Journals
Rehabilitation from the Paid Ad Syndrome
Paid Marketing is highly addictive and hard to scale down, all of us in the industry should always be thinking about what beyond paid ads drives long term value.
Hey You,
It’s a BIG Sunday this weekend. It’s the Black Friday Cyber Monday weekend and if you’re looking at the ads online, it’s the golden hour for e-commerce, globally.
This edition was a no-brainer for me. It came out of my personal experience of interacting with multiple high-growth businesses. My stat wouldn't be off when I say that 2 out of 3 high-growth businesses have been prey to this trap. I call it the “Addiction to Ads”
Before we dive in, for all those who’ve just signed up or been signed up, welcome to the club of consumer business enthusiasts. Sticking a link for you here, to sign up people who you think could benefit from this one.
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And now, on to today’s topic: Rehabilitation from the Paid Ad Syndrome
Let's hop in.
Product Design comes in two phases: I call them the ‘Builder’ and the ‘Accelerator’
‘Builder’ is when you’re building a new product / site. You need basics of your product roadmap, MVP’s, wireframes and some design that gets the job done. This is where you spend less time on the details and more on the overall construct of your product.
Most products (e-commerce or apps) start their operations in this way.
‘Accelerator’ is when you have some traction, some growth, some numbers (data) and some customers who’ve given you feedback. In a good scenario, some funding too. That’s where you start to deconstruct your product ruthlessly and build it again. All of this while the MVP still garners revenue / traction for you in the meanwhile.
Now that we’ve defined what the two phases mean, let's see how ‘brand strategy’ fits into each of these phases.
I can go out on a limb to say that product & brand are two sides of the same coin. They have to be tackled together and not in silo.
Brand is everything from your positioning,to your copy punches, to your comforting or actionable CTA’s (call-to-action buttons), your imagery, product shoots and of course your launch campaigns. But for the benefit of this discussion, we’ll stick to all aspects of the brand that impact your product.
Ideally a brand should interweave into your product seamlessly.
Accelerator Mode: Reality Check
The key differentiator between builder & accelerator is ‘traction’. And traction is a result of two aspects: organic acquisition and inorganic acquisition.
As brands grow, the ad spends start to show results. Your ad sets work, new customers start using your product, you launch newer ad campaigns across multiple platforms and you’ve got it working, finally. The product is up & kicking. CAC (customer acquisition cost) is increasing, but you’ve got funding, who cares. All you care about is customer acquisition.
This continues for a few months, new agencies are hired, you try programmatic, more ad dollars spent on marketing to acquire new customers. Higher CAC. And you don't even realise but you’re addicted to paid acquisition. It’s a trap that most businesses fall into, funding dries out. In your next investor meeting, acquisition is a hit, but CAC is off. There’s no sign of retention, community or LTV. CAC/LTV ratios are negative. And that’s the end of your high ride.
You’re now hit with a double edged sword: should you focus on retention (with the same budget, but you don't really know how?) or should you focus on new acquisition. Lower acquisition numbers here will worry the investors. It’s a chicken & egg problem that you’ve landed yourself into.
Well, read the above story again. If it’s your story, it’s because you didn't focus on building the brand alongside your product.
Scale doesn't always mean sustainability.
Accelerator Mode: Ideal Scenario:
Lets understand where you went wrong in the above scenario:
- The first mistake is when you start thinking of everything as Blended CAC – dividing all your acquisition against dollars spent – as opposed to understanding CAC of each channel (Facebook, Display, AdWords, etc.). The former is misleading.
- Because your initial organic users are your biggest fans, your Blended CAC and per-channel CAC can often be off by 2X to 5X. As you scale your paid marketing, your organic won’t follow in the same ratio. So as you grow, your ‘Blended CAC’ will showcase your dominant channel’s CAC.
The longer your campaigns run, the less effective they become – people start seeing your ads too often. The messaging becomes stale, and novelty effects are real. Market performance has a reversion to the mean. Competitive dynamics are real. They’ll come in to copy not just your product, but also ad messaging and creative.
Your focus on organic marketing keeps you focussed on building a brand:
Enter: Brand Strategy
Brand is a mix of a bunch of things. I’m in no means a brand guru, but for the benefit of this discussion, I’ll define it in contrast to your product design.
Brand = Organic Growth
Organic Growth = Retention + Community Building
Retention = Customers who stick around
Customers who stick around = customers who vibe with the product / offering / messaging
And the answer to bringing in customers who vibe with your product is: branding. Right from the copy that goes on to your CTA’s, to your core positioning, is what attracts the ‘right’ demographic, who is more likely to stick around.
Not just that, they’re also more likely to evangelise.
I’ve spoken enough about building communities, but it actually is an important builder for your accelerator mode.
And finally,
The Hidden Truth:
Build a brand during your ‘Builder’ days of your business. Start forming your positioning statements, communication guidelines and evolve them over time.
Brand is more than marketing campaigns. And definitely important for your product-market fit.
Addiction to paid marketing can get you instant results, but at the cost of profitability or LTV. What’s more important is to fix the underlying growth challenges– creating real moats, product differentiation, user experience, better integrations.
Build out new channels. Fix churn and frequency. Focus on retention. Build a brand. Have real conversations with customers. And optimise your UX to evolve your CX (customer experience).
The point is, knowing that Paid Marketing is highly addictive and hard to scale down, all of us in the industry should always be thinking about what beyond paid ads drives long term value.
To do that, you’ll need to empower your creative team to attack the problem from all angles- new viral product features, better design and really investing in your referral & community programmes, building out your content/SEO strategy even though it’ll take years. It’s worth the investment.
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Hits & Misses: This is where I list a couple of online businesses that I’ve personally experienced as a customer. Hits is for CX (customer experience) that I absolutely loved. And Misses is about what can be improvised on the CX.
Hits: Fi Money: I recently signed up for this neo bank: Fi. And boy, I’ve absolutely fallen in love with everything about their app. The design, the on-boarding, the customer experience for signing-up, I was absolutely blown away by what I saw. As much as I had heard about this app, took me a while to actually get down to signing up for it. If you’re evaluating opening a new bank account, I’d say give this a go. The step-by-step on-boarding will leave you jaw dropped for how they’ve paid attention to detail.
Misses: No misses from this week in particular.
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Well, that’s it from me on this one. I’ll write in soon with my next edition on another interesting topic. Until then,
With Gratitude,
Sak.