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Will performance marketing outweigh brand marketing in a world of shrinking budgets in APAC?

Will performance marketing outweigh brand marketing in a world of shrinking budgets in APAC?

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In today’s marketing world, we often hear the importance of brand building for brands to create awareness and establish emotional connections with customers. However, over the past decade, marketers have been shifting their focus on driving short-term sales by setting up KPIs, especially during times of economic uncertainties when marketing budgets are tight.

In fact, inflationary pressures continue to affect companies around the world in 2023. As such, many companies across the globe have decided to tightly control or even cut expenses – including marketing budgets. According to a survey conducted by technological research and consulting firm Gartner, as a proportion of company revenue, marketing budgets have fallen from 9.5% in 2022 to 9.1% this year.

Furthermore, 75% of CMOs globally are currently readjusting their companies’ marketing channel commitments to do more with less, meaning a greater emphasis on growth, yield and return, a drive toward technological optimisation (pushing up utilisation and ROI), and a tighter focus on the most relevant multichannel KPIs.

While in Asia, industry players MARKETING-INTERACTIVE spoke to also saw a noticeable shift among clients towards prioritising performance marketing over brand marketing. Antony Yiu, CEO of PHD HK said industries such as banking and finance, travel and hospitality, eCommerce and insurance are more likely to spend on performance marketing.

He added that there are some key factors driving marketers to put performance marketing in the front seats, including promotion-driven offer, less human interaction needed, being able to purchase at a relatively low cost and being able to engage with new customers.

Businesses that have to acquire customers online also tend to focus on performance marketing such as travel, eCommerce, OTT or streaming services, app-based services, according to Ranga Somanathan, co-founder at RSquared Global Ventures and former CEO of Omnicom Media Group.

“Brands who have digital fulfilment, for example to complete their sales online, typically over-index on performance marketing. And those who sell via brick-and-mortar stores, tend to skew their marketing investments towards brand building. We see this trend across Asia as well,” he added.

By focusing on the upper funnel efforts, marketers can help establish continued awareness for the brand, as well as sustain market demand, expand customer base and foster brand loyalty, according to Wai Chung Au, managing director of media business, Dentsu Hong Kong.

Striking a balance between branding and performance marketing 

While economic uncertainties and tighter marketing budgets have played a role in this shift, it's still important to strike a balance between short-term performance and long-term brand building.

Dentsu HK’s Au said he has seen brands reaching a "plateau" growing curve where further sales or conversion becomes challenging when solely relying on the lower funnels. “Consequently, we are witnessing a resurgence of brands rebalancing their focus and reinvigorating their brand-building endeavours.”

This shift reflects recognition of the enduring value and necessity of upholding brand equity, even when undergoing immediate business pressures, he added.

“Brands will continue to balance brand building and performance marketing while integrating upper and lower-funnel efforts. This integration will be facilitated by leveraging data and advanced analytics such as major ad platforms which offer tools including data-driven attribution model that goes beyond measuring lower funnel results.”

By mapping the end-to-end customer journey, brands can identify key moments of truth and their pain points, he added. “This allows them to address experience gaps through improved content, offers, and channel integration, ultimately converting visitors to customers. Additionally, brands should track marketing effectiveness against customer satisfaction and lifetime value metrics, prioritise long-term growth over short-term sales, and invest in retention marketing, to name a few.”

With multi-touch attribution modelling becoming more prevalent, marketers investing in data science teams and connecting the dots between upper funnel preference campaigns and lower funnel performance campaigns, RSquared’s Somanathan said he anticipated a balancing of budgets to optimise across the whole funnel and not just “squeeze the blood out of the rock” at the bottom of the funnel, performance media.

Is there a perfect ratio? 

However, there is no one-size-fits-all "perfect" ratio between branding and performance marketing, as it largely depends on various factors, including the nature of the business, industry, target audience, marketing objectives, and available resources. 

PHD HK’s Yiu said there will be campaigns more focused on brand building such as anniversary campaigns, new product launches, and education messages to reach an untapped target audience.

“Therefore, while most advertisers will keep performance marketing as a baseline activity to capture the lower funnel acquisitions, there is a must for the presence of top and middle funnel activities based on the current brand awareness and consideration level amongst the target audience to determine the proper split between branding and performance marketing.”

After all, marketers need to look at each campaign objective to identify the proper split of their budgets to paint a 360-degree story for their target audiences.

“We need to be aware that customers don’t classify the ads they see as brand vs. performance marketing[…]One cannot fly and hope to achieve the best results with low cost per action/ cost per lead (CPA/CPL) and high volume without the presence of the other,” he added.

Related articles:

Carro names regional head of performance marketing
OMG Malaysia partners Google to beef up performance marketing capabilities
Pomelo searches for regional director of performance marketing

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