.jpg "How to make strategic marketing cuts that don't sacrifice growth")
Tucker Matheson is the co-founder and managing partner of Markacy , a growing marketing firm based in New York.
Due to dramatic changes in economic fundamentals following the COVID-19 pandemic, overall marketing spend has declined for most brands. Media reports of rising interest rates and volatile consumer inflation have fueled economic concerns and kept venture capital and private equity firms at bay for much of 2023.
As uncertainty persisted last year, overall consumer demand began to weaken heading into 2024. All of these factors are forcing teams and boards to focus more on EBITDA, profitability and cash flow.
During tough economic cycles, marketing budgets are often the first area to be cut or changed, along with investments in people and technology. According to a May 2023 Gartner survey of 410 CMOs and executives, 71% of CMOs said they lack the budget to fully implement their strategy.
To simultaneously meet cash flow needs and minimize the impact on long-term growth, CMOs must support their senior financial partners with a more strategic budget strategy rather than a one-size-fits-all reactive cost-cutting approach. valid for everyone. .
New customer vs. Analysis of regular customers.
When CMOs are faced with difficult budget-cutting decisions, the best place to start is by evaluating how much current spending is driving new customer sales relative to existing customer sales.
In our experience with Markacy, a growth marketing company, fast-growing brands with annual revenues of $10 million to $50 million spend 30% to 50% of their media budget targeting audiences, site visitors, or customers past and users who are already familiar with the brand. . While some budget is necessary and helpful, this level of investment is too high and overshadows the focus on attracting new customers. Additionally, senior marketers often don't realize that the percentage of budget allocated to repeat users is so high because this data isn't available across all media platforms.
There are several reasons why brands tend to overinvest in existing customers and website visitors:
• These clients tend to have a higher ROI, and when media buyers evaluate audiences or channels for optimization, they tend to target the areas with the highest ROI.
• For the same reason, advertising algorithms will be optimized for existing customers if given the opportunity.
• While marketers may attempt to filter out existing customers and site visitors using lists, it is actually a series of filters. Customer list match rates are well below 100% and often below 50% for site visitors after iOS 14.5. Therefore, even when all exclusions apply, platforms tend to show more ads to existing customers than they would like.
What can marketers do to ensure their spending is more focused on attracting new customers?
• Ensure appropriate exceptions and customer lists are in place across all digital platforms and allocate budgets accordingly.
• Assess progression accurately and frequently. Evaluate which channels generate the most sales to new customers and optimize accordingly.
• Qualitative evaluation of training. Logically, a conversion from a non-branded search almost always corresponds to a new customer, while Instagram ads have a more differentiated customer profile and the display tends to lean more towards retargeting.
Progressive tests and measurements are underway
After evaluating new and returning customer analytics, brands can likely identify areas of inefficiency in display, programmatic and local search, brand search and meta targeting.
After identifying and taking cost measures in these areas, brands should match these savings with specific budget reductions. If additional costs need to be reduced, brands will need to implement an incremental testing process to determine the value of each core media element relative to others.
Channels that typically lead to new customer acquisition include, but are not limited to, Meta, Google, TikTok, Direct Mail, Linear TV, CTV, Out-of-Home (OOH), Audio, Amazon, and other online marketplaces and e-commerce. product platforms. . Like Instagram. They vary depending on the brand and customer profile.
Specific testing plans should be implemented over several months to test the value of these costs and increase them to attract new customers. Brands can use different methods to do this, such as market fit testing where they, for example, suspend Meta spend in key markets for retail sales. It's a logical and effective testing strategy to understand how a particular source influences other channels in specific markets.
By conducting this type of structured testing across all channels with specific exclusion groups, brands can be more aware of the specific benefits in their core channels before making cuts. This will provide greater visibility into areas available for further financial adjustments and ensure that high-growth channels do not experience declines in misinformation that hurt overall new customer growth.
Stay on the attack
Delivering more with less is one of those unrealistic clichés: easy to say but much harder to achieve for most marketing teams.
In addition to evaluating new customers against existing investments and conducting strategic staging across key channels, brands should also invest heavily in customer analytics, customer loyalty and earned channels.
Direct-to-consumer data can be quickly analyzed to identify lag trends, time between first and second purchase, entry-level products leading to the highest LTV, cross-selling trends and more. Brands can gain insights on how to improve their loyalty channel. Measures should be taken to support higher LTV (e.g. loyalty programs, more detailed email/SMS automation flows, etc.).
Brands can also maximize earned channels such as organic social media, content, journalism, email/SMS list growth, campaign revenue and more.
Staying on the attack is the best defense.
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