Given today’s challenging economic climate amid the COVID-19 pandemic, some companies have chosen to reduce or completely shut off their marketing initiatives to save money.
However, although it may seem like a good idea to cut marketing costs when sales are down, studies going back almost 100 years show that those who keep advertising during a downturn actually come out better once the market improves.
Still, there are cash flow realities to consider. And if your business needs to cut costs to stay afloat, the best way to save money right now is to focus on acquiring customers at a lower cost rather than slashing your budget.
While it may seem difficult, there are proven ways to do so no matter whether you’re in the middle of a downturn or not. Here are tips for improving your marketing efficiency that will help you cut costs now and your business later once the market recovers.
Why Cutting Marketing Spend Is a Bad Idea
Marketing is important because it drives what’s known as “mind share.” And if you cut back on your advertising spend, you’ll likely lose mind share with your customers because you’ll be in front of your customers less often.
While this might be an acceptable sacrifice in the short term, it will also impact your sales in the long run, since it’s harder to regain that mind share once you’ve lost it.
But the ironic thing is, maintaining and even increasing your mind share is actually easier during a downturn. That’s because most of your competitors are cutting their ad spends, making the cost of advertising cheaper and the amount of noise you’re competing with to get your message in front of your customers lower.
Needless to say, maintaining a strong advertising presence during a downturn is one of the best things you can do. The trick is to adjust your messaging properly (especially during a crisis like we’re facing right now). Here’s how to do so.
First: How Much Are You Spending to Acquire Customers?
It costs money to acquire new customers and the goal of any business is to acquire them with as little as possible. So to reduce yours, you’ll first need to calculate you’re spending to do so now.
Here’s how you do that:
Courtesy of CleverTap
Total expenses can and should include anything you spend on marketing and sales activities, including print and digital advertising, agency costs, influencer marketing, and others.
Have a clear picture of what you’re spending on each customer? Here’s how to reduce that and still bring in the same amount of business.
3 Essential Ways to Improve Your CAC in Today’s Market
Shelter in place orders has changed consumers’ lifestyles, meaning their behaviour and thought patterns have changed. The good news is, you can use this to your advantage to reduce your CAC.
Develop a “Pandemic Persona”
Your buyer persona is very important for reducing customer acquisition costs because it informs the way you write any advertisements. But that persona is likely different since the world changed overnight with the pandemic.
So to make sure any advertising you do right now is effective, it’s important to rework yours to make sure you’re meeting your buyers in their current situation. Here are a few questions to help you do so:
- What are your ideal customers thinking, hoping for, or struggling with right now during the pandemic?
- Where are they spending most of their time and attention?
- How can your business help them?
The answers to these questions will help you focus your campaigns so that they better resonate with your market, increasing the number of customers with the same spend (or allowing you to cut back without losing any momentum).
Focus on Conversion Rate Optimization
Conversion Rate Optimization (CRO) is the process of testing different ad strategies, copy, and marketing tactics against each other to find what creates the greatest number of sales with the least amount of work/money.
The best place to start with conversion rate optimization is your persona. The better you understand your customers and the reality of their daily lives during the pandemic, the better your copywriting will be, resulting in higher conversion rates on your ads, landing pages, emails, and more.
This allows you to acquire customers at a much lower rate than you were previously.
Consumers who are referred by a friend are 4x more likely to buy than those who find you on their own. Referral marketing is an incredibly cost-effective strategy for acquiring new customers. Look for ways to have your customers amplify your marketing efforts for you with a solid referral program.
Try Out Marketing Automation
Marketing automation is a great thing to pursue right now because it allows you to scale your efforts with less manpower. It can reduce the amount of work required to create personalized ads and can be a beneficial starting point for CRO as well. In essence, it allows you to create more effective mass messaging, lowering the cost of bringing in new customers.
Focus on Retention
Studies show that just a 5% increase in customer retention can increase profits by up to 95%. So while this doesn’t impact your CAC directly, it can help you maintain stronger cash flow so that you have more money to spend on other marketing initiatives.
If you’re going to cut something, cut this.
There are no two ways about it — sales are down. Which means there’s less wiggle room to spend on marketing tactics that aren’t bringing in revenue efficiently. So rather than cutting all marketing, now is a great time to focus on cutting the marketing tactics that aren’t effective.
Take a look at all of the channels you’re using… which ones are creating the bulk of your sales? Which ones are the most efficient? Which ones aren’t producing much of anything at all? Double down on the ones that are working and stop spending on the ones that aren’t.
You can even do this with individual campaigns within your channels as well! Keep in mind; some may just need to be paused temporarily until things return to normal.