Member Exclusive // May 8, 2020

‘Spend on marketing if you’re getting a discount’: Mike Duda on how to navigate the new CAC landscape

Customer acquisition costs are down, but it’s unclear whether marketers should be taking advantage of the deals.

Historically, during economic downturns, marketing cuts are the first to go, leading to massive drops in customer acquisition. However, given the quickly evolving nature of today’s e-commerce habits, it’s difficult to tell what the next six to twelve months will look like.

At this week’s Modern Retail+ Talk, Bullish’s managing partner Mike Duda explained what the current low CAC means for the future of DTC brands, and how to apply it to longterm growth. Duda said online conversions are increasing because “people are bored and rely on shopping to feel good.”

Despite all the hubbub, Duda predicts that drastic consumer behavior changes are unlikely; people will probably keep buying things as they always did. “They didn’t save money in 2008, I don’t see them doing it this time around either.”

What we learned:

The simpler the marketing, the better. People are tuning out the noise. Even inspirational language isn’t making brands more likable.
As a marketer, consider yourself part of customer service by focusing on what you can do for them rather than aiming for immediate conversion.
“Serve the general purpose of why you exist to begin with,” said Duda by showcasing the spirit behind the brand to customers. Examples include Peloton offering free content even for non-bike owning community members.

Keep messaging to the point and keep working.

Find non-invasive ways to remind customers you’re “still there if you need us.”
Agencies need to over deliver without excuses. “Rise up to the occasion by going above and beyond,” Duda said. Agencies are facing budget cuts and layoffs — now is the time they prove their worth to brands.
Don’t to rely on overused emotional tactics when advertising. “It’s not in the execution, but should be part of the broader approach to branding,” said Duda. He pointed to pet food brand Nom Nom’s ads, which simply feature the relationship between the dog and owner.

Know when and how to apply CAC.

Taking advantage of the low social advertising costs makes sense if you can focus on retention later. “Depending on your business model, it’s great to spend on marketing if you’re getting a deep discount,” said Duda.
Keep in mind, however, that people won’t keep buying just because CAC is down. “There’s going to be purchase fatigue, especially in seasonal based brands,” he said.
Increase value with strategic discounting. “It’s going to feel like Black Friday every day for the rest of the year because people love a deal,” said Duda. Offering promotions to price conscious customers can get them to buy into your brand long term.

DTC brands should focus more on community.

It’s hard to build a community when you need to. “Unfortunately it has to be in the company’s DNA to be instrumental in rallying people to be a part of it,” something Glossier and Peloton have done from the beginning.
There are ways to foster meaningful engagement without advertising, said Duda. “Get the CEO to do a Zoom call and take feedback from customers,” he advised. Even if they’re not happy with you, it can be a great re-acquisition opportunity.
Make sure you’re measuring everything. Duda named wellness brand Rae as a current example of effective A/B testing. The company is taking this time to talk to customers every day. “Be surgical and learn from it,” he said.

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