Performance marketing takes a back seat as brands focus more on long-term play

Several companies that spent almost all of their digital budget on performance marketing have cut their spends by as much as 80%. finds out why digital marketing is seeing this tectonic shift

Tanzila Shaikh
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Performance marketing takes a back seat as brands focus more on long-term play

The brands’ obsession with immediate ROIs and gratification seems to be fading away as they start to believe more in the power of long-term brand building. 

Performance marketing, the preferred tool of brands to drive sales recently, isn’t the top choice of marketers anymore. 

Poor ROIs for most brands in terms of short-term gains is being said to be the top reason behind brands cutting their performance marketing budgets drastically. 

In a recent tweet, Gaurav Munjal said, “Took our Performance Marketing spends from 18 crores per month to 2 crores per month. No impact on Revenues.” This sparked a conversation among Twitterati and marketing enthusiasts.

While performance marketing has been used rigorously by companies to acquire new customers through publishers, wherein these companies pay heavy amounts of money to the publishers, brand building is something brands fail to pay heed to. 

Start-ups or new-age brands were preferring performance marketing as they are just starting with their brand-building journey.

Meenakshi Aggarwal

Speaking on the reduction of money spent on performance marketing and the importance of brand building, Meenakshi Aggarwal Gupta - Co-Founder and COO- 4 AM Worldwide, said, “Efforts towards brand building lead to brand salience and reliability. They eventually help drive sales and profitability for a product or service. However, brand building is a long-term effort. It requires investment, and not just in terms of money, to define the brand strategy and hold on to the chartered course. Companies that have invested in brand building or have reached a certain level of salience can afford to reduce spending on performance marketing (PM) since the brand name itself can lead to sales.”

“Start-ups, especially funded start-ups need to demonstrate a certain ROI to their investors. Early wins and sales growth also reinforce stakeholder belief in the product or service. Hence start-ups need to invest in PM while simultaneously investing in brand-building efforts,” she added.

Mihir Palan

On a similar note, Mihir Palan, VP - Media at Kinnect, said, “Every business goes through a cycle. Post-pandemic, a lot of sectors saw exponential growth in the adoption of digital, and ed-tech was surely one of the biggest beneficiaries there. In the last two years, many ed-tech brands have spent aggressively not just on digital but even offline.”

“However, with things coming back to normal, spending seems to be tapering down for most of them, irrespective of whether it's branding or performance. Specifically, in the case of Unacademy, it's also important to note that they have got into the omnichannel business model. Their mode of acquiring more enrolments has surely changed, leading to change in their media mix and overall marketing approach,” he added.

Performance marketing is used by businesses to generate direct leads through clicks on the publishers. It gives control to the advertiser as to how to navigate and learn with every campaign they run with proper analytics provided by the publishers. India, as a country that is booming with start-ups and performance marketing, has gained momentum with the possibilities it can provide for businesses to acquire consumers.

Maanav Mohan

With brands putting in their monies and still not getting good results, how can one go about optimising it to its fullest potential? Maanav Mohan, Co-Founder, The Blue Digit, said, “In terms of optimisations, there are no silver bullets. An optimisation is always an iterative process. However, there are a few checkboxes that brands always need to keep in mind.” 

“Always follow a full-funnel strategy, never ignoring the importance of awareness and engagement. Segment your audience- basis the stage of the journey they are in and target them with customised content. Create a healthy content mix which not only tells the story of your brand in a convincing manner but also generates trust. Ensure that all your tracking signals are working properly and that there are the least errors in attribution. Constant testing on content-audience combinations to find the champions. Keep the focus on repeat purchases to ensure higher customer lifetime value,” Mohan added. 

Abhishek Chaturvedi

Abhishek Chaturvedi, Senior VP - Planning, Digitas India, said, “For the most part this is true of EdTech, Fintech, and BFSI categories, most of these businesses work on the cost of customer acquisition (CAC). With offline educational institutes opening up, the numbers of EdTech companies dried up; so did their spending on performance marketing.”

“Performance marketing doesn’t always work in isolation; it works in the context of factors associated with business dynamics and brand’s preference/awareness. In times of pandemic, EdTech brands got the attention they needed, and people lapped up the offering. But in the post-pandemic world, a holistic approach would be required towards an updated business approach for EdTech, a specific performance marketing approach linked with the business would be required,” he added.

The conversation around marketing and its different aspects has been very active over different social forums since it has an important role to play for a business to sustain itself. However, apart from every other aspect of marketing, performance marketing is the talk of the town these days with many brands withdrawing or reducing their investment in the same.

Akshae Golekar

The experts spoke to said that performance marketing is not at all hyped, as it has a critical part to play for a new business or any B2C to survive. Advocating the same, Akshae Golekar, Co-founder, Optiminastic Media, said, “Any product-driven B2C brand needs performance marketing. It is something that assures sales. It helps in generating leads and helps in generating revenue so it is definitely not hyped.”

“Yes, the spend has to be calculated, the results have to be evaluated, the research has to be concrete, and only then the execution of the campaign can be taken into consideration. If you are investing money in performance ads without evaluating or looking at insights, it results in poor performance and waste of resources”, he added.

Brand building can help performance marketing and shoot up customer acquisition as the brand is already registered in the minds of consumers.

Bindu Balakrishnan

Bindu Balakrishnan, Country Head, India, DCMN, said, “Brand-building is all about driving brand recognition and loyalty, and campaigns often play on emotions while generating a huge amount of buzz. This can have a powerful impact on the success of performance marketing campaigns, which are usually more rational and straight-laced in their messaging. While performance campaigns are undeniably more potent for driving and attributing sales, when consumers do open their wallets, it’s for the brands that are top of mind and have connected with them on an emotional level. Ultimately, it comes down to the fact that people want to spend money with companies they know, like and trust.”

It is always difficult for businesses to decide how much money to put in for marketing. Often, we have heard the saying ‘Money Attracts Money’ and brands go gaga on putting in their money on marketing. In a speech given earlier, Ashneer Grover had spoken about a TVC he made with Salman Khan for Bharatpe, where he spent a whopping Rs 4.5 crore as a fee to the actor, apart from other expenses such as making the TVC, making it public through different marketing channels, etc.

Meanwhile, on the other hand, recently we saw Unacademy, one of the sponsors of IPL, announcing its decision to withdraw from the league. It will no longer be putting their money on IPL, and the EdTech is planning to cut down other costs as well. A lot of businesses and start-ups are reducing their extra costs and are trying to optimise the available resources to their fullest.

Kedar Kulkarni

On the topic of how can one decide what part of revenue should go to performance marketing, Kedar Kulkarni, Vice-President – Digital, Puretech Digital, said, “This is subjective to the business. Depending on a number of factors and the goals that the business has its eyes set on, scale/efficiency/sustenance/nature of business/margins of your product/service, etc. determine the amount needed to be spent on performance marketing.”

On the other hand, Golekar said that he believes 10% of your product value is something that should be your CAC i.e Customer Acquisition Cost. For example - In the case of Unacademy, suppose a course is costing around Rs 10,000 then the cost per acquisition should be Rs 1,000 and eventually whatever goal you set for yourself in terms of conversion should be your ad spend.

“So, if you're looking for 1000 leads, Rs 10 lakhs should be your ad spend. This is just an example to give an understanding of how your ad spend should be. 10-15% is generally what is considered acceptable,” he added.

Sowmya Iyer

Time and again brand building, brand loyalty, the trust on the brand have helped companies to come out stronger from any crisis. In a brand journey, companies should evaluate factors of marketing. To find a balance between brand building and performance marketing, Sowmya Iyer, Founder and CEO, DViO Digital, said, “The approach should be to focus your communication in order to drive that transaction. That creative content piece also needs to very sharply work towards building your brand. Now that all comes to what is my brand? Awareness is needed to use brand building and performance marketing together in the smartest way possible across marketing platforms that are available to us today.”

Himanshu Arora

Adding to Iyer's thought, Himanshu Arora, Co-Founder, Social Panga, said, "Marketing spend and objective vary, as per the growth stage of your organisation. It is from the top to bottom of the funnel. Brands start with an objective of awareness, move to consideration and post that purchase cycle."

"Once a sufficient amount of awareness is created, the focus moves to consideration and purchase. And when they have spent enough, the intent is to make sure that we get the best ROI for the spend," he added.

While Mohan said, “What marketers usually miss is allocating budgets to brand-building campaigns. Everyone talks about making a full-funnel marketing strategy, but they only want to invest in ‘easy to justify’ customer acquisition campaigns located at the bottom of the funnel. We need to understand that full-funnel marketing is not just a campaign strategy; it’s a total shift in marketing. Since the focus and ad spending mostly go to the bottom of the funnel, brands become stuck with the conversion problem after making high digital spending.”

“The lack of understanding that a functioning full-funnel marketing strategy requires you to tailor communication and ad spends at each level, makes it redundant. We need to emphasise that customers who have an emotional connection to a brand tend to be more loyal and valuable over time than those who arrive at a site because of a generic keyword search or social media ad. We need to blend the brand-building exercises and performance marketing techniques with a unified set of KPIs to churn out effective results as they are complementary,” he added.

digital marketing Performance Marketing long-term play