Burhanuddin Pithawala

Notes on Growth and Marketing for Startups in India

The 4 Types of Marketing Budgets and how to measure if they are working for you (3/4) CRM (Reactivation and Engagement) Budget

10P for SMS vs 100 Rs for Google CPC
Photo by Warren Wong on Unsplash

In one of my marketing experiences, Google and Facebook Acquisitions turned out to be very expensive. CAC was 10000 (normalized value). At a review meeting, we all felt that it was very high and needed to go down. But there were very few alternatives. An idea was presented by someone, “What if we ran a rewards-based campaign on our existing base?”

Proposal in Short

  • Anyone who had registered with us could participate. All they needed to do was give a lead.
  • If their given lead bought a subscription, the initial user would become eligible for a lucky draw
  • 3 lucky winners get a Mega Prize worth 50K each every month.

CAC looked fantastic

  • 5000 Participants
  • 1000 Referrals
  • 200 Purchases
  • 150K Cost
  • 750 CAC

750 compared to 10000, the 10000 looked criminal to us. For 2 months we ran the campaign. Then the real cost of the campaign hit us. We were spending roughly 2X of the Performance channels. We had not accounted for the cost of communicating to the existing user base. I don’t want to repeat the same mistake ever again, hence in my Marketing Plans, I always account for the cost of CRM – i.e. Reactivation, Engagement, Calling, etc.

What is CRM Budget?

Cost of reaching out to the inactive or non-transacting users to make them transact

Put simply this is the cost of getting a user back on the platform or for making them take any action via a nudge. While theoretically, the repeat user comes back to use the platform on their own, in reality, the organic repeat case just doesn’t pack enough fuel for the growth that many desire. Most brands use extensive reactivation and engagement strategies to stay “Top of Mind” in the minds of the customer.

Sub Channels that are commonly used for CRM (Reactivation and Engagement)

  1. Direct Communication Costs (i.e. SMS, Email, Whatsapp, Push Notification Costs) – While at a per unit level these costs may look insignificant, they may add up a whopping number on your budget table once the users run into millions. Typically sending a 10 paise SMS to a Million Users will cost you Rs.100K (US$1250), in one shot. That’s where the budgeting comes into play for even the smallest items which look harmless at the per unit level.
  2. Direct Communication Costs (i.e. People Costs) – It is not uncommon at least for the B2B Startups to engage in relationship management, account management kind of a setup, where per 100 (or something based on your industry) users, there are account managers assigned to call and engage the users. Account Management setup helps improve retention and identify some product issues, that may not come out very easily via other means. After all, why someone stopped using your product, can sometimes be more actionable product insight than shipping new features to attract yet new users.
  3. Paid Platform Retargeting Costs – This comes into play when your Direct Communication lines are no longer working. Either the user has unsubscribed to your Direct communication, or they find it not interesting. The same ad platforms that helped you in acquiring new users, come to the rescue here, where you have an option to reach out to the specific users who were active on your platform and now have dropped off. Retargeting can also help in boosting conversion big time. If you have ever been hounded by the “ads of the product you were searching for last night” on every piece of the internet you go to, you have seen retargeting in action. Retargeting helps users pick up from where they left off.

How to measure the Performance of the Reactivation/Engagement Budget

Typical performances across the CRM Channels available to a brand

Before you jump to the measurement, let’s understand what is the atomic unit of the CRM Channel or Reactivation/Engagement.

The atomic unit of the CRM whose performance can be measured is a unique combination of the following

  1. Channel of Communication i.e. SMS, Email, Whatsapp, etc
  2. Target Segment
  3. Creative Content
  4. Objective
  5. Landing Page (if applicable)
  6. Product Feed (if applicable)

Atomic Unit = Channel+Segment+Creative+Objective+LandingPage+Feed

Now, Total CRM Budget = Sum of all the CRM Costs across defined atomic units in operation

{\displaystyle \sum _{i\mathop {=} m}^{n}a_{i}=a_{m}+a_{m+1}+a_{m+2}+\cdots +a_{n-1}+a_{n}}

Lastly, How to measure the performance of a defined atomic unit of CRM, say a

  1. Within a Target Segment, carve out a control sample
  2. Expose the Communication/Message to the Test and keep the Control as is.
  3. Measure the following across the 2 sets
    1. Revenue
    2. Conversion
    3. Cost
    4. Significance
  4. You can measure the efficacy of any of the variables with this approach, be it Channel of Communication, Creative Content, Objective, Landing Page, Product Feed, and so on. But it’s ideal to vary one factor at a time.

Pro Tip – Another technique utilized is to keep a certain segment of users in control all the time, and put all the ensuing CRM Communication on all but this segment (In one of my previous experiences the teams used to refer to one such segment as Pure Organic – for this segment behaves closest to the organic nature of the user). Using this technique you will be able to see the performance of the CRM Atomic unit at an absolute level, and also be able to measure the performance of one CRM Comms compared to the other.

Incremental ROI = (Revenue Test – Revenue Control ) / (Cost Test – Cost Control )

At a particular spend level, incremental ROI starts to drop. Retargeting / CRM spends should ideally stop at this level.

Sample Campaign Reports with Incremental ROI and Cost

Other Considerations in Communications and CRM

Incentives

There is a unique place for Incentives to drive certain engagement and actions from the target users. This is not the same as a Discount as the user can be incentivized in the form of a giveaway or cash reward or some other non-monetary reward in order to drive certain actions. Depending on the product category, for e.g. premium products, non-monetary/exclusive rewards may actually deliver better results.

Unsubscribe Rates / Spam Reports

It’s critical to keep a check on your unsubscribe rates, uninstall rates, and spam rates (in the case of email, and WhatsApp), these are good early indicators of when you have crossed to the other side, and need to STOP and turn around.

How often should you measure the performance of the Reactivation/Engagement Budget?

Short Answer: Depends on your appetite and the scale of business.

The very first communication be it the SMS or a call to the user mostly works. But as the communication keeps adding up, it becomes repetitive and looses the charm for the user.

Typically ROI is established on certain communication modes under certain campaign types and teams usually operate with the same heuristics for a long time. Doing test and control measurements continuously may not be very effort effective. However, teams should still revisit the benchmarks on a 6-month to 1-year basis.

Another technique utilized, is to keep a certain segment of users in control all the time, and put all the ensuing discounts on all but this segment. Hence you are able to see the performance of the discounting techniques over time, and also able to measure the performance of one discounting technique with the other.

Scale

People-led CRM is extremely hard to scale in a B2C setup and may be confined to B2B only.

Reach
  • Direct Comms work only if the user is still actively subscribed to you
  • Paid Ads based retargeting is costlier, but sometimes you don’t have any other alternative but to switch it on. (Ex: when users have unsubscribed to your email service, email is no longer viable)

Questions for the Reader

  1. How would you measure the performance of a certain creative being used for one of the campaigns?
  2. What is the total transaction cost, given that you are spending for both getting the user back on the platform and discounting for improving conversion?
4 Types of Marketing Budgets

More Notes in this Series

  1. Acquisition Budget
  2. Discounting Budget
  3. CRM Budget – This article
  4. Brand Marketing Budget – Coming Soon
  5. Marketing Budget Framework for your Startup – Coming Soon

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