The new reality of marketing under COVID-19 has entered week three.  Time for our third edition of “What’s Going On Out There?”

I want to address two things in this email:

  1. What are we seeing for ad performance across our clients?
  2. What do we suggest as the optimal strategy right now?

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Executive Summary (Full Details Below)

Summary of Changes:

  • CPM down ~45%
  • CTR unchanged
  • CPC down ~45%
  • Onsite Conversion
    down 53%
  • Overall, Cost of Customer Acquisition up 28%

What Does it Mean?

  • People are being very “browsy.” They’re clicking to site and clicking around, but they are not buying.
  • Your best customers are impacted the most (retention) & your new customers are impacted the least.

What will Happen Next?

  • CPMs are dropping steadily by 20% every week
  • Conversion rates dropped aggressively for two weeks, but conversion has been stable for 2 weeks
  • We could see a 20% decrease in CAC every week going forward

Strategies to Adapt:

  1. Shift spend towards Prospecting
  2. Change your creative
  3. Test site-wide promotions
  4. Launch product-view optimized campaigns
  5. Build retargeting or video view pools for later harvest
  6. Build up your email lists

Detail: What is ad performance like right now?

Cost Per 1k Impressions (CPM):

Facebook & Instagram CPMs are down 44%, and keep dropping steadily 20% per week.

  • What are we seeing?
    • CPM’s are down by 44% over the past 3 weeks
    • CPM dropping 20% each week
    • CPM are not stopping their decline- the rate of fall is steady each week
  • Why are we seeing this?
    • Continued increase in “supply” because more people are using FB for more minutes
    • Continued decrease in demand, because many advertisers are cutting budgets
  • What happens next?
    • CPMs have not hit a bottom yet. Expect this trend to continue,

Click Through Rate (CTR):

Overall, Facebook CTR are unchanged, which combined with dropping CPMs, means CPC are down about 40%.

  • What are we seeing?
    • CTR has remained flat over the past month overall (with week to week noise)
  • Why are we seeing this?
    • People are on Facebook trying to distract themselves, not to shop.
    • They are browsing but not buying, and that remains true since broad “social distancing” measures were implemented.
  • What happens next?
    • We expect this trend will continue over the coming weeks.

Cost Per Click (CPC):

  • What are we seeing?
    • CPC system wide is down about 40%
  • Why are we seeing this?
    • Because of the drop in CPM (~44%) and steady CTR
  • What happens next?
    • As long as CTR remains flat (likely) and CPM keep dropping every week, we expect this trend of CPC dropping around 20% per week to continue.

On-Site Conversion:

On-Site conversion is down a huge 53%, but has improved in the past week.

  • What are we seeing?
    • On-site conversion is down 53% in March
    • This is by far the largest change we have seen in the entire funnel
      • Retargeting conversion rates are down 60%
      • Retention conversion is down 60%
      • Prospecting conversion is down 40%
    • Note that while there was a huge drop in the 1st half of the month, the most recent week conversion rates have been flat to up.
  • Why are we seeing this?
    • Users are trying to burn time, and are not specifically trying to shop
    • They are not converting at 0%, (you can still sell to them) but its not easy to convert them.
    • Now that the newness has worn off, people are beginning to buy again
  • What happens next?
    • Our best guess is that conversion rates have reached a bottom and are now stable to upwards.

Cost of Customer Acquisition (CAC):

Overall cost per purchase is up 28%, but has been improving in the past week.

  • What are we seeing?
    • Overall CAC has increased 28% but has been improving in the past week
      • Retargeting CAC up 23%
      • Prospecting CAC is flat
      • Retention CAC up 82%
    • In the past week CAC has dropped by 10%
  • Why are we seeing this?
    • Since conversion rates are down more (-53%,) than CPC are down (-40%), Cost of acquisition is rising.
    • Also, since In the most recent week, CPM continued to drop while conversion rates rose, in the most recent week we saw a decrease in customer acquisition costs.
  • What happens next?
    • Given the steady drop in CPM, and the flat to up conversion rates, we expect CAC to drop about 20% a week for the next few weeks.

How can we improve performance?

Strategy #1: Shift spend towards Prospecting

  • Prospecting is the least impacted
  • Retention is the most impacted
  • Whatever campaign budget allocation you had before is wrong now

Strategy #2: Change your creative

  • Eliminate creative that shows groups of people
    • Instead try single-person or leverage product imagery
  • Emphasize safety & convenience
  • Creative that calls out “rapid delivery” and “ships from US” are doing very well right now

Strategy #3: Test site-wide promotions

  • Multiple clients have done “20% off sitewide,” and all have had a huge impact on performance.
  • We have tested more complex promos, and they have not worked (discounts on certain products, etc)
  • We are testing more sitewide promos right now.

Strategy #4: Launch product-view optimized campaigns

  • People want to browse, so give them what they want
  • We have product-view optimized campaigns that have gone from 2x ROAS → 16x ROAS in the past few weeks.

Strategy #5: Build retargeting or video view pools for later harvest

  • Video view & site traffic audiences are retargetable for 180 days.
  • Take advantage of low CPC & CPM to build these audiences now
  • Harvest these audiences once we return to bis-as-usual later.

Strategy #6: Build up your email lists

  • Cost per email has gone down significantly
  • Build up your email list now for later use, at a 50% discount to normal costs.

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