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High-tech returns to a profitability model and undermines the foundations of the marketing world - voila! Marketing and digital


After years of growth at any cost, the high-tech companies are reducing the money channels and the marketing departments are forced to reinvent themselves. So how do you do more with less to increase profitability?

Marketing departments that once generated millions are now under budget pressure and limited resources. (Photo: Unsplash)

"There is money, what is needed is to bring in as many investors as possible and show significant growth from month to month."

This is a sentence that many marketing managers have become accustomed to hearing from their managers in recent years.

Concepts such as Hyper Growth, Blitz Scaling and Land grabbing, were the ones that guided whole teams of marketing people, when the goal was to produce growth as fast as possible in the amount of users of the various companies' products, and in the amount of sales that the companies knew how to generate from each new user.

All of them raised significant funds from the various venture capital funds and the competition for the eyes and attention of the potential consumers only increased - between companies in the same field, and also between companies in completely different fields, after all - there is a limit to the level of attention that can be obtained from a stranger who, after all, wanted to see videos of cats who push a glass off the edge of the table on Facebook.

In recent times, these expressions are beginning to disappear and their place is being taken by concepts such as responsible growth, profitability and "doing more with less".

180 degree change.

The economic situation created in the last year in the market is radically different today than it was a year ago.

The war in Ukraine, the rise in the price of raw materials, the collapse of the financial markets, and the collapse of the value of many companies have led to a tribal situation, with regard to raising funds and managing marketing budgets, money today is more expensive than before.

As a result, people and companies are cutting back on expenses and the ability of companies today to generate a profit that matches the pace of their spending as it has in recent years has become much more difficult.

Companies that in recent years relied on rapid growth while aggressively marketing their products and building long-term profit models (LTV), are going through a very radical process of changing the forms of work that will result in them seeing profits much faster by reducing expenses and improving the company's profit models.

Until about a year ago, the role of marketing departments in many companies was to produce rapid and aggressive growth while investing in various marketing channels, some of which require very large investments of budgets such as advertising in search engines, social networks, investing in advertisement videos on the various video channels, and buying media on a large scale on various websites.

This was made possible with the help of the companies' extremely high fundraising from investment funds, and profit models that allow reaching profitability over a longer period of time (one, two years and even 4-5 years).

Today's economic situation has resulted in the demand and need to generate growth in profitability models where the company returns its investment in each customer already at the time of the customer's first purchase, or in a very short time (if two or more purchases can happen in a short time).

There is a radical change in the marketing approaches, and in the working methods through which the marketing people and the various companies need to know how to generate growth while investing much less money, with more limited human capital, and know how to convert potential customers into paying customers at a much higher percentage than before.

So how do you do it?

Here are some tips:

1. In-depth understanding of the company's profitability model and creating discipline around it

If I know the company has decided it wants at least $50 in profit on each new customer purchase, that means as a marketer, I can pay up to $100 for a customer who makes me $150 on average.

This means that I need to examine how I advertise and market today, through which channels, and know how to prioritize the more profitable ones and reduce or close the channels that do not meet the above conditions. This necessarily means reducing budgets and marketing channels and focusing on the more profitable channels.

2. Changing work practices and hiring employees

People who managed budgets of millions and got used to working in conditions that allow them to experiment and "burn" money in search of the next client (a very legitimate way of working in order to expand the circle of potential clients), I, marketing, did not necessarily know how to generate growth in restrictive conditions.

They are required to do more using limited resources and broader constraints that make the professionalism of any marketer that much more meaningful.

There is a difference between knowing how to market a product at a loss, even if profitable in the long run, while investing huge budgets, and marketing a product that generates profit from the first moment on a limited budget.

A fundamental change in the way people work is required here, and not everyone knew how to do it.

There is a significant professional challenge for the marketing people and an equally significant managerial challenge for those who manage them and outline the new path.

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3. A greater amount of profitable marketing channels is required than before

It is very important to create diverse and new distribution channels such as -

  • Affiliate programs where the company will pay for each customer purchase (CPA) and not for clicking or viewing an ad.

  • Developing B2B2C partnerships where other companies can deliver your marketing messages to their customer base that overlaps with your target audience

  • Working with different distributors in revenue share or CPA models (different salespeople, physical or virtual stores, complementary services for your product, etc.)

  • Cooperation with various content sites - net marketing value together with the value of organic SEO for the company.

  • Collaborations with comparison or review sites

If until recently companies could continue to generate aggressive growth by using less profitable channels, today they are much more limited and therefore need to know how to generate the same growth from other channels and this requires an organizational change in the structure of marketing departments, a redistribution of advertising budgets, and often development Capabilities that did not exist before in the company.

For example, let's take a company whose marketing people mainly specialize in advertising on social networks (Facebook, TikTok, Snapchat, etc.) and search engines (Google, Bing, etc.).

Since these are distribution channels where there is high demand (search engines) alongside an infinite target audience at different intent levels (social networks), many companies invest large budgets in marketing through these channels, whether they are invested in advertising itself or in hiring employees who specialize in these channels.

In many cases, the costs of acquiring customers through these channels are high, and only by optimizing over time do they decrease.

That is, it takes time until the marketing people manage to find the right combination of ads - text - landing page - targeting target audiences, and a considerable number of other parameters, and during this time the company acquires customers with negative profitability.

For such a company, the transition to today's economic reality and the demands it generates is complex and painful.

4. Investing resources in the company's data capabilities.

The importance of data, and the ability to link distribution channels and their impact on the bottom line is extremely essential.

When you understand which distribution channel brings customers at the lowest costs, or brings the most profitable customers to the company over time, you can make informed and correct decisions regarding the distribution of marketing budgets and regarding how much you can pay for each customer, since each customer may be very different in terms of LTV (Lifetime Value) to the company.

For that matter, if one distribution channel brings me a new customer at a cost of $50 and generates a profit of $100 for me, but he only purchases twice, I would probably prefer to direct the budget specifically to a distribution channel that brings in a new customer costs me $100, but the customers who come through him buy on average 10 times, and make a profit of $500.

I agree and say that in principle, I would prefer to bring both of them and try and improve the metrics of the first channel so that I can generate a greater profit from each client, which makes the nature of the work very different between the channels.

In the more profitable channel I will focus on growth in the amount of customers, and in the less profitable channel I will focus on improving conversion rates, lowering the cost for each customer, and increasing the amount of profit each such customer generates for me.

In order to be able to produce these conclusions, we must make sure that our data structure is correct, that our BI capabilities allow for a comprehensive and rapid analysis of the data, and to instill in the organization a mentality of making decisions based on data.

Investment in the company's data capabilities is directly proportional to the ability to improve profitability by making correct and faster business decisions.

5. In many cases, the improvement in profitability can actually come from improving the conversion percentages on the website, or in the product itself.

The marketing people bring the potential customers, but in most cases, the control of the marketing people and the channels they manage ends there, and the ball goes into the hands of the site, the product or the conversion funnel.

Any improvement in this panel can result in a significant improvement in the company's profitability simply by increasing the percentage of potential customers who converted, out of the total number of customers who arrived through the marketing channels.

A brief analysis of the panel using heat maps of the conversion data of each step in the panel, or even holding user testing sessions, can easily indicate areas in the purchase process that can be improved to lower the abandonment levels of potential customers.

If a company manages to produce improvement in these areas, it will allow the marketing people to bring in more potential customers, at lower costs, thus increasing profitability while improving growth in sales figures.

6. Investing in organic or minimal ownership marketing channels is a must, today more than ever.

Every customer that can be brought in for free, or at minimal cost, is net profit for the company.

Increasing these channels will allow a healthier balance between the marketing channels, and a greater margin of maneuver for the marketing people to balance the high costs of advertising in the other channels.

In many companies, the channels of remarketing, SEO and partner programs do not receive enough focus at the level of organizational attention and at the level of human resources entrusted to these channels.

Suddenly starting to invest in these channels can be a sharp and complex transition for such companies.

In my opinion, there is a huge opportunity here for marketing people who find themselves with much less work due to budget reductions in the various marketing channels, and for their managers, to make a move in which these employees will take on the responsibility for the organic channels in addition, and thus the organization will gain much more attention and work dedicated to the channels these

For the marketing people this is a great opportunity to expand their professional toolbox and their areas of responsibility and influence in the company.

This is an extremely challenging period for marketing people, a period of restrictions, a period of more careful examination of the distribution channels and the profitability that each channel carries with it, a period of changes and uncertainty.

At the same time, this is a time that forces us to step out of our comfort zone and in my experience, that's always good.

This enables growth, development of abilities at the individual level of the marketing people and at the company level, and at the end of the day, building more stable foundations that will allow companies to grow and establish themselves in a more healthy and balanced way than before.

Moran Tracer is the VP of Marketing and Business Development at the Faye Travel Insurance Company

  • Marketing and digital

  • in the headlines


  • High tech

  • Marketing

  • Internet advertisement

Source: walla

All news articles on 2023-01-30

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