According to an alarming statistic from market research firm Kantar, 74% of consumer goods startups in China were eliminated after their first three years of operation. Brands are struggling with how to sustain growth in the face of increasingly sophisticated yet “disloyal” consumers while growing competition is being exacerbated by an expansion of channels and consumer data. Meanwhile, a higher level of accountability is expected of marketers. Therefore, marketers today are under intense pressure to make every dollar count, prove returns and drive impact.  

In Prophet’s latest report, “Brand and Demand Marketing: A Love Story,” we examined how marketers can use both brand and demand marketing to achieve their short and long-term objectives and maximize marketing ROI. Below, we share our learnings from across the globe as well as important nuances for Chinese marketers, unveiling the key to building sustainable brands through balancing brand and demand marketing efforts. 

Brand and Demand Opportunities Throughout the Customer Journey 

Brand marketing typically describes efforts to drive awareness of and preference for a company, product or service, while demand marketing seeks to compel audiences to act immediately (e.g., purchase, click on an offer, sign up for a newsletter). Many marketing organizations experience significant tension between brand building and demand generation – a tension we believe undercuts growth and harms performance.  

Prophet introduces the brand and demand maturity model. It lays out an actionable roadmap for how different stages of a customer journey may lean more on brand or demand. But the opportunity is to always show collective value for each moment. 

Hungry for Growth but Missing Out on CLV 

When asked about their prioritized business objectives, Chinese marketers demonstrate remarkably expansionary mindsets, especially when compared with other regions. They pursue new segments, new business, increased shares and are full of ambitions to expand their reach. However, they tend to focus less on levers that drive CLV (Customer Lifetime Value), such as increasing sizes of orders and repurchase rates. 

Top Priorities in the Past 12 Months

Q: Which of the following business objectives, if any, were the top three priorities for your company in the past 12 months? (Rank 1 results) 

This mentality is likely driven by the fact that marketing teams in Chinese companies tend to shoulder more growth-driven accountability than the average global marketers, with twice the amount of involvement in near-term P&L management, revenue growth and operations. 

This propensity is also evident in the top KPIs Chinese marketers focus on when measuring the success of their marketing campaigns. They are significantly more likely than their global peers to track return on advertising spend (ROAS) and revenue generated, while less likely to consider brand awareness, brand preference and CLV among their top three metrics.  

Top Performance Metrics for Marketing Campaigns 

Q: Which of the following are the top five metrics your company tracks performance of marketing campaigns against? (Rank 1, 2 and 3 results) 

In keeping with the whole customer decision journey, we believe that they place a narrow focus on the left side of the model – persuading customers to choose and buy – while ignoring the enormous potential of the entire CLV contained on the right side of the model – the ownership journey.  

For many of China’s fastest-growing new consumer brands, for example, repurchases, referrals and brand communities are largely being driven by transactional benefits (e.g., free gifts, cash back or steep discounts), instead of brand understanding and advocacy. This is fundamentally still a demand-led approach that is unsustainable in the long term.  

As a next step, in addition to the buying experience and short-term conversion, Chinese marketers should extend CX excellence to the ownership journey to maximize CLV. Meanwhile, a more holistic set of metrics should be used to assess impact and success across all activities and tactics.  

Taking Brand Marketing to the Next Level 

Chinese marketers are particularly skilled at demand generation and have created a variety of effective tactics (private traffic activation, KOL/KOC matrix, etc.) to attract customers. Most new consumer brands succeed by leveraging short-term demand generation tools (e.g., low prices, viral products).  

On the other hand, the explore and advocacy stages, where brand marketing initiatives should take the lead, tend to be undervalued. Brands rarely give consumers the opportunity to actively engage and resonate with the brand’s point of view, story and value proposition. Thus, the customer retention rate fueled by recognition and loyalty is unable to increase due to a lack of brand pull.  

Despite the difficult nature of balancing brand and demand efforts, we’ve highlighted a few examples below of consumer brands in China that are standing out in a highly competitive market by excelling in explore and advocacy. 

PMPM: Attracting New Customers Through an Inspirational Brand Story

(Image source)  

While the beauty industry has long relied on hero products, startup skincare brand PMPM is built on a distinct emotional foundation that speaks to consumer truths. Through a clearly defined value proposition, “spirit of exploration,” PMPM focuses on creating high-quality products with natural ingredients sourced from around the world. The brand’s latest promotional video spotlights its founding team of accredited skincare researchers and beauty experts, telling an inspirational story of the brand’s determination to create a Chinese-born, world-class skincare brand in the next decade. 

Manner: Engaging a Loyal Customer Base Through Shared Values 

(Image source: social media) 

Manner initially won over customers by offering inexpensive but quality coffee to increasingly caffeine-addicted Chinese urbanites and office workers. As the first Chinese coffee brand to introduce the idea of “BYO reusable cup for a 5 RMB discount,” Manner solidified its economic and eco-conscious positioning. Through quality products and a seamless CX that includes mobile order-ahead, repurchase rates increased steadily, and a strong base of loyal customers followed.  

Manner’s additional sustainability and customer engagement efforts, such as giving away branded reusable canvas bags for its 6-year anniversary, have turned customers into eager brand advocates. Compared with other brands in the category that are still trapped in creating complicated pricing schemes to acquire new customers, Manner has moved away from reaping price advantages by connecting with consumers’ values and lifestyles, thus creating a higher and more sustainable CLV. 

Key Takeaways for Marketers in China 

With customer journeys becoming increasingly complex, non-linear and hyper-personalized, the real challenge today is not acquiring new customers, but keeping them.

To wrap up, these are our takeaways for building an evergreen Chinese brand by balancing brand and demand: 

• Think beyond short-term growth to adopt a broadened and balanced lens for execution and measurement. 
• CX is not limited to the buying journey. Carefully consider how to optimize the ownership journey as well to fully activate CLV. 
• Dynamically balance demand and brand across the entire customer decision journey while further increasing branding efforts – particularly in brand exploration and advocacy – to cultivate lasting brand love.

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During recessionary times, marketing is often one of the first disciplines needing to evolve and adjust spending. As you enter 2023 planning, you should be prepared to have to make a case for the budget you will need to drive key business outcomes.  

For savvy marketers, this doesn’t mean shutting off in-flight brand and marketing strategies in service of demand generation. Instead, it means strategically aligning marketing activity to business outcomes and articulating the value in terms that resonate with non-marketing leaders—including the board of directors.   

To help you get started, we’re sharing our five critical elements needed to make a case for your 2023 marketing budget.  

Know Your Baseline  

Performance dashboards are often a wise first point of entry for data-minded marketing leaders looking to show real-time insights and build transparency across business verticals and disciplines. At their most robust, such dashboards can bring value across the business by providing a single view of the customer across sales, product and marketing.   

As a starting place, you should have a consolidated understanding of topline metrics that can empower and facilitate discussion around performance and the next best action, which should connect the marketing activity with business outcomes. A data baseline builds accountability and can relieve concerns regarding marketing efficacy. While it may seem obvious in theory, this level of reporting is rarer than one might think.  

When you align marketing activity with business performance, you empower your partners and teams by efficiently attributing c-suite level metrics. Holding companies and traditional media agencies may not be equipped to discuss the possibility of recessionary budget cuts – primarily because many agencies do not align brand spend with business outcomes. At Prophet, we do things a bit differently. As a growth-minded consultancy, we help our clients connect the dots between business objectives and marketing planning, customer metrics and in-flight marketing results.  

Make the Business Case  

From our recent global research, “Brand and Demand Marketing: A Love Story,” we learned that marketers in the most successful businesses are more likely to cite “customer lifetime value” as a key marketing objective. Whereas, within lower-performing businesses, marketers are more likely to focus on tactic-level measurements, such as “enhancing digital marketing support” and “coordination with channel partners.” While the latter are critical operational goals, they are less growth-oriented and trickier to connect to customer relevancy and business outcomes.  

When making a case for your 2023 marketing budget, ensuring your objectives and the funding needed to execute quantifies the impact on the business will lead to a more successful outcome.  

Developing a marketing budget that delivers a measurable ROI requires a holistic understanding of the business and your customers. Once you have accomplished this, you can map your spending to in-market marketing tactics.  

As you develop a proactive business case for your customer-centric marketing budget, there are three primary areas you should focus on:   

1. Budget Benchmarking: Your c-suite will not always understand the importance of investing in brand and demand marketing, especially during a recession. To help you justify your budget, you should leverage competitor research to build your budget benchmarks.
2. Agile Strategic Planning: Building a marketing budget requires investment in off-cycle marketing strategy and planning. Marketers will benefit from correlating their strategies with revised strategic business goals, especially as operating climates and customer needs evolve.
3. Aligning Marketing and Business Goals: You should ensure your KPIs roll up to topline corporate metrics. We believe this means aligning budgets toward a closer marriage of brand and marketing spend, or what we lovely call at Prophet “performance branding.”  

Benchmarks for Everyone  

You must translate marketing performance into a simple language centered on business outcomes so your C-suite colleagues can understand the impact you can make with the right budget. Benchmarks provide the necessary context on what key metrics mean regarding marketing efficiency and effectiveness and opportunity.   

Finance leaders will want to know how the return on marketing spend compares against peers through the campaign, channel and partner analysis. Sales leaders are concerned with how marketing-owned activities have contributed to revenue generation and how those efforts stack up against industry competitors. Colleagues of all functional areas are interested in marketing insights that identify competency and performance and product gaps and how marketing addresses those opportunity areas.   

A thoughtful spectrum of benchmarks focused on industry and out-of-category leaders and laggards can highlight specific improvement areas where business contributions may be trailing average and high performers.    

Optimize for Agility  

As businesses pivot to accommodate changing economic trajectories, so should marketing function. Marketing teams that are organized to perform against an agile strategic plan are best poised to keep up with evolving customer needs. To build an agile strategic plan, you need to map marketing activities to growth objectives. We recommend leveraging a simple taxonomy to ensure marketing teams are in sync with other departments such as finance, sales and leadership.   

For organizations experiencing more fundamental market shifts or disruption, optimization might require a more robust re-evaluation of investment priorities across operating and execution budgets to support the opportunities that will likely make the most business impact. As customer expectations evolve and go-to-market strategies are upended, marketing planning and overarching program spending must adapt accordingly.   

Embrace a Performance Branding Mentality  

Last is the need to marry the art of marketing with the science of topline fiscal reporting. There is a relatively clear correlation between CFO-level metrics and marketing conversion KPIs for late funnel metrics. However, top-of-funnel, traditional marketing-centric tactics and measurement approaches are rarely understood by non-practitioners.   

What do we mean by that? CFOs are unlikely to understand metrics such as impressions or clicks, especially in a constrained or contracting revenue environment. Downturns are not the time to attempt a profound education on the value of these metrics. Instead, we believe it is critical to put marketing success in terms that the CFO (and other C-suites) can understand.  

Taking a performance branding mentality to your budget can collapse the funnel between brand and performance – and maximize efficacy. Traditional approaches to brand marketing allocate limited rigor in managing upper-funnel digital tactics and media.  

In an inflationary environment where every dollar is being counted, you must deploy a clear understanding of your customer behaviors and preferences earlier in the funnel to apply greater precision to brand spend.  

But it’s important to not over-index on metrics like ROI. Instead, you should evaluate leading indicators for revenue that demonstrate marketing’s influence on growth, such as nurture or account-based progression.   

Prophet has an established baseline framework for evaluating marketing spend. This framework helps translate marketing KPIs to business performance metrics, seeking to integrate brand and demand and create clarity of impact across the organization.

While this can vary slightly by industry, rethinking traditional marketing insights to business-level measurements is the first step in substantiating future marketing budgets. The more you can show a linear impact on business growth, the easier it should be to substantiate marketing spend in support of customer outcomes.  

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During my recent keynote at DigiBranCon in Kuala Lumpur, I spoke to a congregation of leading marketers on the dichotomy of brand building versus demand marketing. In the post-Covid-19 era, where digital adoption and acceleration changed everything, should you invest more on brand building or demand marketing?  

The Context: Southeast Asia’s Rising Digital Adoption 

Southeast Asia’s massive e-commerce sector is advancing at a rate that is exceeding expectations. There are over 350 million internet users today and close to 10 million more coming online each year. In SEA, the time spent online has already surpassed the time spent watching TV and the online time spent in China and Japan. 

Brands hoping to engage with SEA consumers must keep in mind the mobile-first nature of the market, with high levels of social media usage and influence. Successful brands are already using social as an e-commerce sales channel, catering to a young population with strong consumer ambitions. Established unicorns such as Grab, Lazada, Shopee, InMobi and Tokopedia are investing heavily in digital commerce and beginning to compete with newer, emerging players in the space. 

The digital acceleration that took place during the pandemic invariably led to more brands shifting sales online. While there is a myriad of factors that lead to success or failure, one key consideration is the tension of brand building versus demand marketing.  

Having a brand that stands out in the sea of competition is especially important online. In e-commerce, becoming a preferred brand is even harder yet critical – how do marketers build brand affinity and grow demand? Given most brands in SEA are small to medium-sized enterprises, this can be difficult given the time and financial investment required. As a result, many brands focus on near-term goals, relying on demand marketing for short-term sales and promotions. While this may convince consumers to make impulse purchases or trials, it doesn’t accomplish the longer-term goal of building true brand loyalty. 

Should You Invest in Brand or Demand Marketing? 

If no one knows your brand, your demand generation isn’t going to be as successful as it could be. You need brand awareness for demand generation to work and vice versa. Your brand establishes your legitimacy, creates loyal customer relationships and helps efficiently drive demand. Demand marketing is more about “Why buy one now?” It involves education and highlighting pain points with urgency. Branding is more about “Why buy from us?” It entails building your reputation so that people choose your product to solve that problem – even though there are likely other options.

As marketers, we know brand strategies don’t always directly connect to a sales pipeline, and demand doesn’t always lead to increased awareness in the market. But when the efforts from both sides are designed to complement each other, we’re able to reach a new, unprecedented level of cohesion across the entire marketing program –creating a powerful growth engine that helps us achieve the goals of: 

• Building preference for your brand and products  
• Reducing price sensitivity  
• Nurturing loyal and repeat customers 
• Saving costs with improved operational efficiencies 
• Creating a sustainable revenue stream
• Higher effectiveness and ROI with our marketing investment  

Prophet’s approach to brand and demand marketing is grounded in recognizing that there is a better way to engage with modern audiences, which is especially meaningful in SEA. It is a sustained, integrated approach that continuously engages with audiences inside and outside the marketing funnel in a value exchange that drives growth for both the audience and the brand.  

How to Strike the Right Balance?  

Is there a magical ratio between brand to demand? The conventional 60/40 brand/demand investment split is helpful but increasingly outdated and doesn’t accurately reflect what any medium or touchpoint can do. It also depends on the market situation and your business goals – the ratio will and should change at any given time to adapt to competitive environments.  

To be good, we need to do both. But to be great, we need a more intentional, unifying strategy. The ideal state is to develop a long-term strategy across the customer journey to build preference, which helps to achieve faster, short-term quick wins during moments when buyers are more receptive to “demand” campaigns.  

There are four golden rules that we identified in our recent, global research: 
 

1. Build a marketing organization that has the skills and capabilities for both brand and demand, with teams working together against a shared purpose
2. Design your marketing approaches in an integrated fashion starting with annual planning.
3. Experimentation leads to success. Build a learning agenda and provide an investment budget.
4. Track performance and progress with an integrated brand and demand view and laddering up to business goals. 

Through expertise and excellent marketing campaigns, you’ll build relationships that showcase how your product really is better than your competitors, and you’ll have a whole audience of loyal fans to back you up on that. The key lies in regularly fine-tuning your brand-to-demand ratios based on the goals of your brand, the product/campaign and audience response.  

A good example is the regional fashion e-commerce brand, Zalora. When it was still a lesser-known brand, it focused investments on building its brand through traditional and social media marketing across Facebook and search engines. Today, as the brand matures, Zalora invests more heavily in demand marketing through strategic brand partnerships and social commerce, while still investing in data-driven Google ad campaigns.  

Brand and Demand Marketing is the Ideal Couple and Content is a Compelling Aphrodisiac 

As we seek out tactics that will lead us to achieve a proper ratio, there has been a trusted hero of the brand-and-demand approach: Content. If brand and demand are the ideal couple to engage audiences, then content marketing is how we amplify the love story of the couple successfully.  

Experienced marketers know that one asset or social post does not result in a subscriber, let alone generate a lead. Trust takes time to develop, and the consistent cadence and drumbeat of a long-term content effort can help to build and nurture real relationships with audiences.  

Like those addictive Korean drama series, if you can produce a steady stream of engaging and compelling content throughout the customer journey, your audience will be more engaged, and your brand messaging and communication will become more appealing. When this consistent drumbeat aligns with memorable brand campaigns, you build brand recognition and earn loyalty across the marketing funnel. 

Through a strategic storyline approach, brands can extend their master narrative and create meaningful audience interactions throughout the entire funnel, ultimately nurturing prospects to conversion, recommendation and ultimately, loyalty. 

Take the Indonesia-based e-commerce platform, Tokopedia, for example. The brand has embedded K-pop in its marketing content to better target its younger and female segments across Indonesia since 2021. Not only did Tokopedia present K-pop groups BTS and BLACKPINK as the face of the brand, but it also created a long-term content strategy to feature Korean artists in its programs, campaigns and events to drive customer acquisition, engagement and sales. This creates a consistent customer experience, delivering key benefits to the target audience along every step of its customer journey, thereby building brand loyalty. 

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