Customer Acquisition Costs Getting Steeper

Do you have what it takes to survive in the self-serve platform media landscape?

For all brands, staying on top of the digital ad spend game is an uphill battle requiring you to master the terrain, even as it twists and turns faster than you can flex your marketing budget. Marketers have access to the same data on the two big platforms: Facebook and Google. The space is becoming commoditized and costs are going up.

Getting a grip on the current customer acquisition marketplace

The learning curve to buy ads effectively and efficiently is steep. For example, buying an ad on Facebook is now incredibly easy, but ensuring the effectiveness of the buy — to optimize Return on Ad Spend (ROAS) — requires expertise, time, and amazing creative.

The major social platforms have been promoting their ad products and encouraging marketers to pay-to-play vs allowing for organic reach. This levels the playing field for comparable budgets in terms of reach and targeting but makes the choice of how and where to spend critical. Further, consumers are more distracted than ever, so brands need to capture attention by using great creative without breaking the bank. It’s the strategy piece of the puzzle that’s challenging as spend continues to grow. Ninety percent of marketers’ incremental digital spend goes to Facebook and Google, as you can see below.

Viewing ad spend over time shows which platforms dominate — Google and Facebook continue to form a growing “digital duopoly”.

 

Planning your next move by anticipating customer acquisition trends

What lies ahead for customer acquisition? As a digital revenue expert, I see these five customer acquisition trends gaining momentum:

1. Facebook’s efficiency will result in steeper costs.

  • Higher cost means only the strongest will survive, such as large multinational corporations (with varying degrees of KPI’s to run ads) and very high margin products (who lead their categories).
  • Other survivors are online education providers due to the sector’s global nature and the fact that the product is IP (video + worksheets) vs. a physical product.

2. Data co-ops will become more common.

  • Owners of data will begin to form more data cooperatives (second-party data) when they do not have competing products (for example, pet products sold to an airline’s list).
  • Email de-duplications will occur, and Facebook audiences will be shared or sold.

3. Discretionary income will become even more vital and transparent.

  • Marketers will need to fine-tune spending media dollars on market segments who have the income to buy their products.
  • Ability to extract meaning from demographics analytics and build campaigns accordingly will drive ad spend targeting and efficiencies.

4. Everyday household-name brands may matter less and less.

  • Ability to build brand awareness has never been more robust (for example, MVMT Watches built their brand online with no mass market approach), but that may not suffice to drive sales.
  • Frequent-use items, unless they have unique features, will be bought on price rather than on brand (for example, on Amazon, you say: “I need paper towels” vs. “I need Bounty”).

See how marquee, midsize, and infrequent-use brands compare.

 

 

5. Brands that sell emotion will continue to matter.

  • Consumers expect brands to have personalities and connect with them — just like people — and luxury brands excel at that.
  • In the luxury market, brands matter due to their emotional connection, that powerful ‘people magnet’ commanding a premium price that customers happily pay.

Notice how product categories with high emotional potential rank highest in ROAS.

 

Customer acquisition cost can be a startup killer, yet even for the most established brands, optimizing customer acquisition cost versus lifetime value (ability to monetize acquired customers) is a complex and dynamic process made easier with an agile roadmap expertly built for constant change.

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