The pace of innovation has resulted in enterprises constantly finding themselves battling immense competition. New players pose a serious challenge for customer acquisition, and the difficulty is amplified by technology that has resulted in the creation of multiple channels and customer touchpoints.
To add to this, there is an increasing pressure to improve revenue margins. Hence, it becomes critical for organizations to adopt marketing methodologies that increase customer base while reducing the cost of acquiring customers.
Why marketing matters
Poor or ineffective marketing tends to be one of the top reasons why organizations fall behind in the race. Several other reasons are also intricately related to the marketing function. Knowledge about the market needs, pricing and user experience comes from a deep understanding of the target audience and is crucial for the success of the organization.
The importance of marketing is also well reflected in the marketing spends of organizations. Marketing budgets of major US companies have grown in the past one year, and are expected to grow further. For instance, the average marketing spending of consumer services industry, as a percentage of revenue, has grown from 17.4% in 2017 to 18.9% in 2018 1,2.
With such large allocations of spend going towards marketing, it is essential that these activities result in customer acquisition and effective customer engagement. It is widely accepted that a healthy organization must have a customer lifetime value/cost of acquisition ratio of 3 to 1, i.e., on every $1 spent on customer acquisition, $3 should be made over the life time value of the customer. The challenge lies in maintaining, if not improving, this ratio.
The rising cost of acquiring customers
Digital marketing today is the ‘go-to’ channel for customer acquisition in almost every industry. Automated, reporting-on-demand, flexibility and scalability are some of the key benefits offered by digital marketing, making it an extremely attractive choice. But there are questions arising about its profitability.
With the advent of the smart phone revolution, the demand for digital advertising has seen a tremendous increase. Add to this the oligopolistic nature of the advertisement landscape, and what we see is a steady increase in the cost of digital advertising that shows no sign of decline. For instance, CPM (cost per thousand impressions) of a global social media platform increased by 122% over the past one year 3.
The need of the hour is to explore avenues that allow marketing spends to be more effective in terms of customer acquisition.
Making marketing effective
While technology poses the challenge, it also provides the answer. Marketing Cloud platforms offer a robust way of ensuring that the enterprise’s marketing function meets its objectives while being cost-effective. These platforms offer an integrated view of the customer across various channels – both online and offline. This enables the enterprise to meet consumer demands and expectations – offering the right product at the right time through the right channel. Thus, enterprises can offer enhanced customer experience and increase their revenues – with the flexibility, scalability and cost-effectiveness offered by the Cloud.
An American department store chain adopted Marketing Cloud to create a customer-led marketing organization. This enabled the company to shift to one-to-one customer marketing across all digital channels, which resulted in an increase in conversion rates and revenue.
With the inclusion of technologies like Artificial Intelligence, Machine Learning and Blockchain, we will see further enhancement in the benefits of adopting Marketing Cloud. This is the way forward for not just reducing the cost of acquiring customers, but for making the marketing function effective again.