing consumers to purchase from your website requires patience and resilience.
At this stage, it’s imperative that you focus on delivering an exceptional customer experience, with the goal of building early brand loyalists. You should regularly be engaging with your customers and asking them questions - Why did you purchase from us? What could we have done better? What would convince you to buy more?
You should learn as much as you can and try to understand your customer and their motivators. Knowing this will be key to success in the next stage of growth.
Stage 2: Building initial brand awareness.
Once you’ve proven that people will purchase from you, it’s time to introduce the brand to more customers. Your goal is to start building brand awareness.
Common attributes of brands in stage 2.
Brands that are in stage 2 have strong web engagement, high conversion rates, and large average order values. The brand is building a following and consumers are regularly purchasing.
However, overall revenue is still relatively small and the brand’s growth is limited since it’s mostly driven by word of mouth.
Strategies for building and capturing initial demand.
We recommend you invest in influencer marketing, PR, and partnerships, to build brand awareness at this stage. These strategies align the brand with someone that is already trusted and has a relationship with the consumers.
As demand grows, you should activate lower-funnel advertising strategies to convert brand-aware consumers. We recommend launching branded paid search and retargeting campaigns to engage anyone that visits the website or is looking for your brand specifically.
Stage 3: Starting to scale paid advertising.
Brands that reach the third stage have a good understanding of their customers and what motivates them to purchase. You can begin scaling advertising and use paid media to drive additional growth.
Common attributes of brands in stage 3.
At this point, you should have a media campaign that is targeting bottom-of-the-funnel users. This leads to campaigns with a high-ROAS but limited scale.
In order to continue to grow, you have to start investing in advertising that reaches new audiences.
How to scale your paid advertising.
First, start by optimizing your bottom-of-funnel campaigns. You’ll start with a limited media spend, but a high return on ad spend (compared to your break-even ROAS).
Once that’s in place, you’re ready to start expanding your audiences. At this stage, you should focus on “likely-to-convert” audiences. These would-be consumers that look very similar to your most valuable customers.
You’ll also want to start optimizing your campaigns by testing different messaging, offers, and ad creative to determine what resonates best with your consumers.
As you reach new audiences, your ROAS will start to drop but your overall revenue will begin to increase.
Stage 4: Driving incremental awareness.
Once campaigns are scaling consistently, we can start looking for ways to accelerate growth. At this point, you’ve identified how to grow brand demand, activated key advertising channels, and are effectively acquiring new customers.
Now you're ready to start driving incremental growth and brand awareness.
Common attributes of brands in stage 4.
Brands at this stage are mostly investing in consideration and conversion audiences. In order for the brand to truly drive scale and grow, you need to be able to use paid advertising to fill the top of the funnel and build brand awareness.
Driving brand consideration and awareness
Identify the best way to drive brand consideration and awareness by implementing these strategies:
1. A robust measurement & analytics plan
Once you start scaling your advertising campaigns, your return on ad spend will start to drop. This happens because you’re investing the profits from your high ROAS campaigns to fuel your brand awareness campaigns. Without accurate tracking and attribution, you could quickly end up with a campaign that you thought was profitable, but is actually costing you a lot of money.
2. A comprehensive ad testing plan
The only way to figure out what effectively drives brand consideration and awareness are through structured testing. Your ad testing plan should highlight and prioritize different messaging tests, channel tests, and audience tests. Once you know what works, you’ll be able to lean into that strategy to scale your campaigns.
3. Paid advertising expertise.
Lastly, the strategic know-how needed to manage and optimize campaigns becomes increasingly more important as you start to scale. Your campaigns will most likely start to span across multiple platforms, each with different optimization strategies needed. Working with teams that understand how to maximize each platform means you’ll get to scale faster.
Stage 5: Consistent growth and scale.
Welcome to the final stage of growth. Brands at this point have reached equilibrium for their paid ads; their brand awareness campaigns are steadily fueling their performance advertising. The brand has a mature advertising program and is regularly growing top-line revenue while scaling at a sustainable pace.
Common attributes of brands in stage 5.
When we look at brands that have reached this stage, their advertising accounts for about 30% to 40% of their website revenue and they’re hitting at least their break-even ROAS. The focus, now, is on consistently driving top-line revenue growth and finding strategic ways to further increase brand demand.
Scaling the brand and reaching new consumers.
Once the advertising campaign has reached an equilibrium point, you have three levers for driving additional growth from advertising.
1: Reduce the ROAS (take a potential loss) to fuel more upper-funnel investments.
Usually, the goal is to maintain a ROAS above your break-even ROAS for the entire campaign. However, if you need to fuel faster top-line revenue growth, it may make sense to dip below the break-even ROAS to invest in more awareness campaigns. We would recommend you implement this strategy very carefully and test into it, to make sure that the awareness being created is actually being converted to meaningful growth.
2: Identify opportunities for driving incremental revenue from existing strategies.
Most brands at this stage have large advertising campaigns across multiple channels. You can drive incremental revenue from these campaigns by refining your test and learn plan to identify the optimal channel mix, creative messaging, and audience targeting.
For example, you may use a media mix model or attribution platform to help better understand which channels are actually driving incremental revenue for the business and what the optimal spend should be per channel. This helps reduce waste and increase the potential yield from your campaigns.
3: Activate brand awareness campaigns at scale (usually not advertising-led).
Advertising is only one tool in your marketing tool belt. Once you’ve activated the most common brand awareness channels (out of home, connected tv, podcasts, etc), consider strategies that have a large reach, such as event sponsorship, pr moments, and major brand partnerships.
What does this mean for you?
It’s important to realize that your marketing strategies and investments in advertising will change as you move through the different stages of growth. Have realistic expectations for your advertising campaigns and invest in them at the appropriate stage to scale efficiently.