How does brand marketing affect customer acquisition cost?Lindsay Says
Brand marketing done well will decrease your customer acquisition cost, and probably by a lot.
In a single word: trust.
Imagine you wanted to go out on a date. Imagine that those you are asking out do not know you at all. For this first date, you are inviting these people “cold.”
Your success ratio of getting a “yes” to that first date will be low, perhaps 100 to 1. In order to get a single yes answer from people who don’t know you or trust you, you may need to ask 100 people before you receive a yes. This is the “spray and pray” route.
Now imagine that you are instead inviting people who know you a little bit. It’s no longer a cold ask. They perceive you as less of a risk because you are known. Your success ratio of getting a “yes” to that first date will be higher; knowing you increases their trust in you. Perhaps it increases the “yes” ratio to 10 to 1.
Now imagine that they know you quite well, and that they trust you a great deal. Your success ratio of getting a “yes” to that first date will be even higher, perhaps 3 to 1.
The Priming Effect
This “priming effect” is the impact of building trust before making an ask. When you build trust before asking for something, you improve your likelihood of success. When you build trust first, it shows that you respect your customers, and it improves the probability that you will create a happy customer relationship.
When you spend your marketing budget exclusively on spray-and-pray tactics like search and performance marketing, you might achieve a 100-1 success rate. When marketing dollars include brand awareness building to do heavy-lifting priming for you, you might achieve a 3 to 1 success rate.
In other words, brand awareness decreases customer acquisition cost (CAC).
Consider this while allocating your marketing budget. Spraying & praying is expensive. Your CAC is high when you need to touch 100 people to convert 1. Brand awareness enables you to touch, in this case, 3 people to convert 1. You’ve touched 97 fewer people to get to the same sale, and each of those 97 people you did not touch represents a cost savings.
Your CAC decreases when your audience is primed with brand awareness.
Marketing Budget Cuts
Especially when budgets are tight, you need to eschew spray-and-pray. This is particularly important when you are reducing total marketing spend, as many are in today’s environment. While decreasing spend, consider also shifting dollars from performance marketing into brand awareness building that will make your performance marketing tactics perform better.
With fewer dollars spent, you still achieve more profit because your marketing spend is more focused. AirBnB famously shifted their search marketing budget into brand marketing in 2022 and improved performance dramatically.
Metrics and Heart
There are at least two reasons you might find it appealing to build brand awareness: economic, and philosophical.
From a pure metrics standpoint, brand marketing decreases your customer acquisition cost (CAC). By doing brand awareness building, you increase the likelihood that the rest of your marketing tactics will result in a sale.
When you concentrate your marketing dollars, those dollars go farther.
Brand awareness building has a number of other healthy economic affects as well. Lifetime value of each customer (LTV) increases because you attract your right customers. Pricing power increases, as do margins, because your primed customers have a higher willingness to pay for what you bring. (See my post about metrics of powerful brand.)
Brand awareness building is more respectful to your audience than is pure performance marketing. It treats them as a human being who wants and deserves trust before engaging.
Said another way: Why are you even in this business? Do you want your customers to be merely a wallet from which you extract money? Or are you in this business to make your customers’ lives better, while also building a healthy return?
Brand enables this virtuous goodness, so that your business is durable and also deserving of love.
Brand awareness building decreases your customer acquisition costs. It makes your performance marketing more powerful. It makes all of your marketing more powerful.
As you consider your marketing budget, don’t make the short-sighted mistake of putting it all into performance marketing. Dedicate some to trust-building before you go to a prospect with your hand outstretched.