In the last week we’ve seen very different responses from the various niches our brands are in. Some brands are having the time of their lives while others are watching their empires shrinking overnight in front of their eyes. Here’s what we’ve noticed: where some see a crisis, others see opportunity (even if they’re losing money in the short-term).
Our brands look to us for advice on how to navigate these times of uncertainty and our teams have done an amazing job with their crisis management plans. It’s not enough to tweak a few things in your marketing channels and reduce budgets.
Times like these require a holistic rethinking of entire business strategies including cashflow and inventory management, product lines, branding and restructuring of marketing strategies.
In addition to testing our own insights, we’ve also attended Facebook’s webinar on what trends they’re noticing and what predictions they have on how the market will evolve in the next few months following the pandemic outbreak, and here’s my take on the topic.
Today, I broke down:
- The impact of the current crisis on our brands’ sales
- How our businesses are reacting to the crisis to stay cash-flow positive
- How we are turning the crisis into an opportunity even for the worst-impacted brands
Let’s dive in.
3. How coronavirus impacted different brands?
Here’s how our brands have been impacted on Facebook ads alone:
- Food brands -> business as usual, ROAS increased by 30-50%, conversions are stable, CPMs have dropped by 30-50%, which means we can scale much faster; no supply issues.
- Fashion -> TERRIBLE; ROAS down by 20-40%; traffic stable, but conversions are down by 50-60%; CPMs are down 30-50%; MASSIVE supply issues: one company had to close their ecom department and fire all of their employees overnight because they needed to hold inventory for wholesale.
- Supplements -> KEEP POURING MONEY BABY! ROAS UP BY 40%; CPMs are down by 10-20%, CPC is down by 10-20%; conversions are up by 20-40%; no supply issues; people are thinking about their health more, so we’re scaling up.
- Alcohol -> business as usual; ROAS increased by 20-30%, conversions slightly increased, CPMs dropped by 10-20%; no supply issues.
- Beauty -> ROAS climbing up by 10-30%; stable conversions, lower CPCs and CPMs; no supply issues; perfect time for beauty. [One outlier is face lifting cream on the German market that saw a dip of about 20% ROAS with no CPM decrease and an increased CPC]
- Jewelry (high ticket) -> ROAS is down by 30-50%; conversion rates are down by 50%; CPMs are down by 30-50%; no supply issues; people have stopped shopping for luxuries and are saving cash in the expectation of lay-offs;
- Subscription boxes -> ROAS is up 20-30%; conversions are stable, but CPMs are down 20-30%; good time for subscriptions.
- High-ticket electronics: APOCALYPSE; ROAS down by 20-40%; CPC is stable, but conversions are down big time; CPMs decreased by 30-50%; one company had to temporarily lay off 85% of their staff on top of that, they were legally obliged to continue paying for TV ads that yielded ZERO effect.
- Pet accessories -> ROAS is up by 20-30%; conversions are stable, but CPMs are down by 20-30%; some supply issues.
- Discount retails -> Living the dream! ROAS increased by 20-40%; conversions are stable; CPMs are down by 30-50%; some supply issues; people have nothing against shopping for deals now.
- Blankets & travel accessories; ROAS is down by 40%; CPC is stable, but conversions are down by 40%; some supply issues.
- Watches (100 USD+) -> This was a really sad week for one of our watch clients who had to downsize their factory and move it to one employee’s house so they didn’t have to commute. They also had to cut salaries temporarily; ROAS is down by 30-40%; CPC is down by 20%, but conversions are down by 50%;
4. Google Ads
Google ads numbers are very similar: CPMs have gone down by 10-30%, except for fashion, where they’re up by 5-10%; CPC has either gone up by 5-15% for brands negatively impacted, or has gone down in line with the CPM decrease; conversion rates are down by 20-60% for those badly affected.
- Email revenue is down by 30-50% (for some by almost 100% 😞)
- Organic search revenue is down by 10-30%; search volume is down (e.g. for jewelry) by 70%; for fashion down by 15-40%; supplements: search volume down by 5-20%, but organic search revenue is up by 10-20%
6. …to sum up.
- We’re seeing a consistent drop in CPMs -> people sit at home and there are more eyeballs on social media, so competition on Facebook auctions is lower.
- Consumers feel uncertainty due to the probability of lay-offs and have stopped spending on luxuries and travel.
- People are still bored, and they will not hesitate to buy cheap items, things they’d use at home, entertainment, and feel-good products such as beauty or home fitness gear online.
- Health markets are living a dream as consumers have become super health-conscious.
My biggest conclusion from this is that THE MARKET IS NOT STAGNANT.
People are still spending money; they just spend it on different product categories. This is where the opportunity lies. If you’re on the lucky side of the spectrum, great! Keep scaling up and stockpile as much cash as you can.
But if your brand is on a decline, don’t panic. Crisis is an opportunity to maximize efficiency, get lean, and get ready to come back stronger.
But how do you act to 1) not run out of cash and 2) actually keep making money and possibly make more?
There’s a lot of advice floating around that goes like this:
“Hey, CPMs are going down, so just keep advertising. Stay on people’s minds. Once they’re ready, they’ll buy from you”
There are a few flaws to this thinking.
1) Yes, CPMs are down, but so are conversion rates. Only large corporations can afford to burn through branding budgets that do not yield returns and do not run into cashflow problems.
Most SMEs will need a strategy that fulfills not only their long-term growth targets but also their short-term cash flow needs without the need to leverage debt in these uncertain times.
2) There is a low CPMs benefit in the short-term for the product categories that consumers are currently buying. You’ll need to refocus what you’re selling (and to whom) before you decide to ramp up your ad spend.
Here’s a master framework for crisis like this:
- 1) Cashflow plan: Fix cashflow holes & reduce costs while having a long-term picture in mind.
- 2) Market plan: Diversify revenue streams, restructure your product portfolio, refocus branding, and re-distribute marketing budgets.
- 3) People plan: Work with your team and strengthen your company culture.
7. Cashflow plan (costs out)
- Especially if you’re selling through marketplaces, use cashflow financing companies in order to skip the payout delay between acquisition of a customer and payout of your cash.
- Consider switching to credit cards that provide cashback for advertising spent. You can get up to 10% of your spend back to reinvest into other activities.
- Reduce inventory through discount promotion campaigns. If needed, run twice a week “25%+ off on everything” campaigns via email like All Saints. You’ll unlock plenty of much-needed cash.
- Negotiate delayed payments with your suppliers. They’re most likely suffering too, and they might be more than willing to help you out in the short term for the sake of long-term relationships.
- To avoid layoffs, work with a mix of in-house team and contractors.
- Reduce fixed costs
- Explore automation opportunities within your admin tasks, manufacturing, fulfilment, marketing, and sales.
- Downsize the production line, if feasible (e.g. one of our clients moved their production line into their apartment temporarily).
- Work with your team to take a solitary pay freeze/cut depending on whether you’ll need them to work or not. If you’ve built a strong culture, your team might be more than willing to help you out because they’ll know that for the long-term, you’ll have their backs too.
- Switch to non-fixed-fee fulfilment centers.
- Eliminate all non-essential software costs.
- Restructure your marketing budget (more about it in the next section).
- Explore automation opportunities within your admin tasks, manufacturing, fulfilment, marketing, and sales.
8.Market plan (Revenue in)
There’s only so much that you can save without destroying the systems you’ve built in your business. You want to reduce the need to compromise the long term for the short term as much as possible. To do that, you’ll need to find creative ways to generate more revenue.
Here’s an example contingency plan we laid out with one of our brands:
- Product Strategy – as crazy as it may seem, if your product category is not what people are buying right now, this is the time to launch a new product to diversify your portfolio. Look back at my analysis of different niches and think what category is in line with your branding that you can get into. Focus on the lower-ticket items, stay away from luxuries, and above all, try products that relate to the coming season that people will need despite the crisis. Example: for our luxury watch brand, we’re selling cheaper sunglasses (summer is coming), earrings, and bracelets.
- Brand Strategy – Crises affect poorer demographics more severely, while more affluent groups despite some short term hesitation they will quickly get back to purchasing products within the luxury category. Consider targeting customers with more disposable income using high-end branding with products of high perceived value and use ad targeting to laser into customers who tend to spend more.
- Channel Strategy – it goes without saying that brands with significant offline retail reliance, need to push online more. Brands selling through their own stores may in fact consider diversifying their sales channels onto Marketplaces. If you’d rather not cannibalise your brand by competing on Amazon, consider launching separate brands for marketplaces only. If your operating expenses do not increase drastically, you’ll gain a crisis-proof portfolio consisting of some high-end products and some low-end ones.
- Offer Strategy – even if you don’t typically like to use discounts in your strategy, strategic discounting is a tool you may want to employ short-term in these extraordinary times to get rid of excess stock and sustain sales. Make sure you and your marketing team are all clear on your Profit per Sale metric, including and excluding discounts and set clear ROAS targets that take profit into account for performance marketing department.
- Increase LTV – Monetizing Customer lists:
- If it would take too long to launch a new product, consider doing joint ventures with other brands that are on the rise whose products are in line with your brand and who sell to the same audience. Reach out to them, strike a % rev share deal, share pixel data, and plan joint communication. In exchange, they might also sell your product to their audience, which could become an interesting new acquisition channel.
- An additional twist to that could be researching offers that compliment your brand on affiliate networks. Find an offer that suits your audience and launch it to your customer lists via email and paid ads. Your audience will thank you for more diversity of products and you’ll sleep well knowing that you’ve just diversified your revenue streams.
- Intensify cross-sells of other product categories in your store -> for example, leverage %-off deals and test bundles. Use email marketing and push notifications
- If you already have a large product catalogue, consider launching a mobile app with weekly/daily deals. Why? It’s another marketing channel you own, it builds massive brand loyalty, and you can send push notifications which are essentially free advertising. Building a mobile app is much easier and cheaper than you might think. Shopify apps such as Shopney can in minutes turn your Shopify store into an app.
- Turn your customers into affiliates. Everyone will want to make some cash soon and you and your customers can help each other out. Make sure that the program communication fits your brand and you’ll soon see a nice influx of brand ambassadors that don’t require any additional costs.
- Take advantage of SMS sequences and push notifications.
- Increase AOV:
- The more you can make back on each acquired customer, the easier it will be for you to counteract the decrease in conversions. Use various upselling strategies, cross-sell apps, and plan high AOV bundles.
- Maximize Conversion Rates:
- For the short term, add a website banner emphasizing that you’re still delivering products. If feasible, make all deliveries free. Mention where your products are manufactured (unless it’s China). Add: Disinfected packaging and Safe Contact-less delivery. This banner increases conversions across all of our brands (hard to calculate by how much, as we didn’t split test it, but was definitely a solid increase of 10-20%).
- For the long-term, implement a full-conversion rate optimization program with A/B split testing in order to maximize the efficiency of your traffic.
- Use cart abandonment emails , SMS sequences, and push notifications extensively
- Activate longer timeframe retargeting lists on low budgets via Facebook and Google ads (also Adroll or similar, if possible), e.g. use 180 days retargeting audience (even using Reach or Engagement objective to further lower CPMs) and run discount campaigns (will help reduce inventory and bring additional income).
- Walk your traffic team through your fixed and variable costs and plan ROAS targets for the crisis; lan how much profit the brand needs to make in order to minimize cash loss and decide what ROAS vs spend balance will be the easiest to strike in your situation. You can use a copy of our sheet. Keep profitable campaigns running and cut inefficient ones. Especially keep retargeting but remember that on its own, retargeting without new prospecting traffic will not stay profitable, so strike a nice balance between prospecting and retargeting budgets.
- Double down on high-intent channels: use Google Search & Shopping extensively. If you’re not yet on Pinterest and you sell to a female demo, this is the time to enter Pinterest. It’s an intent-based channel and people there are ready to buy. Pinterest has received some bad PR suggesting they have cheap traffic that doesn’t convert, but from our experience it’s a matter of having a working campaign framework.
- Influencers: time to enter Word of Mouth on steroids. With so many fashion brands on decline, most influencers will be out of income soon. This means there will be lower costs of running influencer campaigns! Influencers, if done right, are not a money drain without returns. Their traffic will now be cheaper, so make sure you polish your team’s negotiation skills and know that you’ll have more leverage. But traffic aside, influencers have not only trained themselves to be master content producers, but they have also tested what works and what doesn’t for their audience, so they can create high-quality content for your ad campaigns. It now goes without saying that User-Generated style content is among the best converting ones.
- Push heavy on SEO -> investments here will continue to pay off for months to come. This is especially the case if you’ve already been on the market for a while, as you can receive plenty of organic traffic. If you’re not already, find an SEO strategist that you can trust, optimize your website, and start building backlinks and writing content. You’d be surprised how much low-hanging fruit you’ve been leaving on the table.
- Explore offline marketing – postcards! They’re cheap and really do provide measurable ROAS.
- Explore clean affiliate networks that can get you traffic without you risking any of your ad budget. Just make sure you pre-screen affiliates and have solid contracts and briefs so that they don’t misrepresent your brand.
- Data Attribution – with people under quarantine, TV and digital placements will bear significantly more attribution, while all offline banners will be significantly discounted. Most digital-only brands, will likely not see massive differences in their attribution paths, but do monitor your Google Analytics Attribution Model Comparison tool and Facebook Attribution reports to see how your customer behaviour is changing and restructure your ad budgets and targets for your marketing teams accordingly.
No business can thrive without people. Your team and your culture are what makes or breaks businesses, especially in the times of crisis. Be transparent with your team, explain the situation, and brainstorm on how you can keep the company afloat together. Your team will have some great ideas on how to bring new customers to the business, how to find efficiencies, and they will be more than willing to take a temporary pay cut in order to help you out. You’ll all come out of the crisis with a stronger culture and a much more efficient business.
Let me know what other creative ways you find to turn this crisis into an opportunity.
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