You have probably read and seen enough in the news about impending recessionary times. If nothing else, the media’s coverage may create a self-fulfilling prophecy by changing our purchasing habits!
Usually the CFO has a louder voice during tough times. Investments and expenses are scrutinized. They’re looking for cost-cutting programs and investments that grow revenue scaling against operating expenses.
So what marketing investments do you make when planning for difficult times?
When marketers talk in terms of opex scaling, the finance department perks up like you served them a double latte. With scaling, costs either decrease over time as revenue stays flat or increases, or costs don’t increase as quickly as revenue does. Therefore, revenue may grow year over year at 20%, but operating expenses grow only at 15%…thus netting 5% higher net profits.
CFOs like revenues, but they’re even more interested in profit and margin dollars. PE ratios and most methods of valuation are based on EBITDA and cash flow. Your goal is to show them how you can impact those numbers.
Unfortunately, there’s a problem with most marketing campaigns and site functionality investments during tough economic times. Traditional marketing campaigns aren’t as efficient because the purchasing bar is higher for the consumer. Consumers must have strong reasons to buy. The natural reaction of marketers is to discount products, but this has bigger implications for the brand.
There are also problems with introducing new site functionality during tough times. As employees get stretched thin, they don’t have time to use or optimize the new functionality, so the new, cool function doesn’t end up being the competitive advantage everyone hoped for, and its value depreciates over time.
So, you and the CFO are looking for investments that scale opex (growing revenue and impact while maintaining costs), don’t damage the brand and margins, and don’t require a lot of resources to get up and running.
These are all great reasons to implement user-generated content (UGC) on your site. In fact, consider proposing UGC as both a positive career move and a win for the company, as the ROI will get the thumbs-up from the CFO and the CEO.
Word of mouth: an excuse to buy
We all know that a “dirt cheap” deal can get people to click and check out. The CFO will like the revenue but hate the short-term margins, not to mention the impact to your brand.
But when customers are persuaded by the relevant and credible word of mouth by people like them, they have a new excuse to buy. Discounts aren’t as important when they find a product, service or experience that is a “must-have” based on the reviews they read. Customers feel confident making a purchase when they read reviews, answers and experiences from others.
What’s more, UGC brings new customers to your site while converting the ones who are already there. And promotions that include UGC increase average order value – no mean feat in hard times.
User-generated content is a marketing annuity.
At Bazaarvoice, we have published several case studies proving that more user-generated content – in reviews and questions answered by the community – equals higher conversion, average order value, traffic from SEO, lower returns and new opportunities for merchandising and marketing. We’ve seen conversion rates increase anywhere from 10% to 100%. Return rates (high cost) can drop as much as 67%.
So from day one, every new piece of user-generated content, whether it is a story, Q&A or a review, adds incremental impact (revenue) over time. The CFO can appreciate the concept of net present value and annuity revenue!
UGC (can) require very little effort
Bazaarvoice clients can immediately see the impact of UGC and start to leverage it. UGC is a highly leveraged investment because your customers are creating the content that helps sell products, so with a small percentage of one person’s time, you have a program that grows in impact (scaling!).
UGC costs stay relatively flat
Traditional marketing programs and campaigns only scale moderately, and that’s only if the costs per impression decreases or the advertising effectiveness increases. There is room to optimize campaigns; however, to bring in more customers, you typically need to increase costs proportionately.
With a hosted UGC solution, companies can predict their monthly costs and yet the potential revenue impact actually grows over time – the more UGC you accumulate, the better your revenue results get. You can then multiply the scaling by using UGC in more marketing tactics such as email campaigns. So, UGC offers a one-two punch: it scales itself and fuels your existing marketing programs!
There are two responses to tough times – retreat and cut costs or be intelligently aggressive. When you’re intelligently aggressive, you choose effective marketing investments that hit the “marketing bulls-eye,” driving long-term, sustainable P&L impact.
Investing in a scaling word of mouth program is the best investment you’ll make – before, during and after a recession.
Now, go make friends with the CFO!