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Rethinking brand for the rise of digital commerce © Copyright WARC 2021. All rights reserved. CONTENTS Marketing budgets are under unprecedented pressure. The events Contents of 2020 saw deep cuts to marketing investment in general, and brand- building in particular. More than ever before, marketers have to achieve more with less. If we hold that a strong brand is key to the long-term Page 3 Page 6 health of businesses, we now face a profound risk – both to our commercial prospects, and to the Executive summary Why we need to talk about brand reputation of marketers as drivers of growth. As the business world looks toward a post-pandemic rebound in confidence and budgets, the marketing discipline needs to rethink the way it talks about brand, media and performance marketing – and Page 8 Page 32 reframe it for a world of digital commerce, algorithms and almighty walled gardens. Brand as ‘future demand’ Building brand advantage in the shift to digital commerce James Hurman argues that we’ve taken the wrong lessons from digital disruptors, David Tiltman argues that brands still and that we need to reframe brand in drive an advantage in digital commerce, terms of future demand but the current industry narrative around brand-building needs to evolve WARC subscribers can access a series of evidence decks containing research and insights behind these pieces. Rethinking brand for the rise of digital commerce, WARC, 2021. 2 EXECUTIVE SUMMARY Brand-building still matters But we need new ways to talk about it 1. 3. Consistent future demand creation The focus of e-commerce, tech and This has led to a growing number of start-up companies on performance companies ‘optimising themselves out • Future demand is consistently built marketing has influenced the wider of effectiveness’ as they efficiently • Demand is converted at a sustainable rate as it’s created marketing world. As larger brands convert all available market demand • Conversion activity continues to work as new demand becomes available pursue digital commerce and attempt with conversion tactics, then see their to emulate the high growth of performance metrics decline as that DEMAND successful early-stage companies, they demand is exhausted. are switching focus to a shorter-term, SALES performance-based approach. 2. 4. The ease of access to short-term metrics Brand-building can be considered like cost-per-acquisition is intoxicating the creation of future demand. when compared with the relative Future demand is created when new TIME difficulty and expense of measuring customers become aware of a brand the commercial return on investment in and add it to their consideration set. brand-building. The idea of ‘brand’ has At this point they become more likely accrued much baggage. Connotations of to respond to performance marketing fluffy, unmeasurable, vanity-based and efforts. Before this point, converting wasteful marketing abound. them can be difficult and expensive. Rethinking brand for the rise of digital commerce, WARC, 2021. 3 EXECUTIVE SUMMARY 7. 2. Four drivers of brand advantage Start-up tactics have limited effectiveness A review of the literature points to at for mature brands, for whom there isn’t least four ways that well-supported that pool of pre-existing demand to brands still enable effective outcomes FAME MENTAL AVAILABILITY efficiently convert. Mature brands grow in digital commerce. These can be most efficiently by focusing on sustaining termed four drivers of brand advantage, Am I aware of it? Would I consider it? existing demand and generating new and communications plans should be demand. developed with these in mind. 8. • Fame and mental availability (two RECOGNITION PERCEPTIONS OF VALUE linked concepts) both matter. Pre- Converting existing demand and existing knowledge of a brand helps creating future demand are both search outcomes, and consideration Do I know it when I see it? Do I think it’s worth the price? critical to sustained growth. They’re of a brand during the ‘active’ stage compatible and should happen of a purchase journey is a huge concurrently. But they require different advantage. marketing approaches. • Recognition also matters – 5. 6. Brand advantage distinctive brand assets help both to ease recognition on the digital in digital commerce Converting existing demand with For good companies, starting up is shelf and to maximise the impact of performance marketing is predicated relatively cheap and easy – there’s a 1. performance advertising. on targeting customers already in pre-existing demand for insightful, the market. Creating future demand innovative, new products, which can To make the case for building brands • Perceptions of value, built requires the targeting of customers be efficiently converted with strong as companies shift into online sales, via functional and emotional who aren’t already in the market, by performance marketing. Scaling up marketers need to be confident that associations, help support pricing. standing out with engaging advertising, is much harder, as that pre-existing brand strength still delivers some form of and creating an emotional connection. demand has been exhausted and advantage in online purchase journeys. companies need to create future demand. Rethinking brand for the rise of digital commerce, WARC, 2021. 4 EXECUTIVE SUMMARY 3. 2. 4. 2. But research also points to the The result in the current business Given these trends, brand-building The emerging study of attention will be limitations of communications. Strong climate is that marketers are trying to (creative and media approaches that key for brand managers as they look to brands risk an ‘expectation gap’ if the achieve more outcomes on challenged build future demand) and performance prioritise media and assess emerging reputation they build is not matched budgets. Media channels and platforms (conversion of demand) need to be formats. New research connects in the experience they deliver. Brand- are responding to these needs with planned together to leverage the attention with mental availability, one building communications, product and new products that blend brand and connections between the two, and of the key drivers of brand advantage experience (both online and offline) performance – for example, ‘full- maximise the impact. The channels that for online sales. There is potential must work together. funnel’ platforms that offer a range of convince marketers they can support in the idea of an ‘attention strategy’ formats and buying options, including both will attract investment. that reflects a company’s objectives ‘shoppable’ opportunities. and takes account of existing brand Challenging the strength. brand-building ‘silo’ 3. Finding the right media opportunities 1. This challenges industry assumptions on the role of different channels – 1. Research suggests brand investment for example, the outdated view that should be three times that of The assumption that online sales require traditional channels drive brand while performance for brands selling online online ads also needs to be challenged. digital channels drive performance. – but that is not what is happening in All channels have an impact across online As digital channels mature, and as the market. One explanation is the and offline sales. The opportunity lies traditional channels digitise, there theory of ‘digital rent’, which suggests in understanding how combinations of will be more opportunities to build the advertising budget is having to channels might work together to support brands in what have been thought of absorb new responsibilities to support specific brand objectives. For example, as performance channels, and drive the shift into online sales. This would there is a long-established relationship performance from brand-building work. include search spend on the platforms. between TV and search which can This trend complicates the brand/ arguably be under-leveraged if brand and performance equation. performance are planned separately. Rethinking brand for the rise of digital commerce, WARC, 2021. 5 WHY WE NEED TO TALK ABOUT BRAND Why we need to talk about brand 2021 investment has shifted heavily Post-pandemic budget cuts The past year has seen a step-change As money has flowed into formats into performance media, including largely fell on brand-building in purchasing online. The peaks we’ve like Amazon search or paid social, e-commerce and retail media and related expenditure seen at the height of lockdown are the cutbacks have been to brand unlikely to last, but development has investment – across advertising, How do you expect the balance Where are budget cuts being made? been accelerated. Companies in a sponsorship and associated costs. of your investment to change in the slew of categories have been forced The upshot is a stark shift towards what coming year? to invest in new infrastructure, and are termed ‘performance’ channels – there is a clear direction of travel. those that drive short-term, measurable Toolkit 2020 Toolkit 2021 60% 80% sales impact. 70% For media owners, the biggest winners 67% 51% have been the companies that span That shift away from brand is an 45% 60% 53% 49% both digital commerce and advertising. acceleration of a long-term trend. 40% This is a global trend. It includes In 2019, standing on the WARC stage 30% 40% 32% Amazon, Alibaba, Shopee, Lazada and at Cannes Lions, the researcher Peter 29% 28% other marketplaces around the world, Field declared a crisis in creative 15% 20% 20% 14% 13% the emerging retail media sector, and effectiveness. Marketers were failing to 5% in performance investment Increased brandin investment Increased change No increasingly social platforms such use creativity to build brands and drive 0% 0% Brand advertising fees vendor and Agency partnerships & Sponsorships development creative New investment Tech Performance marketing Other as Instagram and TikTok that enable growth, he argued. commerce. Incredibly, at a time when intangible In WARC’s Marketer’s Toolkit 2021, we assets make up 90% of the S&P 500’s asked our global audience how these market capitalisation, marketers trends had affected their budgets.