Marketers are pouring money into adtech for new customer acquisition. They are taking unsustainable shortcuts in pursuit of growth. CAC is rising rapidly and sucking away even more of the marketing budget. Marketers therefore face a doom loop of spending: rising CAC demands more adtech spending, which reduces funds available for existing customers, which impacts the relationship and experience, which in turn causes churn, which pushes marketers further down the adtech path. The solution lies not in trying to optimise adtech spending but to start with existing customers and focus on how to build a better relationship with them.
In this quest, marketers need to solve two problems: attention recession and data poverty. Existing customers can be brought back to the brand’s properties (website and app) via two mechanisms: great branding or push messages. Branding takes time and money to build, and is also an outcome of the experience delivered. On a daily basis, it is the push messages (sent on email, SMS, WhatsApp or as app notifications) that have to do the magic. The problem here is that customers are not paying attention to the promotional messages sent by marketers: open rates in email and SMS are very low and push notifications are blocked by many app users. In other words, customers are not listening to what brands are saying.
There is a second problem: lack of a unified customer view to personalise the customer experience. While martech platforms help brands collect a lot of customer data, the first-generation point solutions do not provide an integrated view since data gets siloed and integration costs can be very high. For example, one of India’s leading banks does not recognise me as the same person who has a bank account and a credit card with them even as the mobile number is the same for both accounts!
Taken together, attention and data are the two fundamental challenges that marketers need to solve. So far, they have taken the easy way out: discounts to get customers to pay attention (which means treating every existing customer as a new customer each time) or just retargeting them via the adtech platforms. Both are expensive propositions and hurt profits. But for marketers goaled on growth, profits are not their concern. But for a CEO or CFO, this short-sightedness has serious implications on the bottom line.
This is why I believe profit-centric marketing must become a founder/CEO/Board agenda. Unless the top leadership understands what’s hurting their business, they will not escape the spending trap. And without ending adwaste, there is no path to profitability, even though they may be able to demonstrate short-term growth. To make sustainable profitable growth a reality needs a rethink on all aspects of marketing: next-gen ideas for email, loyalty, martech and adtech.