By Charles Anijekwu - Senior Growth and Performance Marketing Manager
How do you know when you are sick? Isn't it always obvious? Well, for most cases there are obvious symptoms in our body, for example, when we lose appetite or develop fever, when we visit the toilet more regularly than often, then the reality that something is not right sets in.
Alternatively, to spot if an object is in a bad state, say a car, the noisy sound it produces, and the excess fumes from the exhaust pipe are sure obvious signs.
For an economy to be undergoing a recession, then there is an obvious decline in economic activities. The Global Growth Forecast from the World Economic Outlook has shown a slowed-down trend from 6.0 percent in 2021 to 3.2 percent in 2022, and 2.7 percent in 2023. This is more than a 50% headwind growth. Meaningful stakeholders and tech operators need to position their businesses against the looming recession.
How does the recession affect tech business?
The tech business is not different from every other business, but tech businesses are simply set up to grow fast by nature, either by failing or winning fast, then rinse or repeat the key learnings.
This approach is what the venture capitalist calls a growth-driven model. It prioritizes the user base, transaction volume, and value processed by the business over the real profit that the business generates.
The implication of this business model is that they are faced with liquidity shortage quickly, because they spent a huge money to spiral product usage, however, fail to convert customers to paying customers, and in other cases, the profit generated from the business is just not sufficient enough to cater for its operational cost.
Two out of many examples of tech businesses in Nigeria facing this challenge in recent times include
- Lazerpay, A crypto company that allows businesses across the world to receive payments in the stablecoin, shut down its operation on April 30, 2023 due to the inability to raise additional funding.
- Also, Kippa a Nigeria Fintech company shut down its offline payment solution; Kippapay on November 15 2023 due to its inability to generate profit.
This is a reality check for founders to start building sustainable businesses, the ones that can self-sustain without necessarily relying on venture capital investment, as the current economic landscape has affected equity-based funding.
A recent report from Benjamindada shows that there was a 92% in VC funding in Q1 2023 compared to Q1 2022. This is a huge decline, but founders need to not worry much but rather focus efforts on revamping business models and leveraging growth marketing initiatives to navigate this challenging season.
This piece is meant to highlight high-level tactics and marketing initiatives that tech businesses can focus on in other to successfully plow the limited harvests that inflation has brought.
Leveraging growth marketing can be the game changer
My intention is not to create a fuss, as there has been some misunderstanding in an attempt to explain growth marketing by some professionals.
In simple terms, growth marketing is the type of marketing that targets customers all through their life cycle - at no point should the user be left wandering.
For example from the point when the customer newly signed up, to when they use the product, down to when they make their first purchase.
I will codify these stages as customer acquisition, customer activation, and customer retention.
The lifeline to any business's profitability is hinged on focusing on these three, particularly in this era when customers are extra cautious with spending.
1.) On Acquisition; Businesses should have a short and long-term approach to acquisition marketing:
Every business should be able to tell what their major marketing channels for acquiring customers are. By major I mean the channel responsible for more than 50% influx of customers. It's quite painful to see startups and established companies not able to answer this question and most time this is because they lack proper measurement and analytics tools. Investment in the right marketing attribution tools will go a long way, and there are many good solutions in the market.
The best practice for long and short-term acquisition marketing is to follow the 80-20 rule.
a). Short-term marketing approach - Focus 80% of your marketing resource on effective channels responsible for driving at least 50% of effective sales.
A caveat: By effective channel, I mean channels that have a reasonable customer acquisition cost (CAC).
The first thing to do is to establish what sales means to your business.
For a crypto company, this is when a customer has successfully bought their cryptocurrencies.
For a lending company, this is when a customer successfully receives a loan disbursal to their account.
For a company focused on savings investment, this is when a customer makes a deposit into their savings account.
I know most businesses are used to focusing on topline metrics like app installs and account signups, but business needs to be radical in their marketing approach in other to survive. Sales is the only true metric that determines the health of your business, so focus 80% of your budget on the best channel that drives at least 50% of sales.
b). Long-term marketing approach - Focus 20% of your marketing spend to discover the next best-unexplored channels.
Most businesses are used to marketing on popular channels such Instagram, YouTube, Google, Facebook, and Twitter but there plethora of ad networks yet to be explored, but efficient for driving new customers to the business. Take for instance having ad placement directly on Android phones is a novel one as it brings your business closer to the customers even when they are not searching. Also, most popular ad channels are very saturated and can be expensive at the same time, so it’s wise to expand your channels by investing 20% budget to unlocking promising channels.
2.) On Activation; Businesses should reduce tech debt by making customer activation delightful:
Activation is an act of getting your customers to discover the real value of your business.
Marketing should not stop at getting customers to the door of your business, they need to be allowed in, to experience the real value of your product.
The most common onboarding challenges that lead to activation leakages that I’ve seen include;
a). Delays in sending customers' OTP codes to validate biometric verification numbers.
b). Facial capture not working (which could be a result of data mismatch, technology's inaptness, or just the customer's camera device not being effective),
c). Sometimes other components of the onboarding just stopped working unexpectedly, like the PIN/Password reset
I've seen companies invest time and money in shipping features that no customer wants but neglect all these leakages in the product's onboarding flow.
A customer that encounters a bug is equivalent to 3 potential customers lost.
Serious founders need to prioritize solving any customer barrier to product adoption. This might mean adopting more reliable technologies and solutions or designing a fallback interim plan that affected customers can use during moments of downtime.
Takeaway: Every business has technology glitches at one point or other, but having a system that ensures proper monitoring of the activation funnel, and being able to swing engineering resources to ensure timeless resolution goes a long way in attaining excellence with customer onboarding.
3.) On Retention; Businesses should reduce CAC by focusing on cross-selling and retention marketing:
There is the popular notion that it costs 3x more to gain a customer than to retain her. This is to say that retention is cheaper when done correctly. A satisfied customer will do more good to the business than imagine. Oftentimes companies are doing retention marketing the wrong way. It’s a very common notion to see companies build loyalty programs just because their competitors are doing the same.
Retention marketing should be peculiar to your business and your customers. The primary reason for doing retention marketing is to address the needs why customers are churning or likely to churn.
Here are two things founders and experts should hold on to when going about customer retention.
a) Focus more attention on the paying customers that churned or are about to churn: I mean why bother so much with customers that are yet to be financially committed? Founders need to work with data by properly segmenting customers into different commonalities. Such as spending patterns, and usage behavior.
Takeaway: The best way to solve retention is to understand why. Start by surveying your best customers to understand the reason why they are churning or likely to churn.
b) Solve the real problem: Why have a loyalty program when in the true sense customers only want a product that solves their needs and makes them happy? Or why give a Netflix coupon when your customer is concerned that your product is overpriced? The only true way to solve retention is to introduce a reasonable solution that directly tackles customer pain.
About the Author.
Charles Anijekwu is a Growth Marketing Professional with 5 years of experience across 4 industries (Fintech, SAAS, e-commerce, and Social Enterprise), Charles is driven by the passion to see African businesses succeed and attain global visibility. Charles is happy to connect and discuss strategies and tactics to move early-stage and growth-stage businesses to the next level.