WHY BRAND BUILDING IS KEY IN 2023.

Last week, Airbnb announced that they'd reached £1.04bn in net income over the 3rd quarter of its fiscal year whilst also posting its highest-ever quarterly adjusted EBITDA - £1.3bn, a 32% year-on-year increase.

So, what does this mean in layperson's terms? It means they've seen some pretty epic results against the bleak picture of the hotel and tourism industry recovering from the Covid pandemic and now heading into a glooming recession and increasing uncertainty.

So, how did Airbnb pull this off?

Well - in 2019, Airbnb made a straightforward strategic decision, ultimately setting them on this path towards success.

First, they would revamp their marketing strategy to be more about long-term brand building and PR exposure and less about performance and search engine marketing. Then, they would envisage their marketing efforts as a tool for 'education' rather than a tool to 'buy customers'.

It was a risky bet, and maybe one they wouldn't have taken if they'd known what was just around the corner. But there's no denying that the gamble has paid off. You only have to look at the actual business outcomes to know that. But, even more, interestingly, they have no intention of returning to a performance-focused strategy any time soon.

So, as they say, the proof is in the pudding. It's worked, it's working, and it shows no sign of stopping.

It's worth adding that Airbnb isn't alone in this feat. ASOS also recently shifted away from its overreliance on performance and decided to lean heavily into brand-driven activity to tackle stagnant growth.

But I hear what you're saying - "This is Airbnb, a beast in the world of brands. So how can this possibly relate to me?"

Well, the answer is twofold.

First, yes, it's never a good idea for SMEs to copy and paste the strategy of a big-fish mammoth brand and expect the same results. It could spell disaster.

We're in a recession, businesses are struggling, and the challenge will only worsen as we turbocharge into these economic headwinds.

So please do not, and I repeat, do not change course completely, or throw your performance, metrics-driven marketing in the bin. Instead, find balance, but more on that later.

Having said all that, let's shake off the assumption that there's nothing that your business can take from this case study. Firstly, the chronic obsession and overreliance on quick turnaround wins and instant gratification performance-based marketing are even more prevalent in SMEs.

You also have an advantage that the likes of Airbnb and ASOS could only dream of: The ability to move at speed, take risks and be agile.

So, in summary, acknowledge there are lessons to learn but resist the temptation to throw everything you've ever known away.

Instead, let's dig deeper into what we can learn.

SO, WHAT’S THE LESSON?

If you want to unlock success in 2023 - acknowledge that you must incorporate a long-term brand building strategy into the mix.

Too many SMEs focus solely on performance-based marketing, and that's a dangerous game to play, especially in 2023.

First off, what is brand building vs performance marketing?

In the simplest terms, brand building is your slow-burning wooden fire. It takes a while to get going; it takes showing up consistently and bravely over months and even years. But once it gets hot and those flames appear, it keeps you warmer for longer. So as long as you keep topping up that wood and nurture that fire, it will burn on and on and on and only get stronger and mightier.

Performance marketing is your quick on-and-off electric heater. You can switch it on, and the room will be warm; there's no doubt about that. It's fast and effective and gives you immediate gratification, but it's expensive, and as soon as it's off - it's off, and the room is cold again.

Brand marketing focuses on the upper funnel - emotion, connection, purpose and values. It seeks to earn that all-important market share, bring and keep you front of mind, and solidly establish your distinctiveness vs your competitors. You could also call this ‘driving brand awareness’.

Brand building is challenging to quantify and takes a budget we often can't attribute to provable results. Above all, it takes time and patience to work. But once it does, it's widely accepted that it dramatically outperforms performance marketing in revenue generated, profitability, and sustainability over time.

Performance marketing is your short-term quick wins hugely overvalued by quick-growth mindset SMEs. It seeks to generate an immediate ROI, activate your customer, and provide provable, trackable results and measurable outcomes. If we were to simplify it, think of search, paid social, display etc. The problem with performance marketing? Well, it requires a constant 'on' tap of investment, is hard to sustain, and will ultimately plateau in effectiveness. 

PERFORMANCE IS IMPORTANT, BUT STOP PUTTING ALL YOUR EGGS IN ONE BASKET.

I'll repeat, only bin your performance marketing if you want a winter of discontent and a gloomy 2023. 

Instead, it would be best to look at how you can create a strategy that focuses on both. For example, your marketing should not only deliver multiple performance-driven campaigns throughout the year, targeted to activate your consumer and deliver tangible ROI. But, it should also integrate a strategy that drives mass awareness through authentic and purpose-driven marketing that has an emotional appeal over time. 

Aim for the magic mix - brand building and performance marketing running simultaneously, and work towards a 50/50 split of your energy, time and budget. 

If you do this, you will create a more harmonious balance, creating a standout brand that wins over hearts and minds and delivers reliable results and ROI.

If you still need convincing, let's go over a few more reasons why this will work in 2023.

YOUR COMPETITORS ARE TURNING THEIR HEADS TO THE SHORT-TERM EASY WINS.

It's no secret that when challenging times arise, a recession looms, and a cost-of-living crisis rears its ugly head, usually one thing, and one thing only happens. CEOs scramble to slash their marketing budgets, and the first victim? You guessed it - brand building. Why? Because, as I said earlier, it's difficult to quantify and hard to measure.

Most of your competitors will shift all their marketing budget into instant gratification, short-term, ROI-generating tactics. Purely because they can't justify investing in brand-driven marketing against the current backdrop, but mark my words, they'll pay for it later.

If they're even more ill-informed, they'll panic hard and resort to price-based promotions. (FYI, they're a terrible idea amidst the current climate and will only eat up your profit margins, increase customer price sensitivity, and discount products or services you would have sold anyway, but that's a story for another time).

But it's not all doom and gloom because this presents a fabulous opportunity for you and your business. Get serious about your brand-building marketing over the next 12 months, and you'll come out on top. All the research indicates that companies who continue to spend and drive brand-driven marketing activity during economically tricky times gain a significant advantage on the other side and catapult way beyond their competitors in market share and share of voice. I promise you - there are endless case studies to support this theory.

MAKE YOUR BUDGET WORK HARDER.

As we've already touched on earlier, the problem with performance ROI-driven marketing is that once you switch the money off, the results stop coming in. Take a paid ad, for example - once the budget runs out, the conversions stop. It's as simple as that. Although it brings reliable and measurable outcomes, it can get expensive, and trying to maintain an ever-accessible mountain of cash to pump into these ill-thought-out and panic-induced tactics, can be difficult in times like these.

The effect will also inevitably plateau, and you'll be scrambling to look for new quick-win drivers as the cost-of-acquisition increases, return on ad spend dips, and efficiencies become trickier to find.

But brand-driven marketing? It can be done on a dime if you're creative, daring and bold enough and give it the time, energy and strategic forethought it deserves. Head-turning guerilla stunts, creative PR, phenomenal organic content, showstopping video, a podcast... I could go on and on.

These are all ways you can start to drive genuine and sustainable brand growth over time for almost no cost. Sometimes a lack of budget is a strength when it comes to brand-building. It forces you to think outside the box, look for underpriced channels and mediums, and take a brave and bold approach. But, on the other hand, sometimes, the more money you have, the more predictable and boring you become. Ask some big brands which, for all the money in the world, are still learning in this department.

The barrier to entry is lower than ever, and now is the time to take advantage.

IT WORKS - BETTER, LONGER AND HARDER.

It's a fact that performance marketing peaks in returns around 18 months into the execution of the strategy.

If you imagine you're looking at a graph, it will spike, dive, spike again, then dive again, and then eventually plateau as it eats up spending and energy. The only thing driving that up-and-down yo-yo is, you guessed it, money.

In contrast, brand-driven activity peaks later, usually a few years in, but when it does rise, it peaks way higher than performance marketing and gradually, consistently and steadily grows over time. It doesn't require constant money thrown at it or higher and higher budgets to achieve the same result. Once established, it just needs to be maintained, and you can slowly start to turn off the performance marketing spend.

If the Covid pandemic taught us anything, sustainable and reliable business models will always stand the test of time and outperform those who rely on erratic tactics and hollow strategies, putting instant results before brand magic.

LET'S BE CLEAR, DON'T DITCH YOUR ROI-DRIVEN MARKETING ALTOGETHER.

There is still a place for it. But start approaching your mix differently if you want to come out on top on the other side. And we will reach the other side sooner than we think.

If you do one thing this week, get clear on how you will balance your strategy with a big chunk of your energy and attention towards brand-building activity. Have separate objectives, KPIs, and goals for performance-orientated and brand-driven, and trust us, you'll unlock sustainable and organic growth.

Want to know more about how you can step up your marketing and accelerate your brand in 2023 and beyond? Get in touch.