To cut budgets or not to cut?
This million dollar question has D2C brands and businesses across the country questioning themselves on what to do with their marketing budgets. We have been hearing the terms inflation, recession and consumer spending a lot since the height of the pandemic. But what does this mean long term for the D2C world? It isn’t all bad! With history repeating itself yet again, it is critical to prepare your business with a recession-proof marketing strategy.
D2C has been on rise for many years with no inclination of going anywhere. However, a strategic marketing strategy is the #1 thing separating you from your competitors when things start to feel uneasy. Marketing is the backbone of a lucrative brand, here is how to put the proper measurements in place to build a foundation for what is next to come
Keep your marketing message consistent
Now that may be hard when you're spending $7 on a loaf of bread and $5 on a gallon of gas. But in terms of your marketing budget, your consistency will allow you to soar past others.
Trials and tribulations are inevitable as a business owner, and seeing declines often strikes financial cuts. These cuts are seen in layoffs, investments, real estate, and most frequently the marketing budgets. But is slashing your marketing budget really the most cost-effective thing for your business? Let's break it down! The short answer is no.
When your competitors cut their spend, you win
Inflation is a major stressor on businesses everywhere, which unfortunately results in two things happening; they sink, or they swim. During inflation, two things dramatically decrease; CPC and your competition. When cost per click goes down, you all of the sudden have more bandwidth to reach a higher amount of people with the same amount of money in your pocket, that's a win! That means that when your competitors aren’t prepared for inflation, they have no choice but to cut back on their spending, resulting in more brand visibility and conversions for you. A second win! Think of it as a marathon, not a sprint.
Staying consistent with your consumers during uncertain times keeps your competition from overshadowing you, establishes stability, allows new customers to find you, and makes you the hero of your D2C space! If the budget-cut conversation comes up, take a step back and build out a strong strategy to keep your brand on the rise. Not all heroes wear capes, but some have great marketing strategies!
Make your Brand Recession Proof
Always easier said than done, but there are some important things to consider with your brand when building this solid foundation for rainy-days.
To “recession-proof" your D2C brand you must ensure that:
- The product(s) that you are offing are essential to your ICA, they have unique value, and cannot be found anywhere else.
- By understanding consumer spending, you must make sure that your price is competitive and in line with what people are comfortable spending in a recession.
- Focusing on your existing customer base and retaining/nurturing them through the recession will increase overall LTV.
- Invest in marketing efforts that are reaching consumers who are cutting back on spending.
- If feasible, diversify products or product offerings to expand into new markets.
Like mentioned above, this is a marathon not a race. Inflation won't last forever, but your consumers will! While other companies come to screeching halts, you are prepared with a plan to continue to drive conversions and pick up the slack where your competition has dropped it.
Target and personalize for your audience
Now more than ever, technology is helping us advance marketing efforts through target marketing. By understanding consumer behavior, the ability to get granular allows D2C brands to reach their customer the ideal way, and at the ideal time.
Segmentation strategies allow you to target your consumer based on previous browsing and purchasing behaviors. When inflation is fluctuating, buying patterns and behaviors become inconsistent and become more important to take note of. Marketers who use segmented campaigns note as much as a 750% increase in revenue (Campaign Monitor, 2019).
It pays to personalize your message
Targeting your audience increases trust, establishes brand definition, increases product views, and allows the consumer to feel nurtured, especially in times where things can feel lonely. Using personalization attributes like the consumer's name, viewed products, and product recommendations have the ability to increase engagement by more than 350%.
Staying consistent in these practices will continue to assure that you have your best foot forward when driving conversions during uncertain times.
Data-Driven Decision Making
Data is to D2C as Oil is to a car, the most important thing. Data says everything about your brand from customer journey to performance.
Interpreting data is essential in making tough decisions that dictate the future. With data you can decide that if you spend X, your ROI is Y, and sales increase Z%. With inflation and consumer spending habits being unpredictable, these numbers can have dramatic change from day-to-day and week-by-week. The dramatic ups and downs lead to “sticker shock” and force decisions that aren’t always well thought through, like slashing a marketing or advertising budget.
Remember: data is your friend
A well-oiled digital marketing team is built up of many components and departments. Inflation affects each area differently and tracking individual performance is the trick to driving the most revenue. In some cases, PPC spend can be low while simultaneously still driving 30% of your revenue through email marketing. It would not make sense to slash a marketing budget in this sense as the departments experience fluctuation based on consumer behavior.
Inflation can be a difficult thing to navigate, but there are ways to strategically place yourself in a good spot to make sure your consumers are still converting. When you stay consistent, build a recession-proof marketing plan, target and personalize for your consumers, and make data driven decisions, you have taken the right steps to retain customers in times of inflation. While we see a repeat in history, it is evident that if you can continue to hold your marketing budget where it is, now is the best time to do it.