The Execution Gap: Why PE Firms Need Investment Marketing, Not Performance Marketing
The private equity landscape has fundamentally shifted. With interest rates elevated and valuations at historic highs, the era of financial engineering as the primary value creation lever is over. Today's outperformance comes from execution capabilities—specifically, the ability to transform portfolio companies into high-performance growth platforms through operational excellence.
Yet some PE firms are still approaching marketing and digital transformation with outdated frameworks. They're optimizing for performance marketing metrics when they should be implementing Investment Marketing - treating every marketing dollar as capital allocation with measurable enterprise value impact.
The Misaligned Incentives Problem
Digital underperformance in PE portfolio companies stems from a fundamental issue: "everyone's job but no one owns it". Marketing sits in one silo, data analytics in another, and digital transformation becomes a collection of disconnected initiatives rather than an integrated value creation engine.
This misalignment manifests in three critical ways:
Vanity Metrics Over Value Metrics: Portfolio companies track clicks, impressions, and conversion rates instead of customer lifetime value, incremental revenue attribution, and enterprise value impact.
Short-term Optimization Over Long-term Systems: Teams focus on monthly performance rather than building the data infrastructure and customer journey analytics that enable sustainable competitive advantages.
Channel Thinking Over Customer Thinking: Marketing investments are evaluated in isolation - as tactics - rather than through sophisticated measurement frameworks like media mix modeling and incrementality testing.
The Investment Marketing Framework
Investment Marketing represents a fundamental shift from rented reach to owned advantage. Instead of asking "How do we optimize this campaign?" PE firms should ask "How does this marketing investment build enterprise value?"
See Further: Beyond Channel Performance
Traditional performance marketing focuses on last-click attribution and channel-specific metrics. Investment Marketing requires seeing the complete customer journey and understanding long-term value creation patterns.
Root Cause Analysis:
When portfolio companies struggle with customer acquisition costs, the issue rarely lies in ad creative or targeting. It stems from fundamental misalignments - missed category entrypoints, unclear value propositions, friction in the customer journey, or data infrastructure that can't support sophisticated measurement.
System-Level Thinking:
Rather than optimizing individual touchpoints, Investment Marketing builds scalable, predictable customer acquisition engines. This means investing in zero and first-party data capabilities, user centric end-to-end journey analytics, and the measurement frameworks that enable true incrementality testing.
Think Deeper: Data Infrastructure as Foundation
Every PE firm talks about being "data-driven," but only a few seem to built the foundational capabilities that make data-driven marketing actually possible.
Five Essential Capabilities:
Customer Journey Analytics: Understanding category entrypoints, drivers and barriers, and how prospects move through awareness, consideration, and conversion across all touchpoints
Incrementality Measurement: Determining which marketing investments drive truly incremental outcomes versus capturing demand that would have existed anyway
Media Mix Modeling: Optimizing budget allocation across channels based on marginal returns and interaction effects
Real-time Attribution: Moving beyond last-click (duh) to understand the true contribution of each marketing touchpoint
Lifetime Value Forecasting: Connecting acquisition investments to long-term customer value and enterprise metrics
These aren't nice-to-have analytics projects - they're foundational infrastructure for pricing, selling, marketing, and operations decisions.
Break Through: End-to-End Ownership
The most successful companies we've worked with solve the ownership problem by creating unified accountability for digital ROI. This goes beyond hiring a Chief Digital Officer or creating a "digital transformation team."
Integrated Measurement Systems: Connect marketing spend directly to enterprise value through unified dashboards that track customer acquisition cost, lifetime value, market share gains, and long term growth/profitability impact in real-time.
Speed of Insight Drives Speed of Execution: When marketing teams can see the enterprise value impact of their decisions within days rather than quarters, they can optimize for true business outcomes rather than proxy metrics.
Aligned Incentives: Compensation and KPIs must connect marketing performance to portfolio company valuation multiples and exit readiness.
The Competitive Advantage of Distribution
In today's market, the companies that win aren't necessarily those with the best products - they're those with the most sophisticated customer acquisition engines. Distribution becomes a moat in motion.
For PE firms, this means portfolio companies that can predictably acquire customers at scale represent fundamentally more valuable assets than those dependent on relationships, luck, or market timing.
Investment Marketing enables this transition by building systematic capabilities rather than campaign-dependent results.
Implementation: The Three-Quarter Transformation
Based on our work with various companies, the transformation from performance marketing to Investment Marketing can follow a predictable three-quarter timeline:
Quarter 1: Foundation
Audit existing data infrastructure and measurement capabilities
Implement customer journey analytics and unified attribution
Establish enterprise value-connected KPIs
Quarter 2: Integration
Deploy incrementality testing frameworks
Launch media mix modeling capabilities or some form of impact measurement if none exists
Create real-time dashboards connecting marketing to (leading) business outcomes
Quarter 3: Optimization
Scale successful acquisition channels based on true incrementality
Implement predictive lifetime value models
Optimize budget allocation across the complete customer journey
Companies that complete this transformation typically see 25-40% improvements in customer acquisition efficiency and 15-25% increases in marketing ROI within the first year.
The Path Forward
The PE firms that will outperform over the next decade are those that recognize marketing as capital allocation rather than expense management. They're building portfolio companies with sophisticated digital capabilities that enable scalable, predictable customer acquisition as the primary value driver.
This isn't about hiring better agencies or implementing new marketing technologies. It's about fundamentally reimagining how marketing creates enterprise value - moving from rented reach to owned advantage, from vanity metrics to value metrics, from campaign thinking to system building.
The question isn't whether your portfolio companies need these capabilities.
The question is whether you'll build them before your competitors do.
