A month into the Government’s response to Covid-19 and there is still much we don’t know. One thing that is clear is that the ramifications for business are going to be profound and the impact felt for years to come. Precisely what those ramifications are and how hard they are felt is largely still to be revealed but experience and logic tells us that focus and agility are going to be critical in the next few months and beyond. As we all try to navigate the new normal, we need to be ready to respond, to find and to exploit new opportunities when they arise and to make difficult decisions and hard choices when they are required.
Marketing is a central pillar of almost every successful business, with budgets reaching 30 or 40 per cent of revenue in some cases. It should always be seen as an investment, a catalyst for growth and not an expense without a return. But, you invest to achieve a goal, so marketing spend has to be evaluated against your KPIs and its critical role within the sales funnel communicated to management. Marketing is often the first to line up in front of the budget crosshairs so having a firm grasp of the value of each of your activities is timelier than ever.
Equally, as marketeers, we have to be pragmatic. The significance of what an activity is going to cost has grown in recent weeks and we all have to be receptive to the wider needs of the business. The mantra ‘spend your way out of a recession’ is unlikely to be seen as a viable proposal to a business owner or board right now, despite it holding genuine weight in strategic terms. Those in the corner office are rightly concerned with maintaining cash flow and securing the business’ bottom line and they are unlikely to be swayed by even the most vocal remonstrations, however well informed they may be, of why marketing budgets should be maintained, or better yet, increased.
So, if you’re facing the prospect of having to take a red Sharpie to your carefully crafted marketing plans, how can you do so whilst minimising the impact on your business objectives?
Look to the data
More than ever before, marketeers are being empowered with a treasure trove of data at their fingertips with which, informed, evidence-based decisions can be made, and accurate ROI determined for specific activities.
Larger businesses, with their own data engineers and data science specialists, are able to leverage big data and machine learning to extract volumes of data en masse. For example, they can analyse millions of keywords in very short order, enabling them to create an average conversation cost and assess the level of risk for each search term they’ve bid on in the last 12 months. This approach is proven, with easyJet representing a good example of its execution.
A few years ago, easyJet implemented a strategy of aggressive cost-cutting across its digital direct response marketing. The team responsible looked at what easyJet was spending, where it was spending it and who it was spending it with. As a result, it reduced the number of advertising network partners from 25 to three and completely overhauled its search strategy. For instance, it stopped buying the search term ‘easyJet’, for which it already ranked number one.
easyJet also made other important changes and put a number of rules in place. If the company already appeared near the top of rankings for a particular term, no extra budget would be invested on this term. Data management platforms enabled the marketing team to keep track of performance in real time, with smaller changes made regularly to further maximise value.
This process led to savings of around £8m a year for search alone, with the extra cash used to buy more broadcast advertising, including TV spots, a decision supported by the data.
Back in the real world, few of us have easyJet’s budgets and resources, so for everyone else, the task is much smaller and likely more manual but much of the same intelligence can still be unearthed. The next question becomes, where do I start? Your chosen analytics platform is able to provide a lot of what you need. It will enable you to view results across multiple campaigns and platforms, all in one interface, revealing how your campaigns are performing against each other in terms of click-through, traffic and journey completion. You may need to add some third-party tools to visualise all this intelligence, so take a look at Microsoft Power BI and Google Data Studio, which are two of the biggest and easiest to use.
When set up correctly, analytics can show which specific digital campaigns are delivering ROI, allowing you to reduce or end spending on campaigns based on poor performance. Eliminating all low-performing PPC terms or those that drive traffic but not sales is a relatively easy step and could go some way to helping you achieve your budget goals without a notable impact on leads or conversion rates.
Another area to review is on-page digital advertising. Banner ads, for example, often don’t provide a cost-effective conversion rate so those ‘low-cost’ brand awareness and positioning campaigns, achieving less than one per cent conversion, are perhaps now a vanity you can no longer justify. Spend could be cut or you could try a different approach and see if your results improve.
Fundamentally, this isn’t a crisis strategy, it is actually how you should already be managing paid campaigns but times like these have a tendency to focus the mind so, if you are not already leveraging the tools at your disposal, now is the time to start.
Optimise your social media presence
There’s no taking away from the impact social media has had over the last decade. When performed successfully, it has the potential to be highly effective at a relatively low cost. Social media platforms like Facebook or LinkedIn are a terrific medium for economical, highly-targeted promotion, enabling you to reach your audience at scale and at a reasonable price.
However, it is also very easy to waste money through social, so now is the perfect time to review your strategy and understand if you are getting value from your investment and whether it is meeting the KPIs you set. You need to determine whether it’s helping you effectively build brand awareness, whether it’s supporting your sales objectives, and whether it’s enabling you to engage with your audience. Different businesses will have very different strategies for what they are trying to achieve through social, so the answer will depend on your own objectives.
Many brands when asked: ‘Why are you on Facebook?’ struggle to provide a compelling justification beyond, ‘Isn’t everyone?’, so ask yourself these questions. Is every channel right for you? Does Instagram really work for a B2B business selling security software or an oil exploration company? Is your audience actually using this channel? If the data can’t prove that it is right for you, or that it is providing an adequate level of return, think about whether that investment could be spent elsewhere or saved completely.
Staying within social media, you should also review the activities for each channel and try to understand where you are seeing engagement or conversion. If your video content is delivering ten times the click through of a text-based post, try to determine the cost/conversion ratio so you can decide if video is really providing lesser or greater value.
Review all spend
It’s obvious but just because you’ve always done something, doesn’t mean you should still be doing it. We need to be thinking about the medium and long-term impact of Covid-19 and what it means for business and the way consumers buy products and services. Social distancing isn’t going away anytime soon, but when it does, what will it have done to the way people feel about being in crowded spaces? Will we all be willing to jump on a packed plane and travel halfway around the world to stand in a convention centre with 5,000 other people? So far, the very limited available research suggests not, so why would you invest in that showpiece exhibition stand and the cost of sending your team? ‘We’ve always been there’ or ‘Our customers expect us to be there’ may no longer be adequate justification.
Another area to consider is print and outdoor advertising. I have a personal love affair with print and display advertising, so it pains me to say it but it’s probably already on the chopping block for many. Consider the proportion of magazines currently being delivered to empty office buildings and sitting untouched in people’s cubbyholes. Consider the number of eyes currently on that airport billboard or that bus stop poster. The value proposition for these channels has changed dramatically and you need to respond.
Overall, these are the obvious, low-hanging fruit but they also add up to represent a significant proportion of many business’ budget. Reducing investment in these areas is critical to continuing other campaigns that are delivering clear and demonstratable value.
Look at your wider team
Reducing your marketing budget without negatively impacting performance can be made much easier if you are working with a specialist agency or partner that is able to guide you through the process and do the heavy lifting when it comes to interrogating the data. If you feel that you don’t have the resources internally, do some research and find a partner who will be able to so more efficiently, and therefore more cost-effectively, than you could do yourself.
You should be looking at all your existing external relationships and deciding whether they are still offering you the right level of value. Now is the time to have pragmatic conversations with your external suppliers. If you are facing specific challenges, a true partner will do their best to work through it with you. That might mean they offer to cut their rates or agree to find a lower cost approach for a project – at the end of the day, most agencies will take the view that earning less from a client is better than losing them altogether.
If you are working with separate agencies across social, PR, digital or creative, also think about whether savings could be made by reducing the numbers and working with just one or two agencies that you trust most and that are able to manage all your activities, often identifying sizeable economies in the process. There are other benefits of working with an integrated agency so, if you are interested, check out our article on the use of integrated campaigns during difficult times, here.
Focus on retention
New customer acquisition costs (CAC) are increasing across the board. According to HubSpot, over the last five years, overall CAC for B2B and B2C brands has risen almost 50% — and while paid CAC is still higher than organic CAC, organic costs are rising at a faster rate. High customer retention rates help to reduce these costs — which is one of the many reasons why retention is important to any business.
It costs five times as much to attract a new customer than it does to keep an existing one and, in fact, existing customers are nine times more likely to complete a purchase than new customers.
This means one of the best ways to reduce marketing spend is to maximise the value of the customers you already have. Look at how your marketing spend is split and try to understand if you are missing an opportunity to be more cost-effective by moving towards a strategy that prioritises customer experience, loyalty and retention over acquisition.
Banks, mobile phone networks and insurance companies have long been criticised for their focus on acquisition at the expense of existing customers. Historically, customer loyalty, apathy, or the challenge of switching providers made such a strategy logical and justifiable but, today, when the power has shifted even more towards the customer, you need to question whether you have the balance right. Competition for every pound is going to be fierce in the coming months so you have to ensure that wherever you make cuts, budget is retained to nurture your existing audience and reward their loyalty, and give them no reason to look elsewhere.
The next year is going to be challenging for all of us, punctuated with difficult but nonetheless necessary decisions. There will undoubtedly be significant casualties and global household names will vanish like Woolworths’ Pick ‘n’ mix but as with any seismic shift in consumer behaviour, it is those that are able to respond to these changes efficiently and proactively that will benefit most.
If I can provide one final takeaway, it is this: make sure you have listened and have the right level of insight before you start cancelling projects or cutting budgets. Rash decisions can have big consequences, so do your homework, speak to your teams, your customers and, if possible, your prospects before you make sweeping changes to your strategy or activities.