Big Picture (Macro)
Flushed with free Fed money, 2021 saw a demand boom following a ‘stay-at-home’ pandemic. It was followed by a second ‘out-and-about’ demand boom as we learned we would survive the pandemic.
Post a supply shock, high inflation, and an all-time high Fed-driven bloated balance sheet, 2022 introduced the resurgence of interest rates and a highly restrictive monetary policy.
After roughly a decade, money has value again!
Recession is highly probable. Why? every recession (in the US) was followed by either a Fed tightening, an inverted yield curve, or an oil shock. 2022 has checked ALL these boxes.
Geopolitical challenges (China-US, Russia-Ukraine, Iran) exacerbate uncertainty even more, which in turn drives both consumers and businesses to “batten down the hatches”, as Jeff Bezos put it.
With money having value and a high chance of a recession, investors, businesses, and consumers manage money fundamentally differently. It is one fundamental shift you can’t afford to ignore.
Therefore, revisiting your growth and marketing goals, strategy and MO is imperative. Where you invest your marketing dollars, be it headcount, campaigns, or MarTech, should be carefully analyzed and adjusted.
How to Navigate Your 2023 Growth Marketing Efforts?
[TLDR] Depending on the business setting and context, I would look into adopting either one of these two strategies: Performance Preservation or Profitable Growth.
Performance Preservation
This strategy will fit in cases where your current unit economics are still within a sensible range, but the business is getting strained or outright diminishing.
‘Strained’ may be due to a shrinking addressable market, shrinking cross-sell/upsell forecast, budget shrinkage, rising competition, rising input costs, or no clear growth path, to name a few.
At the very least you should plan to maintain the “mandatory minimums” of your marketing performance, so the business can weather this period. At the most basic level it means:
Maintain ROI ratio - if you expect LTV to decline, aim to reduce your fully-loaded CAC by the same rate, at the very least. And vice versa, if your CAC goes up, match LTV, even at the expense of fewer new paying customers.
Mitigate dollar churn - if your churn rate is expected to increase, aim to compensate by onboarding incremental new customers that will sum up to the total ARR lost.
Under this strategy, I’d broaden the customer quantity Vs. quality tolerance and would be generally less concerned about it, in the short-mid term.
This strategy should be adopted as a last resort, only if you’re on a tight leash and have low conviction in your planned initiatives; or you have high internal (e.g. product delivery, etc.) / external (e.g. macro) dependencies.
Profitable Growth
Not only you can preserve your existing performance, but you also see a path to drive growth at low risk. Where this strategy differs from normal times is your risk appetite toward growth. In normal times, you'd be willing to assume more risk toward driving growth.
This strategy means you have high conviction in your key initiatives and can validate and prove those in fairly short periods.
Your Checklist - Where to Look and What to Change?
I've listed below the most immediate and impactful areas to consider when navigating your growth marketing efforts during a recession.
There might be other areas with different weights of importance, so please consider the list as a reference rather than a one-size-fits-all type. Let's go:
Downsizing Your Team
However unpopular and uncomfortable it is to talk about, this is an unavoidable area to look at. As most businesses measure ROI based on fully loaded CAC, you need to take a deep look into your team size, efficiency, and job relevance.
Most likely you need to trim not just because of the expectancy for "macro" to hit the business. It’s about adapting to the new reality. As most growth marketing teams have over-hired, some teams/ICs will end up engaging in low impact/conviction or will be replaced by automation.
Furthermore, as with every non-organic hiring pace, most likely you have some underperformers (managers/ICs) in your team.
Even if your company already trimmed HC costs, I suspect there's a good chance your company will experience a 2nd wave of ratcheting the team size.
Your team HC costs account for a substantial part of what makes up the denominator in the ROI calc. Any optimization can’t just focus just on initiatives and campaign dollars. As a manager and an executive, it is better to be ahead and manage it proactively upfront, rather than be pulled into it.
Be Highly Tuned to Your Chief Revenue/Sales Lead
Some marketing initiatives are decoupled from the go-to-market group. It is one of these periods where you’ll need to narrow those to a minimum and be even more tuned to the needs and direction of your Chief Revenue Officer.
If revenues are generated by marketing alone (no-touch SMB / DTC / B2C), then run a serious conversation with your growth marketing leadership on what's driving revenues and prioritize ruthlessly.
Exit Interviews With Churning Customers
Your business will experience higher customer churn. Why do they leave? When was the last time you made an exit interview with a churning customer?
Figure what brought them in the first place and what made them leave. If it's a pain not meaningful enough type of churn, calibrate your acquisition campaigns focused around this massage and shut them down or at least put them under high scrutiny.
The same goes for customers downgrading their premium plan or reducing their pro features consumption.
Bottom line: narrow down the key pains your product/service is solving for and figure out which are most relevant in the coming period. Hammer on those in your messaging and campaign $ and park the ones that aren’t.
Product Marketing is a Key Now
This is the time to figure out how to increase new ARR through new ICPs. This is more relevant to businesses that are past their PMF phase and have two or more offerings/ solutions.
The catch here is to do so with slim-minimal adjustments to the product and avoid long dev cycles or meaningful deviation from the roadmap. Think: pricing, packaging, and core pains that your existing product solves for (even parts of it - doesn’t have to be perfect).
Get your marketing efficiency into shape
Tighten up your marketing mix (channels and geo) to the most performing ones.
Shorten your decision cycles.
Manage carefully your “Defibrillated” campaigns:
ROI < 1.5 (on fully loaded CAC basis) → terminate.
1.5 < ROI < 2 → optimize with an aim to cross above ROI=2. Keeping a low tolerance towards the optimization period.
ROI > 3 → max budget allocation, pushing down the ROI towards the 2.x levels.
Deploy only high-conviction new initiatives on your ICE list.
Keep your testing budget (even if reduced). Do not scrape it! If management pushes. you on it, protect it. But, invest it what you believe most. Here consider resources, time-to-show-results, low dependency as important factors.
Be Greedy
One of the first algorithms you learn in Computer Science is the greedy algorithm - it optimizes reaching from point 'A' to point 'B' in a grid, based on what's the optimal next move. It's not the most efficient also, but in tight periods, it keeps things simpler, delivers faster results, and builds confidence.
Fiercely Target Your Competitors
More often than not, competitor campaigns perform beyond the average. Find their weakness and push hard and eat their market share. Work inside out: focus on 1st and 2nd-tier competitors. 3rd tier you should keep as part of your experimental budget.
Retention-Monetization
In every down term lays an opportunity. Maybe your company is not the fortunate one, but some of your customers may very well be. Figure out which cohort is it, and push on cross & upsell campaigns.
Combine product analytics for quantitative inputs as well as surveys and join customer success meetings for qualitative inputs. And if you find a new pain they are using your product/service for, feed that back into acquisition.
Funnel Initiatives
This usually comes at relatively lower costs and has higher benefits. List your high-conviction list of changes but keep one or two moon shots. Then onboard your dev/product to commit to the plan. Areas to focus on:
A classic: negative friction removal / adding positive friction.
Another classic (although lots tend to neglect): ramp up your dev-free/light upper-mid funnel a/b tempo. Now ramp up more!
Dev-enabled testing: build increased testing capabilities. Counterintuitively, go deeper in the funnel for experiments.
Add more granularity to your conversion protocols - this is the time to squeeze that lemon.
Double-Down on SEO
It is always "not a good time” to invest in channels that show results only in the mid-long term. Now is the time to double down. If you already did, double down again.
This recessionary period is longer than you think. Investing now will bear fruits just when you most need it. It will become a competitive edge at the back side of this crazy period.
To Summarize, this period too shall pass. And when it does, you'll come out of it with either a stronger growth team, growth engines, and a MarTech stack; or weaker ones. It all depends on how you and your team adjust to it, in pace and amplitude.