Planit is privileged to have worked with some great clients, such as Universal NBC, Tesco, The Times, Gett, Ladbrokes and Domestic & General. We have taken our experiences and have developed a solution tailored to the needs of start-ups including, Readly, LittleCooks, NextUp Comedy, Grace & Green, Kinn Living, Butternut Box, Bloombox Club, Human Foods and many more.
I spoke recently at an event for founders and was asked some great questions, which I wanted to share with the PerformanceIn community.
What advice would you give a founder that is about to begin the process of scaling through paid media acquisition?
Founders have a real gut feel understanding as to how things are working, they see everything from ad placements, site traffic, social media comments, customer service questions, right the way through to the product leaving their warehouse.
The downside of this is that having so many bases to cover that granular understanding can be difficult to achieve. When we begin working with companies (both early stage, and also enterprise) we often see situations where the current understanding of the key metrics, typically CPA and ROI are incorrect. This is typically because the analytics, or interaction with the billing system has been set up incorrectly. For example we recently onboarded a brand that had the events “add to basket” and “sale” tracked as a sale which gave a false indication of the CPA.
To scale you need accurate, detailed data and a clear understanding of your starting point. This is key to managing expectations around what is achievable, you also need to be able to replicate your successes, and avoid making the same mistake multiple times.
It’s for this reason that our view is that the single most important stage before you press the paid media button at scale is to accurately benchmark your current position, covering all the key numbers, then set up the measurement tools correctly. Once you have clarity around all the key numbers, and a real time view of what is happening you can then start testing with confidence.
What are the main barriers to growth for early stage businesses?
The main barrier across all companies comes down to understanding risk and reward, scaling rapidly comes with associated risk and each business needs to find the balance that’s right for them.
To scale you need to test, and the nature of testing means that not everything you try will generate positive ROI, and for some brands it can take time to obtain a detailed understanding of the ROI that your marketing spend will generate.
We work with over 30 brands that operate LTV or RR models so I will use that as an example. These types of businesses have the challenge that the cost of acquiring the user is often in excess of the amount they are receiving at the first transaction. This presents 2 main challenges. The first is understanding the allowable cost of marketing, which is a function of retention, for example: if the average customer stays for 6 months then you would allocate a percentage of as your cost per acquisition, if they stay for 12 months then you have more to play with, and 3 months then much less.
Understanding this as early as possible, if possible, by source of acquisition and offer type is key. This will ensure that you are not burning a budget on unprofitable activity, the flip side of this is underestimating your lifetime value and then missing out on opportunity.
Once you have established a profitable campaign strategy, LTV has been proven, and you have an allowable cost that works then the only remaining barrier is cash flow, as with payback cycles of anything from 3-9 months you need cash to be able to fuel that growth.
Which stage of growth would you say is the most challenging?
For early stage businesses the biggest challenge is getting beyond the big two of Google & Facebook optimisation comfort zone! It used to be that the most common brief we received was that a potential client could get paid search to work, but couldn’t scale beyond this without the CPA increasing to an unmanageable level, it’s now Google and Facebook that are the baseline channels.
A well-executed campaign on Google and Facebook, targeting your most engaged audiences, should mean that most viable campaigns should be able to achieve a limited volume at a profitable CPA. This is great to a point but can be a massive hindrance in mindset when looking to scale beyond this level.
To go beyond these platforms requires reaching new audiences by testing new channels in order to increase brand awareness. The challenge for start-ups is that they can’t splash out on massive advertising campaigns on TV, outdoor and press so the key here is to max out on organic social and PR, then combine this with innovative, lower cost branding options such as; affiliate marketing, content marketing, podcasts, sponsored editorial, highly targeted display advertising, programmatic and other relevant opportunities. This requires constant testing, and the implementation of a full funnel re-marketing programme as the customers you reach through these channels will not convert profitably with a one-off campaign.
The other factor here is that with audience expansion activity, new audiences do not convert straight away so this activity can require a medium term view, the challenge here is really understanding the balance between risk, investment and return, which makes the previous point around understanding ROI and funding even more relevant.
How do you think that the current situation with the Pandemic affects customer acquisition plans for emerging brands?
The only constant theme right now is volatility, what has worked to date might not work next week, but the good news is that it’s not all bad news as for many there are opportunities.
The key is to adopt an agile approach to your UA activity, testing and challenging previous assumptions. For some this may mean reducing spend drastically as the timing simply isn’t right. For others this is an opportunity to introduce themselves to new audiences that have the potential to turn into long term profitable customers.
The key thing to avoid is not to position yourself as a lockdown brand, through approaches such as heavy discounting, messaging focussed solely on benefits that relate to the current situation, or investing heavily in targeting audiences that may not provide mutual long term value. The brands that have been successful have targeted relevant audiences through being inventive with the combination of product, service and offer.
One of our brands, Next Up Comedy is a great example of this, creating a virtual comedy festival which showcased their product outside of the existing streaming audience, they coupled this with a promotion around annual, rather than monthly subscriptions which has resulted in a significant increase with a highly engaged audience.
What final piece of advice would you give a start-up or scale up?
I would say that you should get an award winning agency on board, and task them to manage this key element of your growth!
Joking aside, the choice here is a tricky one as founders must choose between taking on the costs associated with the tech infrastructure, and internal teams to implement the above. Whatever choice they make, I would say that paid media bills can rack up quickly, meaning mistakes are costly and opportunities can be missed so don’t take any shortcuts. It’s essential to review your options from a cost and a revenue potential perspective, additionally in the current climate I would also suggest that picking an option that also provides flexibility is also advisable.