Product launch · Marketing

Recommended B2C startup marketing spend?

Wayne Cerullo Advocate for prospect-centric B2B marketing

July 7th, 2016

A boot-strapped automotive buying service has proven the viability of its advice concept with several hundred happy consumers who have paid a fee to get professional help to negotiate their new and used auto purchases over the last year nationwide. While there is substantial competition in this particular industry, this service model has superior results and is unique in the field. 

To be successful, it is critical that consumer trust is established as well as the service is positioned as distinctive. There is reason to believe both can be created with this model. However, the story is not simple and it needs to be evangelized, if not explained.   

My question is, what rules of thumb are there about the spend required to establish the brand as a leader in the next 3 years? I know there are many variables, so identifying the top ones and providing any data on other brands would be helpful. Assume heavy use of social media, email marketing, and public relations. 

Sharon McCarthy Chief Marketing Officer

July 8th, 2016

Hi Wayne,
Just a couple of thoughts and ways to think about your marketing spend..
  • Big Spend - You will be competing against the budgets of big car companies, marketing to a similar if you're thinking "share of voice" your advertising budget will need to be quite large. Plus, it's a high ticket category, high involvement infrequently purchased item which will require multiple exposures from a variety of sources, so another case for the big budget.
  • Complexity of the Sell -- It's not only complexity, but it's also the strength of your promise and the believability and demonstrability of its proof points, which I can't evaluate. If it's demonstrable through video, offers a compelling brand promise with believable proof points, your budget could be a lot lower.
  • Talk to an Auto Expert - You should talk to our mutual friend, Beth, because she knows this business better than anyone. She can tell you what keywords cost and you can back into a % of sales your online advertising should be.
  • Growth Hack -- this might be the most relevant way to determine your budget, rather than from a share of voice or % of revenue. You are competing against dealers and car brands who spend x% against a sale of what, $30k? And they're all competing with one another which drives up online ad spend. If your revenue is based on the savings a consumer receives rather than an auto's final sale price, your average sale is going to be multiples lower than that of the bigger spend car dealer and car mfr, but your spend in terms of share of voice would have to be enormous. Conversely, if you base your budget on  % of revenue, you'll be vastly underspending vs the competitive set. So I would focus on "growth hacking" tactics as a way to market your business, and budget based on the cost to test a number (4...10?) of "growth hacks". Happy to be a sounding board if you need one to discuss what those might be. That being said, I can send you a very old 2003 report on % of revenue ad spending. t's good context, but I'm not sure it's relevant for the new economy, bootstrap budget.

Chris Capra Online Gaming - Marketing, Acquisition and Public Relations Consultant

July 8th, 2016

HI Wayne, 

As you point out, there are many variables you have to take into consideration. There is really no rule of thumb for marketing spending, especially in the B2C world but there are some key factors that you have to take into consideration. 

I'm happy to discuss privately if you like.

AJ Brown CEO for LeadsRx

July 8th, 2016

Consumers seem more and more unwilling to engage with "advertising" these days. Instead, they prefer "coming across" new companies and ideas in the belief they found something on their own and will then happily share it with their network. This challenges marketers to reach consumers with low-key approaches using the right channels at the right time.  Where the B2B world can still find quality prospects with very focused and well-targeted messaging, in B2C, I believe it takes an omni-channel approach that lets consumers find you wherever they are most likely to look.

We worked with a client on a study of their Facebook advertising in a B2C market. Ads were getting good click-throughs, and we were able to measure the trend of clicks over a few weeks time. However, conversions were very low for this group... low enough that the client concluded Facebook ads were not working.  But then we saw how organic traffic increased with the exact same trend during the same time.  Conversions from this source were quite high.  As this was the only advertising being run at the time, we concluded many consumers simply did not want to click on the ad they saw but instead visited the company's website directly.  And, in so doing, perhaps felt like they had "discovered" the service on their own and signed up.  

For your automative purchasing service, clearly hearing about the service from trusted networks will make the biggest difference, and all the social media channels are good for this. I think it's important to find incentives that be offered to the early adopters who are connectors and vocal. As I recall, Constant Contact found at one point that their average cost of customer acquisition was about $800 (in the very early days).  They decided to offer this amount to current customers as a referral credit if they got a friend to sign up (I think the friend had to stay a customer for 10+ months).  The program was a huge success, and in addition to staying within their budget, Constant Contact also developed their brand as trusted... something they could not have done on their own.

Consider an omni-channel approach for your automotive buying service and a strong referral program. Find ways to let consumers "find out" about you without pushing too much information directly at them.  Email marketing, while it sounds good on the surface, may not be the best early approach for NEW customers, but it could be better suited for follow-up email to current customers for referrals.  Retargeting makes a lot of sense with consumers as does advertising with partners. Of course you must track all channels from the get-go to understand which are resulting in conversions and which are not.  It's important to be agile in your marketing with consumers, who change their patterns often. Only with proper conversion analysis can you truly understand where wasted ad spend results and opportunities exist.

In terms of actual numbers... I agree with Wayne that there are many variables to consider here.  That said, I have worked with clients spending a few thousand dollars a month to get a couple hundred conversions each week up to $400k+/month for several thousand conversions.