I hope this message finds you well. Health and safety are priority number one. So first and foremost, on behalf of the whole ActionIQ team, we wish you the best in these uncertain times.
The crisis continues to evolve every day, requiring business leaders to make significant changes to their strategies and organizations on a limited and changing set of data.
Over the last few weeks, we’ve had dozens of conversations with clients, partners, and industry executives about what’s top of mind for them right now, and what they believe will be critical in the near and mid term. This piece will focus on 3 strategies to get through the next 90 days that can be executed immediately to influence spend and revenue.
1. Reduce Wasted Ad Spend to Save $8MM+
In any downturn, marketing ad spend is one of the easiest areas to cut. But instead of slashing your budget across the board—which will cost you in the long term—consider a precision approach to reducing wasted spend.
Everyone’s heard that 50% of marketing spend is a waste of money, but you just don’t know which half. Depending who you ask, in the digital age marketers still waste anywhere from one-fourth to a whopping two-thirds of ad spend. But the difference now is you can know which portions are a waste, and do something about it immediately:
Action Plan: Ad Spend Reduction
Remove customers who’ve already converted, as well as low LTV prospects, from your high cost addressable paid media channels: Google and Facebook.
Integrate your first-party data into your paid media audiences and automate daily and intraday suppression audiences across all channels to cut out wasted spend.
Decrease cost of acquisition by up to 50%, which can account for $5MM+ in savings depending on your current spend levels.
Watch this short case study to learn how Pandora Media cut acquisition costs by reducing paid media spend.
2. Predict and Reduce Churn to Save $2MM+
Most companies identify and address customer churn when it’s already too late. For those companies, a churn risk is flagged once the customer calls to cancel a subscription, or hasn’t made a purchase for over a year. “That’s not where the churn started,” says Aaron Tellier, EVP at Merkle, “it started 6 to 12 months ago when you didn’t communicate with them about a service issue they had, or reach out to them proactively and provide a value add.”
For companies with millions of customers, it can seem daunting to implement a churn reduction program for a large and diverse customer base. But that’s where the Pareto Principle, or 80/20 rule, comes in. When 20% of customers generate 80% of your revenue, you immediately have a more manageable universe on which to focus. “Given this, it makes sense to invest a disproportionate part of your resources marketing to your best customers, since it can have a much greater impact on your revenue,” says ActionIQ’s Tamara Gruzbarg.
(For more on this subject, read Tamara’s blog Beyond the Pareto Principle: Five Steps to Capitalize on High-Value Relationships).
Your best customers will be the ones that get you through this crisis. Which means when resources and timeline tighten, it makes sense to focus nearly all your energy on them. This is where you can drill in on churn reduction, using this approach:
Action Plan: Churn Reduction
Identify deviations from high value customer purchase AND engagement behavior patterns—early—and launch personalized omnichannel re-engagement campaigns.
Track the key signals of disengagement and bring them back into the activity fold. For example, if someone used to visit your website every two weeks, and now you haven’t seen them in a month – trigger a tailored message based on the history of your relationship with this customer.
Expect a 15-20% decrease in churn, leading to $2MM or more in annual revenue savings.
Modeling behaviors, and predicting when and with whom a churn event will occur is the most sophisticated approach to this strategy. Executing this successfully requires time and effort to build, train, and test before launching in market. Be wary of solutions that claim to be able to do this out-of-the-box—they don’t work.
3. Migrate Customers to Online Channels to Retain $5MM+
Today, about 84% of all retail sales are driven through stores. With more and more retailers closing physical stores due to COVID-19, and foot traffic significantly reduced for stores that remain open, it’s imperative for retailers to migrate store-only shoppers to online.
Don’t expect customers to shift their spend to online channels on their own – a recent survey found only 35% of multichannel retailers saw sales shift from store to online since the beginning of the crisis. This represents a huge opportunity for businesses to recover sales that would otherwise be likely lost to a digital-first competitor.
Multi-channel businesses can seize an opportunity with this approach:
Action Plan: Recover Lost Store Sales via Online
Identify and migrate store-only buyers to online channels to mitigate the revenue impact of reduced traffic and store closures.
Analyze customer purchase and engagement data to identify offline-only or offline-first shoppers. Send these customers a series of tailored messages highlighting online shopping benefits such as free shipping/returns, curbside pickup, chat consultations and other conveniences. Utilize communications that leverage the brick-and-mortar relationship—such as direct mail or store associate outreach (if you have a previous clienteling relationship).
In the short term, expect to keep customers engaged. In the long term, increasing cross-channel buying rate by 10-15% can yield $5MM in incremental revenue depending on your average order value.
Cross-channel shoppers are typically worth 2x in annual revenue, 130% higher margin and are 50% more loyal year over year versus single channel shoppers. In the short term and the long term, it benefits your organization to grow multi-channel shoppers. Should the shift to online we’re seeing now become permanent (and I think it will), you’ll be better positioned to see upside when discretionary spending rebounds.
Raise The Bar on Relevant Communications
Two of the three strategies we’ve discussed require sending communications to your customers. Now, more than ever, message relevancy is critical. Here are a few additional considerations for communicating with customers over the next 90 days:
- Batch and blast will not work. Nor will the standard sales or product promotions. These will come off as insensitive.
- Instead, communicate with empathy. Show you care by knowing who they are and telling them how you can help them.
- In this environment of crisis, consumers value communications that reduce their anxiety, their risk, and provide a sense of belonging. If your message doesn’t meet this bar, don’t send it.
Turning the Corner
It’s difficult for all of us to stabilize and start planning for the future. But we will turn the corner. First, however, we must all survive this initial shock to the system. I hope some of the approaches I’ve described in this piece help you weather the storm while setting you up with practices that will be valuable in the long term.
As I mentioned earlier in this piece, we’re here to help. If you’d like to talk through a strategy, or learn how other brands solve challenges you’re facing today, please get in touch via the ask a question box below and we’ll make sure you get connected with either myself or a colleague who can answer your questions.