Digital budget allocation is a crucial aspect of marketing strategy in today’s digital era. With the rapid growth of the internet and mobile technologies, businesses are increasingly investing in digital advertising to reach and engage with their target audience effectively. China, as one of the world’s largest and fastest-growing markets, presents immense opportunities for digital advertising.
The digital advertising market in China is anticipated to experience a notable growth rate of 7.50% between 2023 and 2027, leading to a substantial market volume of approximately US$231.80 billion by 2027. This projection highlights the significant potential and attractiveness of the Chinese market for businesses seeking to allocate their digital advertising budgets effectively.
In this article, we will explore the importance of digital budget allocation in China and how it plays a pivotal role in driving marketing success in the country’s evolving digital landscape.
Spending money on digital marketing isn’t really optional when trying to grow your business in China. However, there is a debate about where that investment should go.
Chinese digital landscape is very unique and Chinese consumers’ buying habits are also different from those of their Western counterparts. Applying the same budget allocation strategy from your home country doesn’t mean you would get the same results or better.
This article shares with you tips for how to spread your budget to get the greatest ROI.
Overall Trends in Marketing Spending
Digital Spending is Dominant and Increasing
The dominance of digital advertising over traditional advertising has become evident in recent years. In 2018, digital advertising surpassed traditional methods to become the primary advertising medium, accounting for more than 50% of global advertising expenditure. This shift can be attributed to the changing behavior of individuals, as they have increasingly transitioned from the offline to the online world.
The exponential growth of internet users further supports the expansion of the digital advertising market. Over a span of just ten years, the number of internet users has doubled, skyrocketing from 2.3 billion in 2012 to an impressive 5.1 billion in 2022. This surge in online connectivity has opened up vast opportunities for businesses to engage with their target audience through digital channels.
Several prominent tech companies are at the forefront of the digital advertising market. Leading players in this industry include Alphabet, Meta Platforms (formerly known as Facebook), Microsoft, Amazon, Tencent, Baidu, and others.
Among the various segments within digital advertising, video, banner, social media, and search advertising have experienced notably higher growth rates compared to the classifieds market. This trend can be attributed to the rapid increase in social media consumption and the growing popularity of online shopping.
While the digital advertising market was already displaying promising growth before the onset of the pandemic, the global health crisis has significantly accelerated the adoption of digital platforms. The transformative impact of the pandemic on consumer behavior is expected to have a lasting effect, leading to a robust and sustained growth trajectory for the digital advertising market in the coming years.
Accordingly, digital ad spending in China also exceeds traditional media channels. It accounts for up to 78.9% of total media ad spending in China till 2023, a higher share than any other country.
Digital Now Means Mobile
Residents in China will spend 3 hours, and 53 minutes per day — or 58.6% of daily media time — on digital devices. Mobile will account for 77.0% of daily digital time spent, compared with desktop/laptop’s 23.0%.
In a nation obsessed with doing everything on smartphones, the importance of mobile to marketers cannot be overstated.
Social Marketing and Content Marketing Continue to Grow
Social marketing is becoming an increasing focus for Chinese advertisers.
Social marketing spending will grow by 21% on average, continuing the past year’s trend. KOLs, short-form videos, live streams, and WeChat official accounts are particularly favorable social marketing formats for advertisers.
Additionally, 39% of advertisers are willing to increase content marketing spend on web variety shows. Meanwhile, short-form videos have pulled ahead of both web series and TV series and will become the second-most preferred content marketing format.
Marketing automation and marketing cloud are the most followed technologies. AI and DMP also remain relevant as more and more businesses begin digital transformation processes.
How to Allocate Your Digital Marketing Budget in China
What Should Your Marketing Budget Be?
Many brands entering China have great expectations, incorrectly believing that costs will be low, and rewards will be high. But many times costs are on par or even more expensive than markets such as Europe or the US.
China has radically changed over the past five to ten years, becoming very competitive with all brands from multinationals to start-ups attempting to grab a piece of the market share. Furthermore, Chinese consumers are increasingly sophisticated, requiring brands more creative and elaborate marketing approaches.
In China, yearly budgets are typically around 100,000 USD on the low end and over 1,000,000 USD on the high end which can cover full digital scopes including SEM, PR, Website, Social, and Media.
For a campaign or specific promotion, the budget will be dependent on which channels are used for promotion and what kind of audiences the brand is trying to reach.
In general, an average yearly marketing budget for brands of different sizes would look something like this:
• Very small: 25,000 USD – 100,000 USD
• Small: 100,000 – 300,000 USD
• Medium: 300, 000 – 1,000,000 USD
• Large: 1,000,000 USD or above
In terms of launching a social media campaign, even a very small brand has to spend at least 15,000 USD.
For a holiday promotion, it depends on the product category and the platform chosen, but the budget would be around 10,000 – 40,000 USD.
How to Allocate Your Marketing Budget
Budget allocation is dependent on a number of factors such as the nature of the business, goal, target audience, brand recognition, or maturity in the Chinese market. However, there are some tips when deciding where to spend your digital marketing budget for China.
Small and New Brands
For lesser-known brands in China, it may be better to allocate more budget to search and social to gauge consumer insights before investing in other more expensive media channels like KOLs, media buys, or more expensive social ads.
Other types of big, well-known brands would have more budget to spend across all areas of digital marketing.
Influencer Marketing Needs the Right Strategy
Influencer marketing aka KOL is a big investment in China. Large (Chinese) companies spend 15-40 percent of their marketing budgets on KOLs, while small companies allocate much more, at about 50-80 percent.
However, KOLs can be costly and not effective as expected if brands don’t have the right strategy.
Brands often focus on a blogger’s follower numbers and aim for as much potential reach as possible. Yet big bloggers are not always the best choice for marketing because their fan base is relatively broad.
“[Chinese consumers] have been through all sorts of scams, fake companies, fake products, fake services, etc. They have reached a point where they don’t trust what a brand says about itself,”Hamza Ouarit, marketing director at Shanghai-based Gentleman Marketing Agency. source
If brands want to target more niche markets, they should collaborate with micro-influencers whose followers would find their products most relevant. And as their follower base is not that huge, the engagement rate with the audience is usually higher and thus the audience is more loyal.
O2O Activities are Under-Invested
It is also very important for brands to drive online traffic to offline stores where customers can physically interact with the brand and enjoy entertaining shopping experiences, so brands should invest in events connecting online and offline, such as livestreaming at brick-and-mortars, or bringing fans to stores for gifts or free consultation.
Even many of the technology e-commerce players such as Alibaba, JD.com, and Amazon are investing in real-world brand and shopping experiences that complement the online experience.
Website is Becoming Less Relevant
As user behavior is evolving, websites are increasingly becoming less and less relevant in China. Meanwhile, WeChat mini-programs have been so much favored and should be utilized more by brands.
Besides, Chinese consumers also tend to shop on prominent 3rd-party e-retailers than on individual websites.
This doesn’t say that you don’t need a website – it’s still your hub of information for SEO purposes. However, the role of websites in this market is not as sophisticated as in the West.
Good Content Needs Advertising to Reach a Wider Audience
Another key area where you should allocate your digital marketing budget is toward paid advertising. The algorithms on social platforms in China are built in such a way that brands are forced to advertise because relying solely on organic reach simply will not generate enough exposure.
Even if a brand has high-quality, creative content, it will not translate into numbers if the reach isn’t there. Likewise, high reach volume doesn’t mean anything if it is not paired with solid content.
So, good content with some boost from the advertisement will create the effect. Content is king, and advertisement is queen.
Wechat vs Weibo
These 2 are the most mentioned when it comes to social media marketing in China. However, misjudgment of them could lead to misallocation of your budget.
WeChat is still the most powerful social media in China with more than 1 billion monthly active users. However, as the competition grows, so does the cost of marketing. Average acquisition cost per follow on WeChat now currently hovers between 80-100RMB.
Meanwhile, Weibo can be a very effective way to gain a marketing presence at a fraction of the cost of both content creation and media spending. Weibo is a true social media channel and its user numbers have been growing for over eight straight quarters, contrary to what most international clients believe.
Otherwise, consider niche social media platforms to have better targeting and a higher engagement rate at a lower cost.
WeChat CRM Programs
With saturation and rising follower acquisition costs on many of the top platforms, brands need to start budgeting more for CRM strategies and programs. After many years of focusing on customer acquisition, it’s now about customer retention and how brands can sell more to existing customers.
WeChat is a good choice for creative CRM programs instead of email marketing like in the West (Chinese consumers are not into emails).
Besides, re-targeting ads are also important to drive more returning traffic to your stores and up/cross-sell them.
Get in Touch With Us for a Cost-Effective Digital Marketing Strategy!
“Throw everything into the wall and see what sticks” can be a costly approach for you because China is a huge market with multiple geographical areas and consumer profiles.
Apart from market research and competitors analysis, brands should consult experts who have worked with hundreds of similar brands to get the overall picture of how other brands are doing in terms of digital strategies as well as KPIs/ Costs benchmark for effective budget allocation.
If you’re ready to make waves in China’s digital landscape, but need guidance in budget allocation and navigating the complexities of Chinese digital marketing, our team at Gentlemen Marketing Agency is here to help!
We offer comprehensive digital marketing services tailored to the Chinese market, with a keen understanding of regional preferences, cultural nuances, and consumer behavior. Our expertise spans across all major Chinese platforms such as Baidu, WeChat, Weibo, Douyin, and Little Red Book, ensuring that your marketing budget is invested wisely for maximum ROI.
Our team of seasoned professionals will guide you in prioritizing platforms and advertising strategies that best align with your business objectives. We’ll help you create compelling content, leverage influencer marketing, and fine-tune your PPC campaigns. Let us help you craft a digital marketing strategy that is not only budget-friendly, but also effective and impactful.
Contact us at GMA today and let us navigate the labyrinth of China’s digital marketplace for you, optimizing your budget to yield high returns.