Recently, we have seen a disturbing trend in the e-commerce sphere. Medium and small e-shops that have long focused exclusively on performance marketing are facing increasing financial difficulties. For many of them, the situation is becoming unsustainable and they are facing bankruptcy. What's behind this? And how can this trend be avoided?
The double-edged sword of performance marketing
Performance marketing has long been a key tool for e-commerce growth. By directly measuring return on investment (ROI), it became a popular approach that allowed for quick results. However, focusing too much on performance and ignoring the brand can ultimately be fatal.
The problem with short-term thinking
E-shops that focus solely on performance marketing often prioritize short-term goals at the expense of long-term growth. Once the cost of customer acquisition starts to rise, which is an increasingly common phenomenon these days, their margins start to thin. As a result, businesses that do not invest in brand building lose momentum and become vulnerable to competition.
How performance measurement distorts reality
Another important aspect that cannot be overlooked is the issue of measurement in online marketing. Although the advantage of performance marketing is its measurability, in practice we often see significant differences in numbers across platforms. Each platform, be it Google Analytics, Meta, Google Ads or others, tries to take as much credit as possible for the success of a campaign. This leads to a situation where the data we see in different analytics tools often doesn't match up and the real results are different again.
This difference in reported results can be very confusing for e-tailers. Instead of having a clear view of ROI and the true impact of campaigns, businesses can find themselves in a situation where they have skewed information. As a result, they make decisions based on incomplete or inaccurate data, which can lead to incorrect budget allocation and other financial difficulties.
This brings us back to why it is important to have a long-term strategy as well as a short-term one. A strong brand and customer relationship are aspects that are not dependent on what the analytics tools show us. Investing in brand building delivers value beyond what can be immediately measured and creates a stable foundation for future growth.
Why is branding the key to long-term success?
Brand marketing, unlike performance marketing, focuses on building an emotional relationship with customers. It aims to create a strong and recognizable brand that differentiates itself from competitors and creates loyalty among customers.
1. Building trust and loyalty
Customers are increasingly demanding and have many choices. A strong brand generates trust and allows customers to identify with its values. This leads to repeat purchases and increased loyalty, something that performance marketing alone cannot deliver.
2. Resistance to competition
At a time of increasing competitive pressure, a strong brand is extremely valuable. E-shops that invest in building their brand are more resilient to price wars and can afford to set higher prices. Brand marketing allows them to sell not only the products, but also the story and values behind them.
3. Differentiation in a crowded marketplace
In a crowded online marketplace, it's hard to stand out through performance campaigns alone. Investing in branding allows e-shops to differentiate themselves not only visually, but also in how they communicate with their customers. Well-chosen branding can be what determines success or failure in the marketplace.
How to get started with change?
For e-shops and other online projects that have focused solely on performance, switching to brand marketing can be a challenge. Here are a few steps businesses can take - it all depends on the brand/company strategy:
1. Defining brand values - Every brand should have clearly defined values that it wants to communicate to its customers. These values should be authentic and reflect what differentiates the company from its competitors.
2. Consistent Communication - One of the key components of long term is consistent communication. A brand should have a consistent tone, visual style, and the way it reaches its customers across all channels.
3. Focus on customer experience: brand marketing is not just about communicating externally, but also about how customers feel each time they interact with the brand. Improving the customer experience can be crucial to building a strong brand.
4. Unlike performance marketing, brand marketing requires patience and long-term planning. It's important to keep in mind that results may not come immediately, but investing in a brand will pay off in the long run.
Conclusion
Medium and small e-shops and online projects are facing a challenge that requires a change in the current approach. Focusing on performance alone is no longer enough, especially in a time of increasing competition and rising customer acquisition costs. Brand building offers a solution that not only helps overcome the current difficulties, but also sets e-shops up for long-term success.
If you're looking for a partner to help you build a strong brand from the ground up, we're here for you. At WeBetter, we believe that a well-defined brand is the key to success in any era. We can help you create a strategy that will set you apart from your competitors and secure your future in the marketplace.
