The 4 stages of scaling marketing investment for consumer brands
There are four main stages most B2C companies go through when it comes to how they allocate investment to customer growth and marketing. The first stage is always some form of customer development and establishing whether there is a customer willing to pay for the product. This could happen internally through research or externally by bootstrapping the way to the first set of customers.
Secondly, once these insights are built, companies go on to establish the main digital marketing channels and set the foundation for scaling. Third, with scaling digital marketing budgets brands also pay more attention to building brand awareness on those channels, in addition to direct response marketing.
Finally, very few reach the fourth stage of going ‘out-of-home’ and investing in large scale brand building campaigns using above the line marketing channels.
While the journey through those can vary between brands, the typical amounts invested and channel selection is relatively clear across the board (at this point in time). It’s also very important to move through those stages linearly, as each of them contributes certain learnings and insights that are fundamental to the following stage.
Even if budgets scale very quickly, marketers need to go through this sequence. Especially stages 1 and 2 contribute very fundamental insights about the specific target market, the positioning of the product and the key messaging angles. Many brands jump ahead, struggle to maintain profitable campaign performance, and then try to improve it using the tactical methods of that stage without having done the ‘groundwork’ of improving the market positioning, messaging and customer journeys.
Let’s look at each stage in detail. They can be seen as individual milestones for the marketing department, having very specific goals that need to be achieved. There are different sets of parameters that will enable marketers to make a meaningful difference to the performance.
Stage 1: Customer development & non-scalable campaigns
Goals
Establish viable market positioning, ie which audience(s) to address, what is the specific value proposition (compared to alternatives in the market)
Earn initial validation from customers, influencers or press
Establish initial referral mechanisms to drive organic growth
Main activities
Drive word of mouth ‘manually’
Partnerships, giveaways, low-cost influencer marketing
Events
Budgets
$0 - 50,000 per year
Drivers of success
Formulating a clear value proposition for customers (which drives referrals, partnerships, and conversion)
Detailed understanding of the market niche to address, product USPS and customer needs
Measures of success
Repeat purchase rate >40% - you sell something people want to keep buying
High referral rate (largest source of new customer growth) - new customers get the point of your product. A good test to see if your proposition resonates with people is to ask 10 customers how they explain your product to their friends, and compare how closely it matches what you perceive the main value driver to be
Stage 2: Establishing the main digital channels and always-on campaigns
Goals
Prove that the proposition & audience scales
Establish an agile process for creative development
Focus on direct activation (sales) campaigns & audience building
Main activities
Direct activation campaigns on main paid digital channels (Facebook & Google Ads; for brands with a talent for creative development also add in TikTok Ads)
Crafting effective customer journeys, through product/category landing pages, lead magnets or email series, email automations (welcome series, abandoned basket, up-sell and retention campaigns based on behaviours)
SEO technical and content fundamentals
Email audience building through paid digital lead campaigns & fortnightly editorial email campaigns
Influencer marketing (testing 3-4 small/medium campaigns)
Budgets
$100,000 - 250,000 per year
Drivers of success
Refining target audience & corresponding proposition, including messaging angles - problems at this stage often still relate to the positioning of the product as opposed to tactics (like creative and ad campaign structure)
Creative and its ability to capture attention, create excitement and convey the USP
Customer journeys that are seamless and tailored to the specific audience
Measures of success
MER (Marketing Efficiency Ratio; MER = Total revenue / total ad spend): 4.0 - 7.0
You can reliably produce 3-4 ad creative concepts per month
Scaling ad spend from $5,000-10,000 to 20,000 per month only increases CPCs by 10-20%
Stage 3: Scaling paid digital channels & proactively building brand awareness
Goals
Scale digital ad spend beyond $20k / month without losing effectiveness or diluting the niche targeting
Proactively build brand awareness by establishing Top Of Funnel hook
Main activities
Diversify to 4-5 paid digital channels and more complex campaign structures (multiple audience segments, top/mid/bottom funnel)
Build a Top Of Funnel hook by establishing an effective type of campaign on digital channels, or a major sponsorship opportunity, or a content marketing approach
Continue refining customer journeys with more complex routes involving several landing pages (and potentially personalised sales advice for more premium products)
Budgets
$250,000 - 750,000 per year
Drivers of success
Customer insights setup that continuously delivers qual and quant data on attribution, customer journeys and consumer needs (incl data tools/platforms and internal processes of insights & data generation)
Ability to reach several tightly defined audiences with relevant messaging/content, so as to avoid diluting the niche targeting by just opening up to generic audience with generic messaging
Measures of success
Scaling digital ad spend beyond $20,000 / month whilst maintaining overall profitability of marketing spend
Maintain 40-50% share of new customer growth coming from word of mouth & organic channels
Stage 4: Going out-of-home with topical campaigns
Goals
Establish a broad brand awareness across your entire target audience through large-scale campaigns
Set up analytics process to understand ROI despite not being able to measure direct results of a large share of marketing spend
Main activities
All previous activities, plus large-scale campaigns on out-of-home and above-the-line marketing channels. Usually involves a dedicated storyline or seasonal message to get across (vs the always-on approach from digital channels)
Budgets
$750,000 + per year
Drivers of success
Ability to understand the most effective ‘storyline’ about the brand that brings home the USP and market positioning of the brand/product
Ability to align the entire customer journey and rely more on indirect insights (through qual research & data science approaches)
Measures of success
Highly dependent on the category and spend levels, but increasingly move to assessing overall marketing ROI or MER to understand profitability
Internally, ensure marketing team maintains a view of the entire marketing funnel - breaking into silos is the biggest risk of losing effectiveness at this stage