Home » Blog » E3: How to Combat Rising Customer Acquisition Costs

As 2021 draws to a close, we start to reflect on just how much the last couple of years have shifted the way top marketing and product teams have needed to adapt. From a pandemic that forced nearly every business online, to the demise of the third-party browser cookie and increased consumer awareness of personal data tracking, there’s been a lot to take in!

To help us break down these trends and understand how digital organizations can continue to come out on top, we’re thrilled to have Rory Capern join us on The Advocacy Channel. As an advisor to Canadian SaaS companies with over 20 years of executive leadership experience at companies like Google, Twitter, and Microsoft, he brings a wealth of knowledge and experience that teams of all sizes can learn from.

In this episode, Rory and host Will Fraser discuss top trends in marketing like how teams are adapting to combat rapidly increasing customer acquisition costs, what other avenues of acquisition are being explored, and what you need to align product and marketing teams for ultimate growth.

Hear Rory’s take on these trends plus his best piece of advice for anyone driving a marketing budget so that you can have a successful year ahead as you plan for 2022.

Check out the full episode below, or keep reading for our favorite discussions from the episode.

Prefer to listen on the go? The Advocacy Channel is available anywhere you listen to podcasts.

Trend 1: Adapting strategies amidst rising customer acquisition costs

It’s no secret that that cost of customer acquisition in the digital space has become, and continues to get, more expensive. Whether you’re trying to outbid a competitor on keywords through Google ads, or win over a prospect with retargeting, there’s no limit to the amount of money you could dedicate to this channel.

Plus, the upcoming demise of the third-party cookie (commonly used for retargeting ads) means that leveraging customer data won’t be as straightforward. Not to mention the pandemic that forced nearly every business online, leading to an even more crowded digital ad space.

When acquisition costs rise at a rate that marketing budgets can’t always keep up with, teams are switching up the way they’ve always done things in an attempt to deliver the same (or better) outcome – as Rory puts it, rethinking their approach to growth.

Will 13:20
I’ve been a big believer that many companies are acquisition addicted, and not just in the sense of acquiring customers. It’s really acquisition marketing addicted. It’s been a channel where people can pour dollars into the ad tank and acquire customers, but with those budgets rising, it just looks like it’s a train wreck for so many of these marketing departments on delivering on their objectives, especially from the companies that maybe don’t have unlimited ad dollars.

Rory 13:55
Yeah, it’s definitely a game of scale. But what’s interesting to me is this idea of getting a more creative understanding of other avenues of acquisition and using them as a bigger part of the mix, since they are going to become a much more important part of the story. I think there will always be a very large and profitable market for Google and Facebook ads, but the notion of digital acquisition through the usual marketing channels has got a long future in front of us.

It’s what else that brands can do to acquire customers. How they engage with their users in a way that isn’t banners, isn’t interruptive, and isn’t the ad context that we’ve known for a long time. The conversations that I’m having with senior marketers indicate that they’re really challenging themselves and their teams to rethink their approach to growth, without playing into a game that has prices and competition increasing.

The questions that I’m receiving more and more from the front lines of the marketing game are around what’s going on out there that we haven’t done yet that isn’t as popular, but that still works. That allows us to play more of a competitive strength that isn’t based on the size of the budget, and more on the unique attributes of a product. Strategies based on insights from consumers, and those types of things that drive results in a world where the main game of auction-based yield management and making sure that we’re driving the best possible efficiency outcome, isn’t the only way that results can be driven.

Trend 2: Shifting the balance from acquisition to retention

It hasn’t been a secret that it’s easier (and cheaper) to upsell an existing customer than it is to acquire a new one. The numbers speak for themselves:

  • Improving your customer retention rates by 5% can increase your profitability by up to 95%. (Harvard Business School)
  • It’s 5-25 times more expensive to acquire a new customer than it is to retain an existing one. (Harvard Business Review)

More than ever before, the increasing pressure on acquisition budgets across the digital space is forcing teams to shift their efforts towards retention and make the most of customers they already have to try and grow. Nevertheless, Rory shares how he’s seen that by shifting your focus away from acquisition, you can ultimately fuel more paid growth.

Rory 17:23
What’s interesting about that to me is this idea of being able to understand the full lifetime value of a customer very quickly points most sophisticated advertisers towards activities and strategies that they can do to further the conversation with a customer after the acquisition. So rather than going off and getting a new customer as often as we were before, now the balance seems to be shifting towards speaking to the people that you already have – cross-sell upsell, and improve the relationship. How can you provide opportunities to get to know each other better and ideally increase the value of customers through that kind of activity? I’m seeing a lot of that and there’s a lot of different ways that it’s being done.

Finally, this acknowledgment that it’s easier to upsell an existing customer than it is to acquire a new one, which we’ve been saying since the days of Rockefeller are actually landing. And I think part of that is marketing budgets were cut pretty severely back there, and teams had to do more with less, and there was a need to get scrappy and creative and inventive to try and drive the budget further than it went before.

I also think that there’s a really important trend that seems to be establishing itself with the idea that those companies that are surfacing more value from their existing customers are generating more revenue, increasing their marketing allowable, and going more aggressively after the auction markets. So it becomes a bit of a self-fulfilling prophecy. You can fuel more paid growth by upselling and cross-selling on a more efficient basis.

Trend 3: The merging of marketing and product teams

Another noteworthy transformation in the digital space is the merging of marketing teams and product teams. This can increase collaboration, ensure the product is meeting customer needs, streamline communication, and help you make more informed decisions.

But this can also be a daunting change! Rory shares how creating alignment between teams and creating a common language between the departments is key to success.

Will 26:02
I think that holistic view is what’s really interesting to me around digital marketing right now, but that ability to say that it’s not just for the marketing team to bring someone to the website or to the stores, and it’s not just the marketing team to get them to sign up for a trial. It’s just getting pushed further and further in, and it seems to me like the marketing teams and the growth teams, they’re all merging together and into the product teams. What’s your visibility on this transformation? Is there any piece of advice for companies around how to help collapse that?

Rory 26:38
Yeah, a few. First, on the relationship between product and marketing, this is a debate as old as the hills. Is your company a product-led business, or is it a revenue, marketing, or sales-led business? More and more, the winning formula from what I’m seeing is product-led where a product team is able to develop insights about a market. That kind of sits between engineering and the business, sales, and marketing to create a strategy and try to drive resources from all aspects of the business to deliver this vision of who the user is and what they want, and how they can win the day.

To that end, product teams are getting far more sophisticated on who their customers actually are, and the data that they’re using to paint that picture is far more sophisticated than it was in my experience, even five years ago. So the ability to collapse the lines between the marketing team and the product team gets really important. Are they using the same data set? Do they have the same view of the world? Because the work done by those two teams is very different, but it uses the same insights like user flows, drop-off points, and responses to different messaging. All these things become the fuel of the business, and the teams are actually using them just for different ends. So the first thing that I’m looking for is whether everybody is looking at the same data to make the right decision. And I think that’s especially true between product and marketing.

Each team has its job, but the information that’s being surfaced is typically common across all those different groups, and as a leader or somebody driving a team, it’s important to ensure that there’s a consistency of vision across the data that’s being consumed, and that it’s being used in the right way.

This is a giant piece of the puzzle right now that frankly, many companies are struggling with because there’s a lot of time spent in technology companies in English to English translation. Just people thinking about things in a bit of a different way, and those little fluctuations create massive discrepancies down the road. So keeping everybody together, making sure that the data’s telling the same story, and that the right action is coming across each team from that core of the data I think is one of the most important superpowers of the tech business.

Bonus: Advice for marketers in 2022

With such an extensive background and knowledge, we just had to ask Rory one last question. What is the top thing growth leaders should be aware of so they can have a successful year ahead?

Rory 42:57
If I could give one message to anybody who’s driving a marketing budget at the end of this podcast, it would be to find your authenticity and speak it.

Whether it’s new customer acquisition or existing customer dialogue. I believe that the way to really break through and deliver more efficient outcomes from a budget perspective, but also durable, long-term growth is by doing the things required to establish a real relationship with a customer so that they can then a) buy more themselves and b) advocate for you outside of the relationship, and allow them to become part of the company’s story.

Because there’s an authentic residence between a brand and a user. I don’t think it’s happening enough. I think in those cases where it is and the example that we used to talk about all the time is the Wendy’s Twitter account – one of the most entertaining things you’re ever going to read in your life. Why? Because they’re just saying what they think in a way that’s authentic to them and it draws in hundreds of thousands or millions of users. Extraordinarily effective and it breaks them through the noise. People become loyal when you talk to them like that and I think that’s what’s missing in a lot of marketing strategies right now. The ability to open up that authentic path and authentic communication is, I think, a superpower and one that more and more companies should be focusing on how to exploit.

Want to know more? To hear even more insights from Rory, check out the full episode anywhere you listen to podcasts. Special thanks to Rory Capern for being on the show!

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