Your Marketing ROI Went Up. Your Profits Went Down. That's Not a Coincidence.

The most dangerous number in your marketing dashboard is the one going up.

In June 2026, the Institute of Practitioners in Advertising (IPA) published research that should make every business owner uncomfortable. Across hundreds of campaigns in the IPA Effectiveness Databank, average marketing ROI increased 4%, from $3.07 to $3.15 return per dollar spent. Over the same period, average profit generated by those campaigns fell 11%, from $33 million to $29 million.

Marketers got better at generating returns per dollar. And their businesses made less money because of it.

This isn't a statistical quirk. It's the defining trap of modern marketing. And if you're running a small or mid-sized business in Australia, you're almost certainly caught in it.

The Death Spiral Nobody Talks About

Les Binet, one of the world's most cited marketing effectiveness researchers, has a name for what's happening: the death spiral.

It works like this. You look at your marketing spend and decide you need better ROI. So you cut the campaigns that look inefficient: the ones with the longest payback periods, the ones targeting people who aren't ready to buy today. You narrow your targeting. You shift budget from brand awareness into performance channels. You optimise.

And it works. Your ROI goes up.

But something else happens. Your total reach shrinks. Fewer new people encounter your brand. The pool of future customers who recognise you when they're ready to buy gets smaller. Six months later, your pipeline is thinner. A year later, your growth has stalled.

So you cut more budget. Optimise harder. The spiral tightens.

Binet and his co-researcher Will Davis, Chief Data Officer at Medialab, presented this finding at the IPA Effectiveness Conference in October 2025. Their analysis showed that budget is 8 times more important than ROI in driving profit. ROI accounts for just 11% of the variation in profit outcomes. Budget accounts for 89%.

The amount you spend matters 8 times more than how efficiently you spend it.

65% of Marketers Believe the Opposite

Here's what makes this dangerous. In a survey of 500 senior marketing decision-makers, 65% said ROI was the most important contributor to campaign effectiveness. Only 35% said budget mattered more.

The data says the exact opposite.

As Binet put it: "We need to stop gazing at our navels and our dashboards. We need to get out there and make waves."

Your Dashboard Is Rewarding the Wrong Behaviour

The death spiral is powered by a measurement illusion. Performance channels like Google Ads and Meta are brilliant at showing you exactly what happened after someone clicked. You can trace the journey from click to call to sale and calculate a clean ROI.

That visibility creates a bias. Your marketing dashboard is lying to you not because the numbers are wrong, but because they're incomplete.

Research from Analytic Partners, covered by Australian trade publication Mi-3, found that display advertising is overvalued by 364% in attribution models. Search is overvalued by 336%. Meanwhile, social and video channels are systematically undermeasured.

Even more revealing: 30% of paid search clicks are actually driven by other advertising, mainly video and brand campaigns. The customer saw your brand somewhere else first, then Googled you. Your search campaign gets the credit. The brand campaign that actually created the demand looks "inefficient" by comparison.

This is exactly how you kill your best marketing channel. The channels that build future demand look expensive on a dashboard. The channels that harvest existing demand look efficient. So you shift budget from building to harvesting. Until there's nothing left to harvest.

The 95% You're Not Reaching

The 95-5 rule, developed by Professor John Dawes at the Ehrenberg-Bass Institute (University of South Australia, right here in Adelaide), quantifies the problem.

At any given time, only about 5% of potential buyers are actively in the market for what you sell. The other 95% will buy eventually, just not today.

Performance marketing, by design, targets that 5%. It finds people searching for your service, clicking on your ads, visiting your website. It's brilliant at converting people who are already looking.

But it does almost nothing for the 95% who will buy in the future. Those people's future decisions are shaped by whether they can remember your brand when the time comes. Byron Sharp calls this mental availability: your brand's propensity to come to mind in buying situations.

If you only spend on performance, you're fishing from the same small pond every day. You'll catch what's there. But you're not stocking the pond for next month, next quarter, or next year.

This is why 95% of your future customers aren't Googling you right now. They're not in the market. When they enter the market, will they think of you? That depends entirely on whether you invested in reaching them before they needed you.

What Happens When You Get the Balance Right

A 2025 report from WARC, in partnership with Analytic Partners, BERA.ai, Prophet, and System1, quantified what happens when businesses stop chasing pure efficiency.

Businesses running a performance-only approach saw an average 40% decline in ROI compared to those using a mixed strategy. Brands that combined brand-building with performance channels saw a 25-100% improvement in revenue ROI, averaging a 90% uplift.

The minimum threshold: at least 30% of your budget needs to go toward brand awareness to unlock the multiplier effect.

And here's the finding that should end the "brand versus performance" debate: 92.1% of ads that scored highly for brand-building also performed well in the short term. It isn't either/or. Strong brand campaigns drive immediate results AND build future demand.

The original Binet & Field framework, drawn from IPA analysis of 996 campaigns spanning 1980 to 2016, suggested a 60/40 split: 60% brand, 40% activation for consumer brands. For B2B, the recommended split is roughly 46% brand, 54% activation. The principle holds: you need both, and most businesses drastically under-invest in brand.

The CMO Survey (Deloitte, Duke University, and the American Marketing Association) found that in 2024, 68.8% of marketing budgets went to short-term performance tactics, up from 59.9% the year before. Brand-building share fell to just 31.2%. The same marketers, asked what they thought the ideal split should be, said 50/50.

They know they're over-indexing on performance. They keep doing it anyway because the incentive structure rewards efficiency metrics over effectiveness outcomes.

Why "Efficient" Marketing Feels Right (And Costs More)

Rory Sutherland, Vice Chairman of Ogilvy UK, makes a point that explains why the death spiral is so hard to escape. He argues that businesses systematically undervalue solutions that seem "irrational" in favour of engineering-style solutions that feel more rigorous.

But as Sutherland argues: "It's much easier to be fired for being illogical than it is for being unimaginative." Chasing ROI is logical. It's also, according to the data, up to 8 times less important than simply spending enough to reach enough people.

Daniel Kahneman's research on loss aversion explains why the spiral accelerates. The pain of spending money on marketing with no immediate visible return feels roughly twice as intense as the satisfaction of seeing a campaign generate leads. So when budgets tighten, the "invisible" brand spending gets cut first. The visible, trackable performance spend survives. Every cut makes the next cut feel more necessary.

The Australian Context

This matters even more for Australian SMEs. Research suggests the average Australian small business spends only 2-3% of revenue on marketing, well below the 7-12% range associated with faster-growing businesses.

When your total budget is already small, the death spiral accelerates. A business spending $3,000 per month on Google Ads that decides to "get more efficient" by cutting to $2,000 isn't just saving $1,000. They're reducing their reach by a third, shrinking their future pipeline, and making it harder to grow their way out of the budget constraint.

The Ehrenberg-Bass Institute, based right here in Adelaide, has shown through decades of research that brands grow primarily through penetration, not loyalty. You grow by reaching more people, not by squeezing more from the people who already know you. Your marketing budget is an investment portfolio, and cutting the "underperforming" assets doesn't make the portfolio stronger. It makes it smaller.

What This Means for Your Business

The fix isn't to ignore ROI. It's to stop treating it as the primary measure of marketing success.

Will Davis, co-author of the IPA research, summed it up: "The shift from 'small thinking' to 'big media' isn't born of nostalgia; it's born of forensic necessity."

The most efficient marketing strategy is the one that slowly makes your business invisible. The most effective one feels uncomfortable. It spends more than you'd like, reaches people who won't buy today, and generates returns you can't track in a dashboard.

That's not a bug. That's how growth works.

Further Reading

• Go Big or Go Home: IPA Effectiveness Research (2026) - The full IPA report showing budget matters 8x more than ROI
• The Multiplier Effect (WARC, 2025) - How combining brand and performance delivers 90% average uplift
• ROI Isn't the Growth Engine (Mi-3, 2026) - Australian coverage of the Binet/Davis research
• The 95-5 Rule (Ehrenberg-Bass Institute) - Why most potential buyers aren't in-market right now
• Last-Click Attribution Flaws (Analytic Partners via Mi-3) - How attribution models overvalue search by 336%