In a previous article, exchange4media examined how performance marketing spends by D2C brands might provide a fillip to a flagging rate of growth currently experienced by the digital advertising ecosystem. The article illustrated while digital advertising now has the largest share of India’s ad pie, pushing past TV, the traditional heaviest hitter, performance advertising is the largest component of that digital pie.
That being said, in a quickly shifting digital landscape, with increased scrutiny on consumer data and privacy, online security, marketers are saying the next iteration of performance marketing will see an increased focus on branding, and standing out in an increasingly sophisticated consumer market. And of course there is the ever looming AI question, which is now ubiquitous across industries and professions.
Ashutosh Nagare, Vice President – Head of Performance Marketing, Interactive Avenues (the digital arm of IPG Mediabrands India), points out that most D2Cs/startups embark on their journey focused on bottom-funnel campaigns, primarily aimed at quick outcomes. “Over time, they encounter saturation and struggle to expand without increasing acquisition costs. This resembles stopping the watch to save time, only to later invest in top-funnel or middle-funnel campaigns to drive audience discovery and consideration.”
A recent BCG report highlights that regaining lost market share requires a future investment of $1.85 for every $1.00 saved. Nagare says this trend is changing, with smart marketers now running full-funnel campaigns concurrently, with multiple objectives addressing discovery, consideration, and purchase.
Swarali Halepati, Director, Integrated Media Planning, Carat India, agrees that many D2C brands and startups prioritize performance marketing due to its measurability, attribution capabilities, and immediate impact on sales.
“However, there is a growing recognition among advertisers of the importance of branding. While performance marketing delivers short-term results, it's perceived to potentially exploit brand equity. Conversely, consistent efforts in brand building through salient marketing strategies yield long-term benefits. Brand equity is cultivated over time, influencing future sales,” she says.
Having said that, investment allocation depends on the brand's operating category, potential consumers, scalability, financial backing, and what brand lifecycle stage it is currently at. Earlier, smaller D2C brands operating without external funding used to allocate the majority of their investments (80-90%) to performance media due to a lack of resources. The ratio changes to around 60-70% for relatively popular D2C brands.
“However, this mindset is evolving as brands increasingly acknowledge the significance of branding. D2C brands are constantly struggling to juggle media investments between branding and performance. This conflict of the brands has given rise to the concept of brandformance (fusion of brand building and performance). Brands are eagerly looking forward to leveraging emerging tech trends like AI and ML to drive personalization and using them to enhance their targeting efforts in the privacy-first paradise,” says Halepati, adding that this along with the rising importance of data analytics and its integration with marketing efforts will prompt shifts in investment ratios in the coming year.
Darshil Shah, Director, ChtrSocial adds that with the funding winter, there's a major shift in focus to stay profitable. This means brands are spending more money on ads that directly lead to sales or conversions, rather than just raising awareness.
"Naturally, in most cases performance marketing is the best bet for brands to get quick, consistent and ROI positive growth. The ad spends by D2C brand have consistently grown over the last few years and as we look ahead, with more players emerging with every passing day and existing players focusing on faster growth, this trend is only going to get bigger in 2024-25," he says.
And given that 2024 is the year when third party cookies are finally and nearly completely phased out, and first party data becomes all the rage, Venugopal Ganganna, CEO, Langoor Digital, says looking ahead to 2024-2025, he expects the performance marketing landscape to continue evolving, driven by several key trends.
“As third-party cookies become increasingly obsolete, brands will need to rely on first-party data and contextual targeting strategies to maintain their reach. AI-powered solutions can play a vital role in leveraging anonymized data and behavioral insights to personalize campaigns effectively,” he says.
Experts say performance marketing will need to seamlessly integrate across these touchpoints, ensuring consistent messaging and a unified customer experience. This will involve utilizing marketing clouds and customer data platforms (CDPs) to deliver a holistic brand narrative.
Sucharita Ghosh, Marketing Operations and Strategy Head, Suta, says the evolving digital advertising landscape, with advancements in technology and increasing competition, could see broader adoption of performance marketing across sectors due to its focus on effectiveness and measurability.
She says currently, performance marketing, with its focus on measurable results, is a key driver of D2C/startup digital ad spends. “While exact figures vary, estimates suggest it could exceed 50%. This dominance stems from several factors, including strong growth (performance marketing channels fueled the highest growth in global ad spending in 2022) and D2C reliance (many D2Cs rely heavily on it for efficient budget allocation and measurable results). We can predict its continued importance in 2024-2025 due to factors like measurable ROI; evolving channels and technologies; and increased competition.”
“In conclusion, the partnership between brands/startups and performance marketing is a powerful force in the digital advertising landscape. As the marketing environment continues to evolve, embracing AI and data-driven strategies will be key for brands to optimize their performance marketing efforts, personalize customer experiences, and ultimately achieve sustainable growth,” says Ganganna.
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