It’s no secret that marketing budgets are shrinking across the industry. More than 30% of advertisers are planning to reduce their ad spending in 2023 as an economic downturn looms and brands look to cut back wherever they can.
But changes to brands’ marketing strategies aren’t just limited to spending less. Brands are also shifting their marketing mix, leaning less heavily on broad top-of-funnel brand building and customer acquisition and focusing instead on measurable performance marketing and increasing LTV.
The main appeal of performance marketing through channels like social media or connected TV is that it’s much easier to adjust how much you’re spending on the fly.
“Performance marketing is discretionary, so you can ramp it up or down based on what’s happening,” said Kristin Gall, president of Rakuten Rewards. “If a recession hits in the second half of the year, you don’t want to be overallocated to big brand marketing campaigns earlier in the year that you can’t pull back on.”
Gall said that logic applies both to the brands and the retailers Rakuten works with, as well as to the way Rakuten is changing its own marketing strategy this year as the company focuses on performance marketing.
Brands including Francesca’s, J. Crew and Chico’s, among others, have recently revamped or relaunched their rewards or loyalty program. The move is intended to get them more value out of cost-effective existing customers rather than constantly spending to bring in new customers. Derek Yarbrough, CMO of J.Crew, told Glossy that, though the brand is still doing some top-of-funnel brand marketing, data-driven performance marketing is helping J.Crew drive higher LTV.
“Having been in marketing for a long time, the balance is always fluctuating,” Yarbrough said. J.Crew was one of many companies to suffer during the pandemic, but has bounced back with its 2022 revenue being 30% higher than pre-pandemic levels. “Right now, I’m focused on quality of acquisition versus pure volume. We’re trying to nurture a customer that has high lifetime value. We have access to more data than we’ve ever had before but you have to balance that with brand-driven marketing too.”
Deena Bahri, CMO of the resale site StockX, said that her marketing strategy has shifted in recent months, too. But partially due to the brand’s continued success through the pandemic years — it recorded 40 million lifetime transactions in 2022 — StockX is doing the opposite of many other brands.
“We’re actually investing even more dollars in top-of-funnel stuff this year, which I know may seem counterintuitive and not what other brands are doing,” Bahri said. “But we’re doing it because one of our big objectives for the year is to grow trust with the community, and investing in big cultural moments and influencer stuff helps us do that. We’re trying to do more traditional marketing later in the year, as well.”
Bahri said it’s natural when budgets are tight to focus on measurable bottom-of-funnel marketing, but there are ways to make top-of-funnel brand marketing work in a stricter economic climate. She said StockX keeps a portion of its ad spend in reserve so it can be used if drastic changes are needed. Her team keeps an eye on indicators like searches for StockX to get an early read on whether top-of-funnel campaigns are working.
“We used to look at returns over 12 months to measure marketing success, but now we’re watching over a shorter timeframe,” Bahri said. “And channels like connected TV and Google Shopping are working well for us there. SMS is actually far and away our most productive channel, and because it’s an owned channel, it can help drive a lot more value over time from customers.”
