WHAT DIGITAL MARKETING GOALS ARE BRANDS SETTING IN 2023?
2022 was a tough year for digital marketing in China. How are brands responding?
There’s been a notable change in the air, drifting away from focused efforts on brand awareness and image, and towards the customer – both in sales and service.
Sales conversion, loyalty and repeat purchase lead the way as goals for brands headed into 2023. And much like 2022, brands are concerned with improving LTV (Lifetime Value).
The value customer of data (and connection) has increased. As China marketing subtly shifts to more a more ‘direct’ model, brands are transitioning from acquisition to retention strategies.
Customer service and systems (CRM) are viewed as remedies for high marketing costs and churn rates.
BRANDS ARE STILL (MOSTLY) OPTIMISTIC
Despite challenging conditions in 2022, marketing leaders remain generally optimistic about 2023. Albeit cautiously.
The total number of brands with neutral-to-optimistic outlooks for 2023 is equal to 63%.
By comparison, in 2022, 70% of brands were neutral-to-positive. Headed into 2021, 79% of brands were neutral-positive.
So, over the past three years, we’ve seen a 16 point swing toward a negative outlook.
And, headed into 2023, the number of brands reporting a negative outlook has nearly doubled from 11% in 2022, to 20% in 2023.
IS SPENDING SLOWING DOWN?
2022 wasn’t very active for marketing in China. A lot of initiatives were reduced, eliminated or decelerated. Very few brands operated ‘full speed ahead.’
In this context, budget plans for 2023 show a divergence of approaches, with more brands moving away from ‘neutral’ (un-changed) year-over-year budgets.
Compared with previous years past, budgets appear to be more dynamic – sharply positive or negative.
Despite a weak 2022, many top brands are planning increases in 2023, anticipating improved conditions. Prior to 2020, very few brands reduced budgets in China, as revenue and market promise always tended to support increased investments.
OVER-INVESTMENT IN DIGITAL?
Digital marketing continues to trend higher than overall budgets, but the rates of increase are slowing.
In fact, there is little room to increase the percent of marketing budgets further into digital. Data from GroupM shows that more than 90% of branded media investments already flow into digital. Brands in China likely need to diversify away from digital - both to improve effectiveness and achieve lower CAC (Customer Acquisition Costs).
For investments in digital, the hope moving forward is that LTV can be improved with enhancements to customer retention and ‘direct’ engagement channels (such as Mini-Programs) and ‘private traffic.’
These investments into more ‘direct’ success come at the same time that digital marketing costs continue to inflate, while digital audiences are becoming more fragmented.
In the past, investments into Tmall and WeChat were absolutely necessary. Looking ahead to 2023 and beyond, brands will shift more budgets to fast growing players like RED, Douyin, Kuaishou, BiliBili - while building the systems to integrate a multi-channel, DTC approach.
SOCIAL COMMERCE IS MISSION CRITICAL
Much like digital at large, social out-performs average budget adjustments. Even with brands that plan to decrease overall budgets, social media investments tend to be up-held.
Success in China is closely linked to the effectiveness of brand ‘social commerce’ strategies.
Mini-programs, private traffic, influencers and live-streaming – as key characteristics of ‘social commerce’ – are viewed as mission critical investments.
Despite the overall rising costs of digital (and concurrent budget tightening), many of the key social channels offer affordable advertising systems, where smaller, more bottom-up ad programs can be maintained and adjusted incrementally, based on measurable performance.
In sum, social investments can serve both top-down ‘social commerce’ imperatives as well as bottom-up, value-focused tactics (in the case of incremental ads).
A note about our report: At the end of 2022, Totem Media surveyed a group of 82 brands on their advertising plans for 2023. This group of brands represents a cross section of (mostly global brands) from very large to medium sized - most of which have more than ten years experience in the market. All charts and statistics shown above were sourced from the Totem Media Brand Surveys from 2022 and 2023.