In this issue: a marketer’s perspective on tariffs, planning for a dark future, and reckoning with Trump’s magnum opus. 🎻
What’s with this trade war? Here’s a simple take: Trump is just doing business the only way he knows how: bankrupt, refinance, leverage. This guy bankrupted multiple casinos in Atlantic City and still managed to grow his wealth. Trump’s taking this same playbook and applying it to the biggest business there is: the United States of America. We are all passengers in his catastrophic magnum opus.
If you are running a growth marketing engine, the only way to weather this storm is by focusing on profitability.
Here’s what we think you should do:
Accept lower profits and revenue. The world has changed. Consumer sentiment is in the toilet. People are going to buy less things for the foreseeable future. Denying that is a death sentence. You must lower your (or your client’s) expectations on revenue and profit margins. The new strategy is survival - as your less-nimble or less-flexible competitors fold under crushing tariffs and less flexible EBITDA, your brand will remain to take over the market share. This bear consumer market won’t last forever.
Focus on operational efficiency. Calculate what the tariffs will do to your bottom line. Where can you cut costs to improve margins? Pilothouse’s DTC Newsletter has a great list of ideas. Renegotiate deals with suppliers. See if you can source products in cheaper countries. Warehouse in the US instead of Canada or Mexico. This is marketing’s problem, not just operations: increased COGS result in tighter requirements for marketing performance. If you are an agency, reach out to have a conversation about your client’s operational plans. If you are in-house, break down the silos between your departments. A close relationship with operations will be key for staying lean.
Do not sacrifice your marketing in that hunt for efficiency. Marketing is always the first budget cut and the first team laid off in times of economic uncertainty. This is a mistake every time. Marketing has a lag on returns, meaning ad budget spent today can take six weeks to six months to appreciate into new customer acquisition. If you slash your marketing budget, your momentum may carry you through the short term and create an illusion that you didn’t need to spend in the first place (this is the biggest flaw of incrementality testing, by the way.)
Six months down the road, all of a sudden your retargeting funnels will be empty, your CACs will have skyrocketed, and your CPMs will be high. While your performance metrics may suffer, you have to keep your marketing teams and budgets intact.
Think of your marketing budget as coal in a steam engine of growth: if you stop adding coal, the train will keep running, but it will get slower and slower, and you’ll have to make a big reinvestment later to get back up to speed. Don’t give up your marketing team’s gains - they are likely the only people keeping your business alive.
Maintain your efforts on new customer acquisition, don’t reduce to returning customers. To stay efficient, you might consider focusing exclusively on repeat customers. After all, they’re often five times cheaper than new customers. Your hubris is blinding you: customers are not loyal. Maybe to their favorite sports teams, but they are not loyal to your brand or anybody else’s. I estimate that across the businesses we study, on average 70% of their business comes from new single-time customers. Don’t bet on your ability to squeeze more out of your existing customers. At least not as a replacement for the key growth driver of your business. Don’t fall for this trap.
Resist the temptation to consolidate to bottom-of-funnel channels. Speaking of another trap: if you are focused on one-day last-click reporting (barf) you might be compelled to consolidate your ad spend to Meta and Google because they’re “the only channels that work.” Every CEO who has ever looked at a report on ROAS has come to this conclusion, and it’s a destructive one. If you are focused only on last-click, you’re biased toward the ads that capture demand, not generate it. Already we can see this in the budget splits in the charts. Brands are moving their ad spend away from YouTube and TikTok, two video-based channels that specialize in awareness rather than conversion.
For mainstream marketers, this is common sense. But in the world of DTC, we’ve been chasing numbers so long that we’ve forgotten basic marketing concepts advertisers figured out generations ago.
Cutting awareness budget is like refusing to plant seeds in your garden because you don’t want to wait for them to grow - but expecting tomatoes anyway. Your new customers have to come from somewhere. You can’t be delusional enough to think that everybody is going to want to buy your product after instantly seeing one ad. Cutting back on awareness spend will suppress the long-term performance of your lower-funnel channels.
Set ruthless benchmarks for profitability all the way down to the ad level. Finding operational efficiency in your ad account means not wasting spend. The best way to do that is by establishing targets for each ad so you can understand which metric benchmarks you must hit to achieve profitability on every dollar spent. Everybody is focused on incrementality tests, but those burn tons of money on test and control groups of ads with delayed results. Establishing strict performance requirements for each ad gives you instant understanding of the profitability of your ad accounts. Don’t wait six weeks for incrementality test results - at that point, your learnings are seasonally out of date anyways. This is literally why we built the Northbeam Profitability Benchmarks tool.
Focus on getting higher quality results with tighter integrations. "Enrichment" is so 2015 - at this point, what you need is stronger targeting to ensure the algorithms running your ads can get your campaigns in front of the most valuable prospects. Meta's CAPI and enrichment tools were popular for a while, but now the ad platforms want to provide you with an even better solution. Enter Northbeam Apex. This integration allows you to traffic your ads with your ad algorithm informed on Northbeam first-party conversion data. That means your conversion rates will be higher, the traffic much higher quality, and your ROAS will improve. We built this in anticipation of this exact marketing environment: where high CPMs and high CACs mean that every dollar must be fed into the "algorithmic black box" of ad platforms with the highest certainty of success possible.
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