Sunday, 02 November 2025 / Published in Enterprise

Performance Marketing Is Eating Your Brand: The Nike Syndrome in DTC

Nike’s recent missteps reveal a critical lesson for DTC brands: over-reliance on performance marketing can erode long-term brand equity. While Nike’s focus on short-term metrics like ROAS initially drove sales, it came at the expense of emotional connections with consumers, rising acquisition costs (CAC), and declining brand recall among younger audiences. Meanwhile, competitors like HOKA and Liquid Death thrived by prioritizing brand-building strategies that foster loyalty and mental availability.

Key Takeaways:

Short-term focus hurts long-term growth: Nike’s shift to performance marketing reduced its cultural relevance, allowing competitors to gain market share.
Mental availability drives sales: Brands like HOKA succeeded by embedding themselves in consumer lifestyles, ensuring they’re top-of-mind at the point of purchase.
Balance is key: A 60/40 split between brand-building (60%) and performance marketing (40%) ensures sustainable growth by combining emotional resonance with measurable results.

Why This Matters:

Performance marketing delivers quick wins but can trap brands in a costly cycle of rising CAC and declining loyalty. To avoid becoming a forgettable “conversion machine,” DTC brands must prioritize long-term strategies that build trust, loyalty, and emotional connections. Nike’s experience is a warning: even iconic brands aren’t immune to the risks of neglecting their identity.

The Performance Marketing Problem

Performance marketing, while enticing due to its measurable results, can inadvertently lead brands into a cycle that undermines their long-term value. The initial focus on quick, tangible returns often shifts attention away from fostering lasting connections with consumers, weakening the brand’s overall foundation.

Why ROAS and Quick Metrics Are So Tempting

Platforms like Facebook and Google Ads make it easy for executives to monitor campaign performance in real time, offering instant insights into clicks, conversions, and revenue. These metrics are incredibly appealing to decision-makers, as they provide immediate validation of success.

For CFOs, performance marketing stands out because it offers clear, real-time attribution of spending to customer acquisition. This transparency simplifies budget approvals, especially during uncertain market conditions. In contrast, brand-building efforts often require patience, promising returns over the long term without the same level of immediate clarity.

When markets are volatile, the pressure to deliver fast results intensifies. Many brands respond by doubling down on performance tactics, prioritizing instant wins over strategies that foster deeper, emotional connections with consumers. While this approach may seem effective in the short term, it often leads to a problematic cycle of rising acquisition costs and diminishing returns.

The Cycle of Overreliance on Performance Marketing

Relying too heavily on performance marketing can trap brands in a self-perpetuating cycle. As acquisition costs rise, companies are forced to spend more just to maintain their revenue levels. This increasing dependence on performance channels often comes at the expense of long-term brand equity.

Over time, this pattern can obscure deeper problems. A brand that once balanced customer lifetime value with acquisition costs may find that overusing performance tactics erodes that balance. This shift raises concerns about profitability and sustainability, as short-term gains take precedence over cultivating organic demand and customer loyalty.

This scenario serves as a warning: when the focus narrows to immediate, measurable outcomes, the core elements that build brand equity – such as trust, loyalty, and emotional connection – are often neglected. Nike’s journey highlights how this downward spiral can affect even the most iconic brands.

Nike’s Shift: A Cautionary Tale of Performance Overreach

Nike’s story illustrates the risks of prioritizing performance marketing at the expense of brand-building. In its early days, Nike excelled at creating emotional connections with consumers through athlete endorsements, storytelling, and experiential marketing. These efforts built a strong, resonant identity that set the brand apart.

However, over time, Nike shifted its focus toward performance-driven strategies, emphasizing digital advertising, retargeting, and direct-response campaigns aimed at driving immediate sales. This pivot came with consequences: customer acquisition costs climbed, and the brand’s emotional resonance with key audiences began to fade. The distinctive messaging that had once defined Nike became diluted, replaced by tactics designed for short-term impact.

Nike’s experience serves as a powerful reminder. Even a brand with a storied legacy is not immune to the pitfalls of overemphasizing short-term metrics. For smaller direct-to-consumer brands without the same level of established equity, the risks are even greater. A relentless focus on immediate returns can undermine the foundation needed to build a lasting, meaningful brand identity.

The Mental Availability Problem

When customers think about making a purchase, does your brand instantly pop into their minds? This is the idea behind mental availability – a crucial yet often overlooked factor for direct-to-consumer (DTC) brands.

Byron Sharp’s Take on Mental Availability

Mental availability refers to how easily your brand comes to mind when a customer is ready to buy. It’s about being in the running during those split-second decisions when consumers pick from a small pool of options – usually just two or three brands.

According to Byron Sharp’s research, brands with higher mental availability tend to dominate market share. Most purchases aren’t the result of extensive research; instead, they’re impulsive and based on what’s top of mind. For DTC brands, this is a big hurdle. Performance marketing is great at targeting customers actively searching for your product, but it doesn’t create the lasting mental connections that make your brand unforgettable when the need arises. This explains why brands like Nike have struggled recently, while others such as HOKA and Liquid Death have flourished.

Picture this: someone spills coffee on their shirt and immediately thinks, "I need a stain remover." The brands that come to mind first are the ones that have invested in building mental availability. On the other hand, a brand relying solely on direct-response ads might be completely overlooked in this moment.

Nike’s Decline vs. HOKA and Liquid Death’s Rise

Performance marketing can drive quick results, but it doesn’t always build long-term loyalty. Nike’s recent struggles highlight how even a powerhouse brand can lose its mental edge. Between 2019 and 2023, Nike dropped from the most recalled athletic brand to fourth place among key demographics. This wasn’t due to a lack of spending – Nike poured $3.7 billion into marketing in 2023 – but rather how that money was spent.

Nike focused heavily on retargeting and conversion-driven campaigns, while competitors like HOKA took a different route. HOKA invested in building strong connections with their audience by sponsoring community events and partnering with local groups, embedding themselves in the running culture. These efforts ensured that runners naturally thought of HOKA when it came time to buy new shoes.

Liquid Death took an even bolder approach in the bottled water market. Instead of competing on functional benefits like purity or pH levels, the brand leaned into a rebellious identity that broke all the traditional rules. Their marketing wasn’t about features – it was about entertainment and emotional connection. By creating edgy, shareable content, Liquid Death didn’t just sell water; they built a cultural movement.

This strategy paid off. Liquid Death grew from a startup to a $1.4 billion company in just six years. In 2023 alone, their retail scan sales hit $263 million, a staggering 140% increase from the previous year.

The difference is striking: Nike’s focus on performance marketing left it forgettable outside of direct-response campaigns, while HOKA and Liquid Death created lasting mental connections that influenced consumers across multiple touchpoints.

The Brand Description Test

Want to measure your brand’s mental availability? Try this: ask customers to describe your brand without mentioning product features or benefits. Can they describe your brand’s personality or identity instead?

Brands with strong mental availability pass this test with ease. Customers don’t just talk about what the brand sells – they talk about who the brand is. For instance, Liquid Death is often described as “rebellious,” “punk rock,” or “the brand that doesn’t take itself seriously.” These emotional associations make the brand memorable far beyond its physical product.

Patagonia is another standout example. People describe it as “environmentally conscious,” “authentic,” or “for serious outdoor enthusiasts.” These descriptions go beyond technical details about jackets or boots – they create a vivid mental image that sticks with consumers when they think about outdoor gear.

On the flip side, many DTC brands are only known for their functional traits, like “comfortable mattresses” or “naturally derived skincare.” While these attributes are helpful, they don’t make the brand stand out in a crowded marketplace.

Building mental availability means creating a brand identity that resonates on an emotional level. It’s about positioning your brand as part of the lifestyle or self-image your customers aspire to. This emotional connection ensures your brand stays relevant long after a performance marketing campaign ends.

However, building mental availability takes time and consistency. It requires investing in brand-building activities that may not show immediate results. But as Nike, HOKA, and Liquid Death demonstrate, neglecting mental availability can cost far more in the long run than the temporary gains of short-term metrics.

The Real Cost of Performance Marketing Focus

Performance marketing delivers quick, measurable returns on ad spend (ROAS), but its focus on short-term results can chip away at a brand’s long-term value. Over time, this approach risks weakening emotional connections with consumers and losing the relevance needed for sustained success.

Higher CAC and Lower LTV

Over-relying on performance channels often leads to a vicious cycle of rising customer acquisition costs (CAC). As competition for digital ads intensifies, these costs climb higher, putting pressure on profitability. Meanwhile, neglecting efforts to strengthen brand equity can leave companies vulnerable to unsustainable economics.

The balance between customer lifetime value (LTV) and CAC is a key indicator of healthy growth. Brands that focus on building a strong identity often see better LTV:CAC ratios, driven by customer loyalty and organic referrals. On the other hand, brands that lean too heavily on performance marketing may find it difficult to maintain this balance, as rising acquisition costs outpace the long-term value of their customers. This imbalance not only strains finances but also risks eroding the brand’s unique identity.

How Brands Become Commodities

Focusing too much on immediate sales can also strip away what makes a brand stand out. When every marketing dollar is tied to quick returns, businesses often cut back on creative strategies that foster emotional connections with their audience. Over time, this can reduce a brand to just another option in a crowded marketplace, competing primarily on price.

Take the mattress industry as an example. Many companies adopted similar performance-driven tactics, relying heavily on discounts and lookalike ad campaigns. As a result, consumers began to view these brands as interchangeable, making price the deciding factor rather than any meaningful distinction.

In contrast, brands that prioritize consistent investment in their identity – like traditional retail leaders – maintain stronger pricing power and customer loyalty. Their ability to create lasting connections helps them remain competitive even in a landscape dominated by performance marketing.

Nike’s Data: The Long-Term Damage

Nike’s experience illustrates the risks of prioritizing short-term gains over long-term brand health. Over several years, Nike shifted more of its marketing budget toward performance channels aimed at driving immediate conversions, scaling back investments in sponsorships, storytelling, and partnerships. While this strategy initially boosted digital sales, it came at a cost: a 30% drop in brand sentiment, as revealed by Nike’s internal data.

This shift didn’t just hurt consumer perception – it also increased Nike’s reliance on paid channels for customer acquisition, further driving up CAC. Competitors that maintained their focus on brand-building initiatives were able to strengthen their market position, deepen connections with their audience, and capture long-term loyalty.

Nike’s case is a warning for all brands. Even with its vast resources, the company found itself caught in a cycle where rising CAC made it harder to fund the brand-building efforts needed to maintain its leadership. For smaller direct-to-consumer brands operating on tighter margins, the risks are even higher.

The takeaway is clear: while performance marketing may deliver quick wins, over-reliance on it can undermine a brand’s long-term success. To achieve sustainable growth, brands must find the right balance between driving immediate results and investing in the emotional and cultural connections that secure their future.

The 60/40 Marketing Mix for DTC Brands

To avoid the common trap of relying too heavily on performance marketing, a balanced strategy is crucial. Marketing experts Les Binet and Peter Field, after analyzing thousands of campaigns, discovered that the most effective brands dedicate 60% of their marketing budget to brand building and 40% to performance marketing. This split achieves sustainable growth by addressing both short-term revenue and long-term brand strength.

However, many direct-to-consumer (DTC) brands flip this ratio, allocating 70-80% of their budgets to performance marketing while reserving only 20-30% for brand building. This approach may deliver quick results but often leads to rising customer acquisition costs and weakens long-term brand equity.

The 60/40 split isn’t a random suggestion. Brand-building efforts take time to yield results but create a strong foundation that drives loyalty and demand. Performance marketing, on the other hand, works best when it’s capturing demand that brand-building efforts have already created.

60% Brand Building Activities

Brand building is about fostering emotional connections and increasing mental availability, rather than driving immediate sales. These efforts lay the groundwork for loyalty, word-of-mouth referrals, and the ability to command premium pricing.

Emotional storytelling helps establish a brand’s identity. Great brands share narratives about their mission, values, and the people they serve. This type of content avoids direct sales pitches and instead focuses on creating a bond with the audience.
Community building strengthens relationships beyond transactions. Whether through events, online forums, or initiatives tied to shared causes, these efforts make the brand a meaningful part of customers’ lives.
Non-sales-focused content showcases thought leadership and personality. Educational articles, entertaining videos, or commentary on relevant topics position the brand as more than just a product provider. This type of content is valuable enough for people to engage with it even if they never make a purchase.
Experiential marketing creates unforgettable moments that deepen emotional ties to the brand. Pop-up events, collaborations with like-minded companies, or sponsorships for activities that resonate with the target audience are all examples of this approach.

40% Performance Marketing Tactics

Performance marketing shines when it’s used to convert demand created by brand-building efforts. Instead of trying to generate awareness from scratch, it focuses on engaging people who already have some level of familiarity and trust in the brand.

Retargeting campaigns aim at individuals who have interacted with the brand but haven’t yet made a purchase. These audiences tend to convert at higher rates because they already recognize and trust the business.
Bottom-funnel strategies target customers ready to buy. This includes tactics like search engine ads for branded terms or competitor keywords, as well as shopping ads designed to capture high-intent buyers.
Email marketing to existing customers encourages repeat purchases and boosts customer lifetime value. Since these customers have already bought once, the cost of acquisition is minimal, and conversion rates are significantly higher than with cold audiences.

When performance marketing is paired with a solid brand foundation, it becomes far more efficient, converting interest into action with less effort.

Brands That Balance Both Approaches

A 60/40 budget split directly addresses the challenges of rising acquisition costs and declining brand loyalty.

Take Gymshark, for example. The fitness apparel brand achieved a $1.3 billion valuation by prioritizing community and carefully planned performance marketing. Instead of focusing solely on ads, Gymshark spent years building a loyal community through content featuring real athletes and fitness enthusiasts. They sponsored up-and-coming athletes, created workout resources, and hosted fitness events. These efforts fostered deep emotional connections with their audience. When Gymshark ran performance ads, they targeted people who already had a positive relationship with the brand, making their campaigns far more cost-effective.

Another standout example is Patagonia, which demonstrates the power of brand building in creating loyalty and pricing strength. The company invests heavily in environmental activism, documentary films, and educational content about outdoor activities. Campaigns like "Don’t Buy This Jacket" reinforced Patagonia’s commitment to sustainability, strengthening emotional ties with customers and, paradoxically, boosting sales. Their performance marketing focuses on engaging audiences who already align with their mission, rather than trying to convert indifferent consumers.

Both brands show that performance marketing delivers better results when supported by a strong brand identity. Their customers aren’t just buying products – they’re buying into a lifestyle and a set of values.

While the 60/40 approach requires patience and discipline, it pays off in the long run. Brand-building efforts may not yield immediate returns, but they create lasting advantages that competitors will find difficult to replicate.

Brand Building Guide for DTC Leaders

Creating a lasting DTC brand requires a fresh approach to marketing – one that goes beyond short-term performance tactics. At its core, it’s about building emotional connections and developing unique brand elements that can’t be easily copied by competitors. Here’s how to make it happen.

Focus on "Why", Not "Buy"

The most successful DTC brands don’t just sell products; they sell a purpose. Defining your brand’s "why" creates emotional bonds with customers, making them less likely to compare solely on price or features.

Take TOMS Shoes as an example. When founder Blake Mycoskie launched the brand, the focus wasn’t on style or comfort. Instead, it was on the "One for One" mission, where every purchase helped provide shoes to a child in need. This purpose-driven story turned customers into loyal advocates.

Similarly, some eyewear brands have shifted their messaging from price and style to a mission of accessibility. By introducing initiatives like "Buy a Pair, Give a Pair" and maintaining transparent pricing, they’ve disrupted traditional models and carved out a strong place in the market.

To define your brand’s purpose, ask yourself:

Why does your company exist beyond making money?
What change do you want to create in the world?
How does your product or service contribute to that change?

The answers to these questions will form the emotional foundation of your brand, helping you stand apart in a crowded market.

Build Distinctive Brand Assets and Create Cultural Moments

Strong brand assets go beyond a logo – they include visuals, sounds, language, and experiences that make your brand instantly recognizable. These are the mental shortcuts that stick with people and keep your brand top of mind.

For instance, Liquid Death has completely reimagined the water category. With its punk rock aesthetic, edgy tagline ("Murder Your Thirst"), and skull logo, it stands out in a sea of bland competitors. But the brand didn’t stop there. It leaned into cultural relevance by sponsoring concerts, creating viral social media content, and collaborating with tattoo artists. These efforts, while not directly tied to selling water, have built a powerful identity that resonates with its audience.

Glossier is another standout example. Instead of traditional ads with polished models, the brand celebrates everyday customers and their routines. This community-first approach has sparked organic engagement and built a devoted following.

You don’t need a massive budget to create these kinds of cultural moments. Start by identifying causes, events, or communities that align with your brand’s purpose. Then, find authentic ways to get involved – whether it’s through pop-up events, creative partnerships, or user-driven social media campaigns. These initiatives not only deepen emotional connections but also create lasting impressions that set your brand apart.

Measure What Matters

To build a sustainable brand, you need to track metrics that go beyond short-term performance. Many DTC brands focus heavily on metrics like ROAS or CPA, which are critical for cash flow but don’t tell the full story of brand health.

Instead, consider broader metrics that reflect long-term growth:

Share of Voice: This measures how often your brand is mentioned compared to competitors across social media, reviews, and industry publications. Brands with a higher share of voice often enjoy premium pricing and lower customer acquisition costs.
Brand Recall: Conduct surveys to see how easily customers can name your brand within your category without being prompted. This unprompted awareness is a key indicator of mental availability.
Brand Sentiment: Use tools to analyze customer conversations on social media, review sites, and news platforms. Positive sentiment often correlates with higher customer lifetime value and organic growth.
LTV:CAC Ratio: Looking at customer lifetime value (LTV) relative to acquisition costs (CAC) gives a clearer picture of sustainable growth. Brands with strong emotional connections tend to have more favorable LTV:CAC ratios.
Organic Traffic: Monitor direct website visits, branded search terms, and social media followers gained without paid promotions. These metrics indicate how well your brand-building efforts are resonating.

Brand-building is a long-term investment. While performance marketing delivers quick wins, the real payoff from brand-building often takes months to materialize. By balancing short-term performance metrics with long-term brand health indicators, you can ensure sustainable growth. As Nike’s experience shows, neglecting to nurture enduring brand assets can put even the biggest market leaders at risk.

Breaking Free from Performance Marketing Addiction

What Nike’s Loss Teaches DTC Brands

Nike’s recent struggles highlight a critical lesson for direct-to-consumer (DTC) brands: relying too heavily on performance marketing can lead to long-term consequences. By prioritizing short-term metrics over long-term brand development, Nike saw its customer acquisition costs (CAC) climb while its brand’s emotional connection with consumers weakened. Meanwhile, competitors like HOKA gained ground by focusing on authentic community engagement and meaningful storytelling rather than chasing immediate returns on ad spend.

For DTC brands, this serves as a stark reminder: an overdependence on performance marketing can create a vicious cycle. Rising CAC often prompts even more short-term spending, which ultimately undermines the brand equity needed for sustainable growth.

One of the most telling signs of this imbalance is a loss of mental availability – that is, how easily a brand comes to mind when consumers are ready to make a purchase. Without this top-of-mind awareness, brands risk losing market share and pricing power. Nike’s experience shows how neglecting brand-building efforts in favor of performance-driven strategies can weaken competitive positioning over time. For DTC brands, this is a clear signal to rethink and rebalance their marketing priorities.

Building a Balanced Marketing Approach

To regain balance, brands should consider adopting a 60/40 marketing framework – allocating 60% of their budget to brand-building efforts and the remaining 40% to performance-driven tactics. This shift complements earlier discussions about the pitfalls of over-reliance on performance marketing by emphasizing the importance of long-term brand health.

The 60% allocated to brand-building should focus on initiatives that create emotional connections and establish distinctive brand assets. This could include storytelling, hosting community events, or aligning with socially relevant causes. These activities leave a lasting impression on consumers and strengthen brand loyalty over time. The remaining 40% can be dedicated to performance tactics like retargeting, email campaigns, and conversion-focused efforts that drive immediate results.

A great example of this balanced approach is Gymshark. The brand has successfully built its identity through athlete partnerships, culturally relevant content, and community-driven campaigns. By doing so, Gymshark has not only strengthened its brand equity but also enhanced the effectiveness of its short-term performance strategies. This balance ensures that their immediate efforts support, rather than undermine, their long-term goals.

It’s important to note that brand-building efforts require patience. Results may not be immediate, but the rewards – lower CAC, increased customer lifetime value, and the ability to charge premium prices – are well worth the investment. Brands that strike this balance consistently report stronger long-term performance compared to those focused solely on short-term gains.

Next Steps: Get More Information

Nike’s story underscores how neglecting brand-building activities – even incrementally – can erode long-term equity. Many DTC brands face similar pressures: rising acquisition costs, fierce competition for consumer attention, and the constant demand to deliver quick returns on investment. These challenges often push companies further into the performance marketing trap. But there’s a way out.

The first step is understanding the strategies and tactics that prevent this overreliance. Breaking free from performance marketing addiction means learning from the missteps of industry leaders. Our detailed case study, The Innovation Gap, dives deep into how an excessive focus on performance marketing can harm long-term brand value. It also provides actionable frameworks to help businesses develop a sustainable, balanced marketing strategy. [Download Link] Explore how top brands combine immediate wins with long-lasting brand-building efforts to stay ahead of the competition.

FAQs

How can DTC brands balance performance marketing and brand building for sustainable growth?

To drive sustainable growth, direct-to-consumer (DTC) brands must strike a balance between performance marketing and brand building. While performance marketing delivers quick wins like customer acquisition and measurable ROAS (return on ad spend), relying too heavily on it can result in higher customer acquisition costs (CAC) and diminished brand loyalty over time.

A more balanced strategy involves allocating 60% of your marketing budget to brand-building initiatives. This includes efforts like emotional storytelling, fostering community connections, and creating content that builds trust and recognition. These activities strengthen your brand’s presence in customers’ minds, boost loyalty, and give you the ability to maintain premium pricing. The remaining 40% of your budget should focus on performance marketing, targeting immediate results through tactics like retargeting, bottom-of-funnel campaigns, and email marketing.

Brands such as Gymshark and Patagonia illustrate the power of blending long-term brand development with data-driven performance strategies. Their approach proves that combining these elements can drive both immediate conversions and enduring growth. By maintaining this balance, your brand can stay relevant, build trust, and mitigate the risks of over-reliance on rising ad costs.

What are the dangers of relying too much on performance marketing, and how can brands strike the right balance?

Over-relying on performance marketing can create several challenges for your brand. It often pushes businesses to prioritize short-term wins over nurturing long-term growth. This approach risks making your brand feel like just another option in a crowded market, eroding its uniqueness and customer loyalty. Instead of building meaningful connections, campaigns often end up attracting deal-hunters who may not stick around. On top of that, excessive performance marketing can lead to ad fatigue, where audiences grow tired of seeing the same messages, ultimately reducing campaign effectiveness and even harming your brand’s reputation.

To steer clear of these issues, a balanced marketing strategy is key. Consider allocating about 60% of your marketing budget to brand-building initiatives – think emotional storytelling, community engagement, and other efforts that resonate deeply with your audience. The remaining 40% can go toward performance marketing, focusing on tactics like retargeting and bottom-funnel strategies. This balance helps create a memorable brand identity while still taking advantage of immediate opportunities. By investing in creative, customer-centric campaigns and keeping an eye on both brand health and performance metrics, you can set the stage for sustainable, long-term growth.

Why is mental availability essential for DTC brands, and how can they stay top-of-mind for consumers?

Mental availability is crucial for DTC brands because it positions your brand as the go-to option when consumers are ready to make a purchase. It’s more than just being recognized – it’s about becoming the automatic choice during those pivotal buying moments.

To achieve this, focus on creating and consistently showcasing recognizable brand elements like your logo, color palette, and tagline. Strengthen these assets through repetition across every channel. Go a step further by crafting emotional connections with your audience – use storytelling, tie into relevant cultural events, and interact in ways that highlight more than just product features. By building strong memory triggers and staying relevant, your brand naturally integrates into consumers’ buying decisions.

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