Dealing with COVID-19: practical tips and resources for B2C founders
Unlike operating in B2B, consumer sentiment and behaviours can change overnight. Anxiety, uncertainty, WFH fatigue - these are real feelings felt by consumers across and it’s critical for companies to proactively rethink everything from positioning, messaging, to strategy in order to adapt to these extraordinary times.
While you don’t know when the pandemic will end, there are things you, as a founder, can consider during this time to mitigate risks and build resilience. (For enterprise/b2b founders, see part II)
1. Strategise different scenarios depending on your runway, profitability and category performance
- Create a stress test on your P&L and cash flow to get a clear picture of your financial situation and runway: one simple way is to assume 1) “Just a blip” conservative case (basecase of your previous business forecast); 2) Downside case (take a 20% hair cut to the topline); and “Calm before the storm” case (take a 40–70% cut to your topline forecast depending on category). What does each case look like for your runway?
- If you have 18+ months of runway, and are not operating in categories that are facing complete shutdown: It might be time to consider adopting a more aggressive approach towards investing in long term conversion. Reward loyalty and lean into competition where others might be less nimble or in a weaker position.
- If you have less than 12 months of runway and are facing significant headwind in your category: Take a conservative approach and cut campaigns/projects that are not yielding good results and consider restructuring your team now. Focus on conversion and strengthening cash flow to guard against uncertainty down the road. One tactic could be bringing forward the holiday season promotions to acquire cost-conscious customers; 34% of brands on the 2pm DNVB Power List are currently running promotions. Straight-forward site wide discounts and free shipping are showing strong returns. Bottom line: you do not want to be fundraising within the next 12 months.
2. Unlock the upper funnel
- Latest Facebook and Instagram data show that CPM has dropped 44% this month and continues to drop 20% WoW across the market. While CTR is largely unchanged, conversion rates onsite have also dropped significantly.
- What this means: Consumers are currently very ‘browsy’ and less loyal. It’s a good time to acquire new followers by using organic social media and build up the mailing list (currently a huge uptick in open rates) or generate large video view pools to retarget later (valid for 180 days). Work with other brands and organisations to open up your reach (Example 1, Example 2)
- Reassess partnerships with people and brands: There is currently a good supply of creatives and freelancers (think fitspos, musicians, photographers) that were previously unavailable due to other work commitments. Re-engage with these KOLs to create partnerships for affiliate or revenue share.
3. Listen to your customers and reposition your brand
- Redefine your messaging: What consumers care about today might be very different from what they did a month ago, and that impacts the products/services they want to buy.
- What this means: Use this opportunity to call your top customers and understand their motivations and state of mind. Adjust your value proposition and messaging accordingly. For example, repositioning for “safety”, “convenience” and “fast delivery” have performed well. If your product/service doesn’t have an urgency factor, implement messaging such as “planning for better days ahead” and “WFH tools” to stay relevant.
4. Act fast, act decisively, and over communicate
- Runway compression is happening, and hard decisions will need to be made. It’s much better for team morale and your survival when you cut fast and cut decisively and aggressively, rather than a slow bleed of small cuts every month. If you are worried about over cutting and hurting growth, know that investors will be razor focused on profitability and more lenient on growth for the foreseeable future. Below is a death spiral chart from Sequoia’s infamous presentation from 2008 that shows the essence of time.
- What this means: it’s time to over-communicate with your team, give them a realistic and timely view of what you are facing. How you bring your team through this period will define the success of your company.
- This survival guide has some great concrete steps you can take to reduce cash burn. Negotiating hard about office related expenses/capex, and thinking creatively about structuring compensation and people roles are very useful before cutting headcount. We have also listed some perks for Vectr portfolios in the bottom.
- See how Arne Sorenson, CEO of Marriott Group, communicated hard messages to his team. It’s a great showcase of leadership with transparency, compassion, and the path forward.
***If you are a subscription business or rely on long payback time: As churn tends to be very high during this period, especially on the B2C side, it might be worth considering free trials to help acquire users, and offer discounts to switch people from monthly to annual subscriptions to mitigate the churn and bring forward cash flow. Listen closely to your data and identify early signals impacting your LTV. It’s imperative to remove the fiction and be mindful that new customers are more marginal and need more education around your product.
Historically, turbulent periods like this offer great opportunities to disrupt legacy brands and systems. The companies that survive and thrive are the ones that are laser focused on adapting to consumer behaviours and staying nimble. We hope you will stay safe and here are some useful resources:
Online e-commerce sales benchmark by category:
Daily web traffic data and benchmark by category:
Ad data update and strategies on ads:
Government subsidies and support:
Other incentives and support:
We also have a list of perks availabile for our portfolios, please reach out to get the details.
 A survey done by Profitwell that shows how affinity changed from “make you money” to “save you cost” in a matter of a year.