Advertising

Time to have some fun! Let’s talk about marketing. [Part 1 / Day 1]

High customer acquisition costs (CAC). That’s a nightmare every marketer has to go through. With every passing day, the competition to get the attention span of your consumers keeps on getting tougher and tougher, and with just two largely popular advertising avenues out there, the cost of acquiring a customer keeps on getting steeper and steeper.

At one point a few years back, I was working with a leading e-retailer. Just before I started working there, a new player had entered the race. Well funded, ruthless and not afraid of driving the CAC high. The result. The company I was working for was forced to play catch up. Our CAC started increasing month-on-month. We were reasonably funded as well. But it all boils down to RoI, right?

In any marketing campaign, a marketer wants each day to be a new opportunity to capture low-hanging fruits, capture new leads. We all want that. So the real question is — What is stopping us from doing so?

The lack of a solid strategy, maybe?

Have you ever tried offline marketing?

Think pamphlet distribution. What do you think is the conversion ratio for those campaigns? Not great, right? So why do people do it? Because it is cheap! So it works out well if you don’t need to segment and target your consumers based on specific traits and markers. You simply try to reach out to as many as possible and no matter how bad the conversion numbers are, each lead is a solid lead and since its cheap, it turns out to be cost effective.

Now understandably, that approach doesn’t work when it comes to digital advertising. Since the ad platforms have given you the right tools to target your audience with precision, they charge you more for it. But just having access to the right tools doesn’t mean you are getting the best out of it. A scalpel in the hands of a butcher will still continue to be just a simple knife. Actually it may be worse than a knife in his hands. In the hands of a skilled surgeon, it is the instrument of creating a masterpiece every single day.

Any skill based task works on the same analogy. So, if you are advertising without having definitive goals and the right strategy, you may well be throwing down a butt-load of solid gold plated pamphlets from the top of a really really tall building. It will get you noticed far and wide, sure; but as far as results go, you will lose more than you may gain.

I know of a e-commerce business that is spending close to $25 to acquire every single consumer and at best, maybe they are getting between $14-$18 back from it. Yes. the CAC of that business is $25, and the total gross profit they are making off of that consumer ranges between $14-$18. Add to it the layer to compute the total net profit, and they are probably losing $10-$15 off of every single consumer that they are acquiring. Doesn’t seem like the healthiest scenario to be in. This is the stuff nightmares are made of!

So over the next few days, I thought let’s talk about marketing. What to do, what not to do, how to do it — basically anything that comes to mind.

And it’s easy for me to talk about these things. After all, these are the very same strategies we have used, and are using in our business. If it works well for us, I will tell you about that. If it doesn’t — well, I will tell you about that as well. I’ll tell you everything. What we did, how it blew up in our faces, why we think it blew up, and what did we learn from it — if anything at all. If we did learn something, I will tell you what that was, and if we didn’t, maybe you can help me discover something that we missed.

It’s gonna be so much fun!