Why cut advertising budget?

A piece of data: In the first half of 2019, advertising revenue of major media or platforms declined across the board. In the first half of this year, Focus Media's net profit fell 76.82% year-on-year. Including traditional media such as TV advertising, and Internet platforms such as Baidu, NetEase, and Tencent, either their advertising revenues have declined or their growth rates have slowed down. Data shows that the advertising media market is a bit cool this summer.

One form: I don’t know since when, brand collaborations have been emerging one after another. In almost every week’s cases, we can see some fun, interesting, or weird joint products, such as Mayinglong lipstick, which I cannot accept. The strategy of brands collaborating to launch new products has gradually become widespread, which shows that the irrational bubble period is about to pass.

Media budgets are decreasing, but brand collaborations are increasing. On the surface, it seems that there is no connection, but if you dig deeper, you will find that marketing budgets are moving to the front end. Brands are starting to spend more budget on product creativity, operational creativity, or content investment. This is the inherent logic and trend.

Next, we try to sort out the logic of how the marketing budget should be invested correctly, or in other words, anti-fragile investment, where the loss is limited if it fails and the benefits are unlimited if it succeeds.

Why cut advertising costs, why do joint ventures, how to do joint ventures, and what is the marketing trend behind the joint venture craze? Interpret them one by one.

Marketing budget upfront

Let’s talk about insights first. Why should we cut advertising budgets?

In the past, the industry’s perception was that brands had to continue to run advertisements, even the same advertisement, in order to maintain public awareness of the brand. It was believed that once the advertisements stopped, consumers would forget about them.

There are many such examples. A few years ago, two well-known fast-moving consumer goods companies were in vicious competition and invested billions of advertising budgets every year. However, the winner was actually determined by what was available in convenience stores and restaurants and the channels. However, they placed their budgets on the media. For example, I personally witnessed a brand spending 600 to 700 million yuan on advertising for more than half a year, but in the end there was no effect. The problem with the brand lies in cognition, but blindly expanding its popularity will be counterproductive.

During the entrepreneurial boom in the past few years, startups had huge budgets. At that time, I went to a popular brand to propose a project, but ultimately failed. They were using the most expensive spokespeople at the time, and their ads were everywhere. But it is estimated that the production cost of the commercial does not exceed 500,000, but the media scale is no less than 500 million. It is so magical.

Back to the consumer side, they are exposed to countless information every day, and advertising is just one of them. However, people’s attention is limited, and advertising information has to compete with information such as celebrities cheating. Advertising is bound to lose in the red ocean of information.

Of course, there are some forced advertisements, such as in elevators, before videos, etc., which people will subconsciously ignore. People have a natural aversion to advertising, so much so that high-quality, needed advertising is often ignored. This is not normal.

The purpose of saying all of the above is to illustrate the point that media placement is a silent cost because there is no deliverable, the money is spent but there is no response. If we have to say that consumer attention is a deliverable, it cannot be measured.

So smart brand owners have begun to realize this problem, and judging from the data, they have begun to cut media budgets.

From my observation, there is a situation where marketing budgets are tightened, but it is more common among small and medium-sized brands or start-ups, and the money comes from financing. For big brands with healthy revenues, the tightening of budgets is not obvious, but there has been a shift in allocation strategies.

These smart brand owners have begun to move their budgets forward. Previously, the bulk of the budget was spent on media, but now they are putting it on product innovation and content production. They have even converted media budgets into communication budgets and purchased media based on communication needs. Some communication plans may not require traditional media.

If we understand the logic of budget advancement, it is not difficult to find out why there is a craze for joint ventures. Considering the cost, deliverables, communication efficiency and other aspects, joint ventures are a cost-effective thing to do. It doesn’t cost too much, there are clear physical deliverables, consumers can perceive it, and the exchange of dual-brand traffic improves communication efficiency, so why not do it?

Joint branding is to create a brand +

In an interview with a magazine, Kenya Hara said: "Turn the known into the unknown to keep the freshness of life."

Doing a collaboration is a process of turning the known into the unknown and creating freshness. Nowadays, joint ventures are indeed rampant. If a brand has not yet done a joint venture, it would be embarrassed to say that it serves young people.

We don’t trace back to the distant history, but just look at the joint ventures in recent years. At the beginning, for the sake of news value, this and that were mixed together and it became a communication event. Now, it is very rare for joint ventures to become events.

The joint venture has now passed the bubble period and entered the second stage. I think it is about product innovation and shaping the brand through product innovation.

Next, let’s talk about how to do joint brands. Last week, we saw from various industry media and websites that Sprite and Jiang Xiaobai jointly launched new products, including non-alcoholic Sprite with white wine flavor and low-alcohol Sprite-flavored white wine.

The interesting origin of this collaboration is that Sprite and Jiang Xiaobai have become very popular on TikTok, and it also has a name called "Lover's Tears". I don't usually watch Douyin, and I just found out about this, so I went to Douyin and searched for lovers' tears. They were really all tears of young people, each of them loving with all their heart, and drinking half a bottle of Jiang Xiaobai and Sprite in one gulp, which made me shiver.

To put it more professionally, this is called reverse customization, which means that the user initiates the demand first, and then the official produces and sells the product. Next, let’s take a look at what the value of Sprite doing this is and what it can add to the brand.

Extension of brand power

The core value of co-branding should be the extension of brand power. What is the current brand temperament? What brand temperament do you want to increase? Add to it through co-branding with different brands.

Therefore, collaboration must be done with direction, strategy, and selectivity. Do the collaboration within the framework instead of doing something weird.

Let’s look at the collaboration with Sprite. As the best-selling lemon soda under Coca-Cola, full of youthful and energetic hormonal temperament, Sprite has played an important role in young people’s parties. They always remember to add some Sprite when drinking. So Sprite plus wine is not unfamiliar to young people.

Coupled with the popularity of the Douyin mixed drink "Lover's Tears", the official release of this white wine-flavored Sprite will appear both familiar and unfamiliar. For the Sprite brand, it is an extension in a cooler direction.

Create information increment

The most troubling and painful thing for those of us who work in advertising and communication is that you keep talking about the same selling point over and over again. You have come up with countless creative ideas for one selling point, but it has long been exhausted and is really meaningless.

For consumers, if you keep talking about this selling point over and over again and put advertisements everywhere, people will have become numb to it. No matter how good-looking a handsome man or a beautiful woman is, people will get annoyed with it after a while. This is especially true for brands.

The long-term lack of information growth for a brand will lead to creative fatigue and aesthetic fatigue. For fixed SKUs like Sprite and Jiang Xiaobai, where the products remain unchanged for thousands of years, marketing is difficult. It is nothing more than shooting new commercials and hiring new spokespersons, but there is nothing new.

In this case, product co-branding will fundamentally change or strengthen the selling points and generate new information increments. Therefore, under the premise of established direction and strategy, making the brand fresh, creating incremental information, and intensifying consumer sensory stimulation is something that no amount of media placement can achieve.

Creating social currency

Most of the collaborations are limited editions, and most of them are not for sales, but more for brand value and communication value. The first two points talked about brand value, and the next two points talked about communication value.

A successful co-branded product should be sought after by a small number of people and talked about by the majority of people.

As for the collaboration between Sprite and Jiang Xiaobai, it originally came from dissemination and has become popular on Douyin. The official reverse customization is an official blessing for the popularity, so it will be more topical in dissemination. There is already a group of fundamentalist fans of the way to drink Sprite Jiang Xiaobai on Douyin, and the official products will be sought after and spread by this group of people.

This time, we conducted a round of online communication with the slogan “That’s how we should get by” to convey the brand’s youthful attitude. The mass communication value of this collaboration lies in the fact that after everyone knows that Sprite has done such a thing, they will have a different view of the brand, and some socially active people will actively spread this information to gain a sense of superiority from information asymmetry.

To sum up, co-branding is a high-quality marketing investment, but it can’t be done blindly. Think about two questions clearly: What is the current brand temperament? What brand flair do you want to add? Collaboration is the multiplication of two brands, but for each brand, it is an extension of brand power, which is brand +.

For brand communication, co-branding creates incremental brand information, gives consumers stronger stimulation and freshness, forms self-communication through product innovation, and saves brand media budget. Therefore, product innovation-based brand collaboration is a more worthwhile marketing investment than media placement.

Co-branding will become outdated, but innovation will not

Finally, let’s talk about the nature and future of brand co-branding. Today’s core insight is: smart brands are reducing media budgets and increasing product innovation and content production budgets. The underlying logic is to advance the marketing budget. This is a very important trend, and this trend will become more obvious in the future.

The core of brand co-branding is to launch new products, like Sprite and Jiang Xiaobai (just putting the logos of both parties together and changing the packaging or even not changing the packaging is just hooliganism, it is not called co-branding), and most of the products launched are limited editions, which only serve marketing communication and are not really sold in large quantities. If we take brand co-branding a step further and turn it into marketing-oriented product innovation, perhaps things will be different.

I was thinking, for example, Sprite is a serious lemon soda, so from a marketing perspective, can we launch some unserious lemon sodas? From the perspective of the execution of the joint venture, the production line can support small-batch product innovation experiments.

This time it’s liquor-flavored soda, next time it could be coffee-flavored, or any flavor or packaging. If the production line supports it, you can even continue to do so and keep the brand fresh. Even if one day they test out a Sprite that is more popular than regular Sprite, the Coca-Cola Group will add another product.

A while ago, a friend from Alibaba told me that Li Ning’s national trend did not seem to be planned in advance. Instead, there were resources for the New York Fashion Week at the time, and Li Ning’s e-commerce department did not want to waste this resource, so it made a catwalk series of clothing, which immediately became a hit. Then it actively followed up and led the brand transformation, directly driving the second curve growth of the Li Ning brand.

Regardless of whether the story behind Li Ning is true, we can see from it the paths of product innovation of old brands and big brands. First intervene by marketing products, using co-branded or limited editions as product trials. When a certain innovative product becomes a hit, increase production and directly turn it into a long-term secondary product, or even like Li Ning's national trend, completely usher in a second spring for the old brand.

Marketing-oriented product innovation is an anti-fragile marketing investment. If you fail, you will lose a little budget, but this amount of money is a drop in the bucket compared to the media budget.

Achieving success in the secular sense will become a successful brand communication campaign, bringing more self-propagation, saving media budget and shaping brand temperament.

To achieve true success, product innovation must evolve from marketing-oriented product innovation to true product iteration, and then develop into a new product that sells well in large quantities over the long term.

Author: Yang Buhuai

Source: Yang Buhuai (yangbuhuai01)