Marketing and Customer Acquisition During Economic Downturn

On April 7, M13 partners hosted virtual office hours to discuss pressing challenges facing startup leaders today. As former founders and operators, we’ve successfully navigated periods of economic downturn and wanted to share strategic approaches to finance, talent, data, digital marketing, and more.

Our Partner and Head of Operations Lizzie Francis shared best practices on marketing, customer acquisition, and fostering meaningful brand experiences during crises. Read Lizzie’s insights, and watch her office hours below.

Founders are experiencing a number of marketing and customer acquisition challenges. How do you balance an offense vs. defense strategy in this climate?

CPMs are going down as advertisers withdraw and consumers spend more time online. Unfortunately, you can’t control these macro impacts to consumer behaviors, but you can focus on your customer experience and evaluate your acquisition and conversion funnels. Determine the areas that you can positively impact and that could improve your metrics throughout your funnels.

If your customers are like me, they’re tracking every single package because they care more than ever about when things will arrive. So think about your shipping fees, customer service hours, your return and refund policies these are a few of the things you can absolutely control and have the ability to truly drive demand in this uncertain climate.

If you are at scale, invest some of your margin into those things. Look at leading indicators on your paid acquisition. Understand if your hypotheses on your tests are actually coming to fruition. Most startups are thinking about these things on a day-to-day basis right now, but I would recommend mapping out your strategy over the next few weeks. Make sure your test plans are nimble, particularly with regards to the areas of your business that you can control.

Should you be testing right now? How should you think about your test budget?

Under normal circumstances, at least 30% of your marketing dollars should be allocated towards innovating, ideating, testing, and thinking aggressively about how to surpass what you’ve already done. In an economic downturn, that percentage may change. It could be as low as 10% or as high as 40%; it really depends on your business. I would still encourage brands to ruthlessly test. Look at leading indicators. You may not be at statistical significance or however you’ve defined statistical significance for your organization at this point, but you really need to look at those leading indicators and then quickly kill tests or experiments that aren’t working.

How should founders prioritize what to test?

Invest in tactics that drive sales and revenue at the top of the funnel. Invest in your existing customers; they will help drive recurring revenue if you invest in tactics that further encourage their loyalty.

This is an unknown time for all of us. Those of us who experienced the 2008 recession remember the incredible arbitrage opportunities that arose and the great partnerships that came together as people collided in the marketplace. I think we can expect to see similar opportunities unfold now. I recommend that you stay on top of what’s coming up in your pipeline and network and understand what you should be testing.

Because you’re going to be ruthlessly prioritizing, you need to be particularly sharp with your hypotheses. As you run these experiments, make sure that you are clear what you’re testing and think about what will truly drive revenue or learnings for your business that can then be doubled down on over time.

How do you double down on existing "super users"? What have you seen work in terms of doubling down on these highly valuable customers?

After spending money acquiring customers, it's real important to create a plan to keep them loyal and engaged. Allstate and American Family Insurance announced they're refunding 15% of premiums paid by their customers in April and May. This isn’t to drive new business; this is to reward policy holders and keep customer satisfaction high as they look at the macro environment. This is a great example of something all businesses can think about doing, even if it’s on a much smaller scale.

‍Connecting with your customers in meaningful ways and creating a bespoke experience for them is so critical to driving your revenue over the next few weeks and months. Especially right now, customers enjoy having dialogue and feeling connected with brands they love.