Why Branding is Still Relevant in a Digital World

2016 marked a breakout year for the digital advertising market. In the US, total digital advertising sales reached $70bn USD, finally overtaking television advertising sales of $67bn USD.

Source: www.adage.com via MAGNA

In 2017, this gap is forecast to widen further, with approximately $83bn USD flowing into digital advertising compared to approximately $73bn USD in television advertising. Check out the forecast from eMarketer below:

Source: eMarketer

Marketers are pushing more dollars to digital for multiple reasons, but perhaps the most important factor is that digital is the easiest media format on which marketers can track marketing performance.

Marketers have known intuitively that advertising drives sales since the dawn of the industry, but it wasn’t until the emergence of digital — and the accompanying rise in data — that the impact of advertising could be precisely and accurately calculated.

Quantifying the impact of advertising spend is the holy grail in advertising as it provides clear financial justification for the industry to exist. However, more importantly for those of us in digital, the rise of quantifiable data has empowered marketers to drive more ad dollars into the digital market, and effectively gave birth to the digital performance marketing industry.

Today, performance or call-to-action marketing is where about 90.0% of digital dollars go with the 10.0% remaining focused on branding related expenditures.

Source: eMarketer

Notice that the split of performance vs. branding spend on digital is in sharp contrast to TV where the majority of TV ad dollars actually go to branding (80.0%) instead of performance (20.0%).

The increasing use of data in digital has created a generation of marketers who obsess over performance metrics and spend the majority of their budgets in performance marketing because they think that branding does not have a place in digital budgets.

This thinking is shortsighted and ultimately counterproductive to the stated goal of most digital marketers which is to optimize their ad spend to maximize sales / revenue.

The reason branding remains relevant today in digital is because of its ability to actually reduce the cost of performance marketing, and drive greater ROI.

This happens through a well researched phenomenon called the mere exposure effect. Coined by a scholar named Robert Zajonc, the mere exposure effect describes the tendency of human beings to like an unfamiliar stimuli merely by being exposed to it over a period of time.

To cut a long story short, Zajonc proved that if you expose someone to something unfamiliar (image, sound, taste, experience, etc.) over a period of time the person will actually develop a preference (a liking) for the (once) unfamiliar thing. Furthermore, the more you’re shown something unfamiliar the more you will actually end up liking it. This process works on a subconscious level, so you don’t even have to be aware of the object to develop a liking for it. Studies have shown for instance that people will develop preferences for images that were shown to them so quickly that they weren’t even able to consciously process them.

The mere exposure effect is essentially the justification for branding. But how does it improve performance marketing?

The answer is that spending on branding effectively reduces your customer acquisition cost (CAC), which in turn drives greater ROI. The fact is, the more a user has seen your brand the more likely they are to click on the campaigns you’re running online.

More exposure = greater brand preference = more clicks = lower CAC = higher ROI

What does this mean in practice?

  1. If a user runs a search online for a product similar to yours, they’re more likely to click on your product’s sponsored search result than on your competitors’
  2. If you run a display based sales promotion campaign, users will be more likely to click on your banners if they recognize your brand
  3. If customers are shopping online they’re more likely to add your product to cart if they’ve been exposed to the brand before
  4. The effect works offline as well. If users walk into a physical store they’ll be more likely to pick up your product if it’s the brand they recognize the most

This is especially relevant for companies that sell relatively inexpensive products at high volumes (e.g. FMCG companies) or companies that sell products which are fairly indistinguishable in terms of price and features from their competitors (e.g. TVs within similar size categories). When you go to the store to buy toothpaste, the cost of the product is not high enough to justify a rational exploration of the pros and cons of various brands. Similarly when you buy a TV, once you’ve decided which size you want, most of the brands offer similar price points and features and so the most efficient way for your brain to decide which brand to choose is driven by brand exposure.

The mind is lazy, and when the stakes aren’t high enough or when it is too difficult to differentiate between options, it will just choose the option that it likes the most.

The digital marketers that internalize this point and leverage the power of branding in their digital marketing budgets are going to experience the greatest results in the long-term.

I hope you enjoyed the read! If you want to chat more about branding, I’d love to hear from you, e-mail me at joe@brilio.net