Brand to Performance: Marketing Strategy Transformation Amid Budget Cuts
As we learned about the various digital advertising models and ad metrics, it reminded me of some marketing internships I've had with a few brands and Xiaohongshu and made me think about different kinds of ads in some new ways.
In the current marketing industry, "budget cuts" is frequently heard. After presenting marketing plans, we often receive client feedback questioning the effectiveness of the ads, such as "This TVC is creative, but will it drive sales?" or "What is the role of this outdoor advertising? We can't measure its effectiveness with CTR." or “The CTR of this feed advertisement on Douyin is significantly high, so it's necessary to consider increasing the spend or even allocating the entire budget to it." These responses reflect a reality: the traditional marketing industry is experiencing transformation, with brands increasingly inclined to measure advertising effects with data, neglecting the long-term value of brand building. This is a battle between brand advertising and performance advertising, and it appears that performance advertising is gaining the upper hand.
Marketing Decisions Driven by Data
The marketing industry, which was originally a competition of user insight capabilities, creative thinking, and product insights, is now being tied down by one-dimensional data metrics and making decisions with a linear way of thinking. CTR, CPC, CPA, ROI, etc., have become key metrics for measuring advertising effectiveness. Creative short films, outdoor advertising, TVC, and content marketing are the hardest hit. However, this purely data-driven marketing approach is vulnerable in the face of public opinion, as demonstrated by the negative public sentiment incident involving Florasis in Li Jiaqi's live broadcast. Even without public opinion incidents, the cost of traffic increases over time, and brands need to re-examine the importance of brand advertising in marketing.
Addicted to Performance Advertising
Performance advertising represents a form of expenditure for brands that lacks long-term value. The nature behind performance advertising is to precisely extract the most likely customers to purchase from among those who already have brand awareness. Many brands see decent results when they first implement performance advertising because they are capitalizing on the user base they have accumulated beforehand, which can be described as "living off one's old capital." However, this old capital will eventually be depleted. If brands continue to invest in performance advertising, they will find that the scale of deployment is limited, and traffic becomes more expensive. Moreover, users' sensitivity to prices will increase. An overemphasis on short-term gains, intensifying investment in performance advertising, and frequent discount promotions may boost sales in the short term, but they also cultivate consumer price sensitivity and weaken the brand's premium pricing power that was originally accumulated.
Looking at internationally renowned brands such as Apple, Nike, and Disney, their advertising strategies emphasize large format, high visibility, and exclusivity to capture user minds and establish brand high ground. These brands successfully establish a strong brand impression in consumers' minds through storytelling, user connection, and attention to detail.
Brand Ads VS. Performance Ads: Not Exclusive
Brand advertising and performance advertising are not mutually exclusive but also can complement each other. Brand advertising establishes brand awareness and emotional connections, laying the foundation for performance advertising. Performance advertising, through precise targeting and direct response, achieves short-term sales goals.
Faced with the reality of shrinking budgets, some small brands can't afford to invest as much money in content and brand marketing as the big brands mentioned above, but ALL IN performance advertising is not a long-term solution, so what's the optimal solution for them? The collaboration between Nature's Answer and Xiaohongshu might offer us some insights.
Nature's Answer ✕ Xiaohongshu: A Showcase for the Balance Between Brand Ads and Performance Ads
Nature's Answer is a health brand from the U.S., primarily offering natural herbal supplements such as 'voice care spray.' When Nature's Answer first started to cooperate with Xiaohongshu, it faced not only challenges in terms of brand recognition but also a limited marketing budget.
One of the initial things for Nature's Answer was how to promote an overseas niche brand in the Chinese market. The brand chose Xiaohongshu as its entry point, focusing on the user's pain point of "razor throat"(刀片嗓) and aligning with community content trends (COVID-19).
Unlike emphasizing "trusted big brands," Nature's Answer focused on the product's natural herbal formula and the refreshing sensation after use, with users vividly comparing it to "masking throats" or having a "throat SPA," successfully attracting more user attention.
The brand produced a series of posts that fit user demand scenarios, utilizing the word-of-mouth content of popular products, significantly increasing brand awareness. It also used Xiaohongshu's smart feed ads to naturally connect "the right content" with "the right people," allowing the product to continuously break through and penetrate new demographics and scenarios. Data showed a 709% increase in platform search volume during the campaign.
Despite the limited budget and resources, Nature's Answer adopted a strategy of balancing "recommend"(种草) and "conversion," establishing a closed loop within Xiaohongshu to achieve a positive cycle of "reputation—sales—reputation." Ultimately, Nature's Answer achieved over 15 million in GMV on Xiaohongshu for the year, with over 5.5 million in mainstream e-commerce transactions attributed to Xiaohongshu in Q3 of 2023.
By implementing the above strategies, Nature's Answer successfully balanced brand advertising with performance advertising on the Xiaohongshu platform, creating a hit product even with a limited budget and achieving dual goals of brand awareness and performance.
Conclusion
In the reality of budget cuts, brands need to rethink the balance between brand advertising and performance advertising. Short-term sales growth should not come at the expense of long-term brand value. Brands should use digital tools and new statistical methods, such as A/B testing, to measure users' attitudinal responses to different ad content, thereby more accurately targeting the effects of brand advertising. In this way, brands can maintain short-term effectiveness while also laying a solid foundation for long-term brand building.
I completely agree with the argument that brands need to find a balance between brand advertising and performance-driven ads, especially in the context of budget cuts. It's clear that while performance ads can bring immediate results, they don't always support long-term brand equity. The example of Nature's Answer using Xiaohongshu to balance both brand-building and sales conversion is an excellent case of how strategic integration can yield strong results even with limited resources. However, I’m curious about how exactly brands can ensure they don’t over-focus on short-term performance metrics like CTR and ROI at the cost of long-term branding. Also, while A/B testing is mentioned as a helpful tool, how can brands ensure that the right balance of creativity and performance is maintained across multiple platforms with such different audience behaviors?
ReplyDeleteAs mentioned in my essay2, Xiaohongshuhas achieved efficient marketing through strategic transformation against the backdrop of budget cuts. It leverages data analysis to drive decisions, seamlessly integrating content seeding (recommendations by users or KOLs in the form of images, videos, etc.) with live streaming sales, and implements the KBFS integrated marketing strategy along with integration with the Alibaba platform. These initiatives not only enhance advertising effectiveness but also bring actual sales conversions and long-term marketing value to brands. This fully demonstrates that in the context of budget cuts, brands need to pay more attention to data-driven marketing decisions and strategic transformations to achieve efficient marketing.
ReplyDeleteThe article dives into the ongoing transformation in marketing, particularly the shift from brand advertising to performance-driven strategies due to budget cuts. While this approach delivers short-term gains, it risks diminishing long-term brand value.
ReplyDeleteThe example of Nature’s Answer and Xiaohongshu illustrates a smart balance between brand and performance advertising. Despite a limited budget, the brand achieved impressive results by combining community-driven content with targeted ads, enhancing both brand awareness and sales.
I agree with your argument that both types of advertising can complement each other. Brands should aim for a holistic strategy that addresses immediate sales goals while also nurturing long-term brand equity. This balance is crucial for sustainable growth, especially in an increasingly data-driven marketing environment.