Growth efficiency: a new metric to monitor brand health and generate future sales growth

Short-term sales efficiency is not an indicator of how efficiently a company can grow, but by measuring longer-term growth efficiency, scale-up brands can plan for profitable growth, according to a new report from WARC.

Growth Efficiency: Marketing’s Existential Metric, produced in partnership with brand tracking company Tracksuit, and WARC sibling company Perpetua, a provider of e-commerce advertising optimization and intelligence also highlights that building brand awareness drives greater effectiveness in performance marketing.

Key findings

• The Paradox of Unscalable Efficiency
  A common pattern among brands seeking to scale up is that at a certain point, growth plateaus, becomes more expensive, and previously strong performance marketing metrics, such as ROI or ROAS, decline.

• Growth Efficiency and Brand Strength
  High awareness brands generate more than twice the sales lifts of low awareness brands as they increase their spend. At a 10% spend increase, high awareness brands yield an average 13% sales increase, while low awareness brands yield just a 6% sales increase.

• Future demand and growth efficiency
  Very low awareness brands (1-5%) with small overall sales have very high growth efficiency. But as those brands grow past a certain scale, if they haven’t built awareness among Future Demand, their growth quickly diminishes. 

• Modelling growth efficiency as brands scale
  When brands scale up awareness at the same time as scaling up performance spend, sales can continue to happen very efficiently and brands can grow profitably into a much bigger and much more valuable business.
  Greater levels of brand awareness supports greater levels of growth efficiency. Both are critical to sustainable, profitable growth. And the latter is very much dependent on the former.

A complimentary sample report is available to read here. WARC subscribers can read the report in full.