This is post 5 of 6 recapping Reforge’s recent webinars on Leading Growth in Turbulent Times. You can watch all the webinars here.
For reference, here’s the table of contents for the series.
B2C Growth in Turbulent Times (this post)
This post focuses on insights provided by Noah Freeman (CTO/Co-Founder @ Social Fulcrum), Mark Fiske (Former VP of Marketing @ Credit Karma), and Dan Hockenmaier (Growth Advisor, Basis One & ex-Growth @ Thumbtack) during our webinar on leading B2C growth in Turbulent Times. You can watch the entire webinar B2C here.
Advertising Media Is Cheaper, Conversion Is More Expensive
Over the past month, many businesses pulled back on media spend while consumers on quarantine have been spending more time online. Due to the increase in supply (available ad impressions) and decrease in demand (ad budgets), CPMs have been dropping across Facebook and Instagram, where Noah Freeman and the team at Social Fulcrum focus most of their time. (You should follow the Social Fulcrum blog for the latest changes in the ad markets.) Through the week of 3/22, Facebook and Instagram CPMs & CPCs declined about 45% for B2C companies in the US before a slight recovery the week of 3/29. Prices vary based on the specific strategy of the campaign.
(source Social Fulcrum)
In the graph above, Prospecting campaigns target users who have never visited the website. Retargeting campaigns target users who have visited the website but not purchased. Retention campaigns attempt to drive repeat purchase by targeting previous purchasers.
While this decline in media prices might seem like a potential windfall for advertisers, it's not. Onsite conversion rates declined even faster, about 53% overall, before making a recovery in recent weeks.
(source Social Fulcrum)
The result is that the cost per purchase is fluctuating wildly depending on target segment, but up 20% overall. Retention audiences, which are typically the highest quality and the most likely to buy, are ~2x more expensive than before COVID impacts began in early March. You need to validate your own campaign costs, but overall the cost per purchase for your business is likely to be up.
(source Social Fulcrum)
Remodel your LTV assumptions and adjust budgets frequently
No matter what is happening to your CAC (customer acquisition cost), Mark Fiske (Former VP of Marketing @ Credit Karma) recommends revising your LTV assumptions to be far more conservative. With consumer behavior fluctuating this wildly, you have to assume that longterm retention will be just as variable. Aim for breakeven on the first purchase for transactional e-commerce businesses. For subscription businesses, consider dropping your retention assumptions to a couple months to account for people who are only buying for the quarantine timeframe. Even if you are experiencing a flood of demand, don't assume that any new customers will stick with you when this is over.
These CAC and LTV fluctuations also mean that your previous budget allocation is almost certainly incorrect. At a minimum, you'll need to revisit budgets weekly until things settle down. And the best teams are holding daily stand-ups to adjust strategies and tactics as soon as new data is available.
Playing Offense with New Tactics
If you haven't changed all your ad creative, you should strongly considering doing so. See post 2 about rapid response tactics for what to avoid. More advice from Social Fulcrum suggests that ads mentioning COVID-19 by name perform poorly, but ads that say things like “In this difficult time…” or “You want convenience and safety” are doing relatively well. Ads showing boxes on doorsteps and that focus on reliable fast delivery are also effective.
Here are some other tactics to consider:
To boost campaign effectiveness (as measured by ROAS), you might try a promotion. It's best to focus on simple site-wide discounts that consumers can easily understand.
If your competitors have turned off all their ad spend, you can try running conquesting campaigns to grab market share
People are bored so you can probably increase your email frequency without a spike in unsubscribe rates
Consider how you can leverage free channels. West Elm scored a ton of free publicity by creating virtual backgrounds for zoom.
Look at implementing geo-targeting on your campaigns. Consumer spending has dropped less some areas than others. You may be able to exclude hardest hit geos to boost performance.
Collecting data gives you an advantage
Overall, the next few weeks will continue to be rocky, but if you can keep some campaigns on, it will give you more data sooner about when things begin moving toward healthier levels. If you see the recovery happening before others in your industry, you'll be better positioned to accelerate out of the downturn. Keep remodeling and reworking until you establish confidence in your new operating models and assumptions. For more on scenario planning and what recoveries might look like, check out Dan Hockenmaier's blog entirely on this topic.
Other posts about Leading Growth in Turbulent Times:
B2C Growth in Turbulent Times (this post)
If you have more questions or suggestions, please let us know on Twitter @reforge or connect with us on LinkedIn.