Customer acquisition is broken
Brands have it tough, and more tools, talent and processes are not going to solve it. It’s time for disruption.
Customer acquisition is broken.
Brands know this. Marketers know this. Agencies know this.
You would have thought, though, that things would get better with time. With so many new tools to optimize the customer journey, real advances in AI and ML, and improved predictive abilities, you’d think that the process of customer acquisition would eventually be streamlined into an effective and seamless operation.
It’s only getting worse.
While customers are becoming ever more dynamic and sophisticated, audience data is as stale, fragmented, and hard to come by as always. Platform data is increasingly siloed. There’s no visibility or transparency. Metrics are often not connected to true business value, and any attempt at meaningful measurement crumbles in the face of data gaps and latency. Fierce competition over the same audience pool in a saturated market is constantly pushing up bid prices.
Over more than a decade of working at leading tech and customer obsessed brands, we’ve seen brands genuinely trying to overcome these problems by turning to one of two alternatives—outsourcing the whole mess to agencies, or keeping the battle in-house while trying to reinforce the lines with new talent and technologies.
But, unfortunately, each of these solutions gives rise to a new set of problems.
Working with agencies means that the brand is removed from one of its core activities. In-house knowledge deteriorates, results naturally fall into the “comparable or slightly better” trap, and the brand’s integrity is endangered.
Fortifying in-house marketing, on the other hand, often involves a growing overhead without a significant improvement in results, while additional data scientists are using additional analytics tools to try and put together a data landscape which is almost beyond repair.
No wonder, then, that during the last five years, the cost of acquiring new customers (CAC) has increased by over 50%.
Take a minute to take that in.
Why in-house customer acquisition is broken
In some verticals and for companies at some stages of their growth, Marketing Percentage of Customer Acquisition Cost (M%-CAC) is higher than 50% of budget, but only 16% of CMOs cite acquisition as a top three capability.
Brands are pouring the lion’s share of their marketing budget into acquisition, while at the same time gaps in knowledge, data and technology are keeping them from seeing any reasonable—not to mention great—ROI. Aligning target audience analysis, practical customer acquisition tactics, attribution, and analytics around a clear strategy to reach a target ROI often feels like trying to catch fish with your bare hands. Here are just some of the issues brands often come across on the road to acquisition:
Target audiences. While brands tend to have a decent grasp of who their typical customer is, that understanding is mostly derived from their CRM. So while brand marketers know who are currently buying from them, they struggle to actually define their target persona outside of this scope. Identifying, testing and validating new audience segments simply demands too much resources. This leads to a broad generalization of targeting, grouping multiple personas and use-cases together, and without even knowing it, hinders performance (whereas the best practice is to micro-segment and segregate different retargeting options, states, ages, genders, etc.)
Practical user acquisition. While brands typically know their top-level KPI’s like CPA or ROAS, and might engage in both Prospecting and Retargeting, building, measuring and optimizing processes end-to-end seldom happens, simply because the actual practice is so convoluted. Typically, interim KPI’s like % from ATC to Checkout Initiated aren’t used, and many marketing teams still think in terms of CPC as if it even matters (would you mind paying double the CPC if it triples the ROAS? We wouldn’t...)
Optimization. Running clear-cut A/B tests is harder than it seems, since typically retargeting runs as a sort of “catchall method”, and will always garner better results than prospecting. This means that in theory, you need to compare only prospecting campaigns (apples to apples). But most brands look at overall marketing performance, and find it hard to implement a qualitative comparison. Not being able to measure the marketing value of differentiated marketing activities means that no real optimization is taking place.
Analytics. In many cases, a lack of tech integrations and know-how leads to broken (or misfiring) pixels, incorrect data, systems in different time-zones, and more haywire issues that make an analyst’s life really hard, especially when trying to find the right numbers and understand attribution across platforms.
No wonder, then, that many brands ultimately opt out of customer acquisition and park it with marketing agencies.
Why agency customer acquisition is broken
Target audience analysis, practical customer acquisition tactics, attribution, and analytics are the stuff that agencies thrive on. It’s not that agencies have a secret formula to make these processes any less messy. But as opposed to brands, who need to specialize in innumerable other areas, the agencies’ focus often builds the kind of expertise that’s hard to grow in-house.
But it’s no magic bullet. Outsourcing the activity that your brand’s future literally depend on comes with a price tag. A trade-off is involved, and it revolves around three major pillars:
Brand authenticity. No matter how involved and on-board the agency is, no one understands the brand, vision, products and audiences quite like, well, the brand itself. An agency can’t emulate your brand personality, but rather create an approximation of it, which will inevitably feel more generic across all marketing activities. Internal employees naturally possess a more thorough understanding of the brand’s image than agency employees, and are more invested in the success of each campaign.
Alignment & Agility. Marketing is becoming increasingly time-sensitive. The immediacy of social networks, online media and eCommerce are creating constant marketing opportunities and threats, demanding brands to become both more reactive and more creative. Brands working with an agency around weekly calls and an allotted schedule feel a real lag in their ability to be agile and responsive to the marketplace. An in-house team, on the other hand, provides complete integration—same goals, same agenda, greater learning across the organization, and the ability to solve problems very quickly—all of which add real business value.
Cost. There are multiple ways to skin this cat, but the overall agreement is that for smaller operations working with an agency will be cheaper than recruiting an in-house team, while bigger brands have a lot to gain by bringing the work home.
Back to the drawing board
Whichever angle you choose, the current practices of customer acquisition are disempowering brands.
While brand marketers have a crystal clear view of their brand’s identity, messaging and voice, they struggle to apply it effectively to achieve their marketing objectives without the mediation of an agency.
What brands need isn’t more tools, dashboards and elaborate processes—the stuff that created this situation to begin with—but rather tools that automate and simplify the areas where knowledge and execution gaps exist. Metoo solutions that bandage specific pain points are a long shot from providing a holistic solution. The marketing space already has too many of those.
It’s time for real disruption.
It’s time to turn the tables around and introduce a whole new approach to customer acquisition, one that will cut through the problems plaguing audience analysis, discovery and targeting in one fell swoop.
We felt we had to do something about it.
So we built Novarize.