A Q&A From The Lead Innovation Summit with Juan Meija, Managing Director at Brightower, and Christopher Jones, Managing Partner of Markacy. Both industry experts sat down to discuss retention and acquisition strategies for today’s leading brands. Here’s a brief transcript of the conversation.

Question 1: (Juan Meija (Managing Director at BrightTower), Markacy is an award-winning digital strategy firm with a focus on marketing and advertising, but you come at it with a strong analytical and financial bent. Do you think the financial aspect of marketing is more important than the creative side when it comes to “Customer Acquisition and Retention”? [somewhat of a provocative question but just trying to get at the financial/ROI points you made on our call]

Chris Jones (Markacy, Managing Partner): Both the financial and creative aspects are crucial in “Customer Acquisition and Retention,” but at Markacy, we tend to favor the analytical and financial wide while fully appreciating and leveraging creative elements. One example of this is that you need to understand margins to be successful in media and marketing. On the acquisition side, a lot of media tactics prioritize high conversion rate, low AOV products – which is at the expense of margin and ROAS. We seek to make manual adjustments to ensure profitability isn’t inappropriately deprioritized. Additionally, with respect to retention, a lot of brands will overspend on paid media to acquire a second purchase when that customer would’ve bought twice through a strategic, low cost CRM tactic, and that money could be better reallocated. These are just a few examples of how we really aim to bring everything back to the financials because in our view a lot of consumer brands fail not because they have terrible products but because they too often neglect essential business and financial fundamentals.

Question 2: (JM) What are some of the mistakes you see some of the larger brands make? I know we’ve discussed in the past about how some brands spend money on low-quality ad units.

(CJ) One of the most common mistakes we observe in larger brands is their lack of accurate measurement frameworks. Many of these brands primarily rely on Media Mix Modeling (MMM) through multivariate regression. Unfortunately, this approach often leads to an overemphasis on lower-cost channels, as models tend to group digital impressions broadly without considering hyper-targeting by audience or tactic, resulting in overweighting the benefits of display ads with low CPMs.

Another common mistake is TV oversaturation, where brands maintain significant spending to counteract the diminishing returns of awareness. Now I’m a huge fan of TV – it’s an incredible brand unit but spending on TV just to minimize decay effect is often at the expense of achieving better ROI elsewhere.

To avoid these mistakes, our focus lies in implementing better strategies. We concentrate on high-visibility placements, captive audiences, and campaign creative with potential virality loops. In terms of measurement, we prioritize custom incrementality and engagement metrics across ad media to gain a deeper understanding of user interactions with ads. While we don’t completely move away from MMM, we supplement it with custom incrementality and engagement frameworks, adding nuance to how users truly interact with ads. This approach helps us optimize our marketing strategies and avoid common pitfalls seen in larger brands.

To put it simply – if I had to venture an approximation of the gaps in standard media mixes, I would say that many large consumer brands could cut 50% of their display budget and around 25% of their TV budget and see virtually no drop in incremental sales. 

Question 3: (JM) Given the macro-economic environment, what is the biggest change you’ve witnessed your clients make (or encouraged them to make) when marketing to new or existing consumers?

(CJ) Without a doubt, the most significant change we’ve witnessed our clients make, and one that we have actively encouraged, is placing a strong emphasis on efficiency and profitability in their marketing strategies.

This shift involves adjusting our models and key performance indicators (KPIs) to better align with current macroeconomic conditions. It’s crazy to say but in the ‘growth at all costs’ height, we observed that many brands were previously spending in excess of the customer’s lifetime value (LTV).

We have also better-factored margin into the LTV to Customer Acquisition Cost (CAC) models, which we find surprisingly wasn’t as commonplace before. Our primary focus with clients now is becoming more strategic in order to maximize efficiency without sacrificing long-term growth. It’s a big challenge but something we’ve been able to help many of our clients navigate successfully over the past 12 months.

Question 4: (JM) In the coming years, how else do you expect clients will leverage analytics and financial information to acquire and retain consumers?

(CJ) In the coming years, we expect clients to leverage analytics and financial information with increased sophistication to acquire and retain consumers. My rough predictions are:

  • (i) Clients will use product margin and customer lifetime value (LTV) as strategic considerations for customer acquisition, allowing for a more nuanced approach to marketing investments.
  • (ii) Traditional platform-metrics will be surpassed by custom incrementality models, providing a deeper understanding of ad performance and ROI.
  • (iii) Brands will increasingly utilize AI and advanced analytics to maximize retention strategies, optimizing customer engagement and loyalty. I’m of the opinion that external AI tools (e.g. third-party apps) are best used to interpret data and surface hard-to-see insights vs trying to find similar new customers and bet Meta and Google at their own game –  Meta or Google already have their own advanced AI/machine learning capabilities that will be hard to surpass for the foreseeable future.

Question 5: (JM) As you think about Markacy’s role in the ecosystem, are there other capabilities you will be adding to assist your clients?

(CJ) It’s been an incredible journey growing our agency and seeing many of our clients continue to grow through our team’s services. As we look ahead, we are excited to be launching Markacy Ventures, a new initiative where we will build and invest in leading brands. One of our upcoming projects will include a homegrown consumer brand that we expect to launch in Spring 2024. This will be an exciting way for our team to contribute their expertise and experience to the market and continue to make a positive impact on consumers and the broader business community.

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