App Marketing During an Economic Downturn: Part II

Economic Downturn App Marketing

In our last blog post we discussed how running a business during an economic downturn takes resilience, creativity and, importantly, optimism to help you navigate and prioritise sustainable business growth for your app during these more difficult economic periods.

Part I (read more about it here) we covered strategies and tips for app marketers who have seen a reduction in their marketing budgets as a result from the economic downturn. However, in this post, we’re focusing on businesses who have fortunately managed to retain the same budget this year. There are still opportunities that app marketers should consider, as the market shifts to adapt to economic uncertainty.

Let’s get into it.

Reallocate (rather than reduce) marketing spend

We would advise any business under financial pressure not to cut marketing spend. The numbers support this: a study found that businesses that reduced their marketing spend during a recession saw sales drop 7% below pre-recession levels, while 60% of brands that increased their media investment during the last recession saw ROI improvements.  And if you need further convincing, consider the fact that if your competitor doubles their marketing spend (bullish, but possible), you risk losing 15% of your business.

It’s also important to acknowledge the impact on the advertising platform algorithms. Halting spend on the likes of Meta and Google can have a detrimental impact on the platforms’ machine learning efforts to find you optimised users. If you restart your campaigns after a pause, you’ll need at least 50 conversions per ad set to regain algorithmic power.

Let’s say you have three ad sets on meta (audience targeted, broad and demographic). You need to consider each ad set as its own machine learning hub – requiring a baseline of conversions to optimise effectively and find the algorithm’s sweet spot to achieve target cost. Ensure you increase and decrease spend sensibly and avoid drastic decisions that may sacrifice the time you’ve spent on your optimisation efforts.

Take advantage of lower advertising costs during an economic downturn

When there are fewer advertisers, demand drops and therefore so does the price. Some advertising companies have reported a 35% drop in CPM on Google Search campaigns year on year, while retargeting platform Remerge found that their CPMs were a massive 43% lower overall when looking at July 2022 to November 2022.

2022 CPM data from Remerge
2022 CPM data from Remerge

Even if consumers are spending more mindfully right now, recessions do come to an end and consumers will once again loosen those purse strings in the future. According to Forbes, the effects of the economic downturn on consumer expenditures will be mostly limited to interest rate sensitive categories. So as people continue to spend on smaller purchases, such as apps, you need to be front of mind. It takes three to five years to recover the brand equity lost when you stop advertising, so now is not the time to shut up your advertising shop completely.

Unleash the power of your existing customer base…

The exact amount it costs to retain an existing customer versus gaining a new one varies wildly depending on which study you read, but they all agree: keeping your existing customers is significantly cheaper than courting new ones.

Retargeting existing app users with advertising can pay dividends. They’re 37% more likely to make a purchase in their first 30 days if they see an ad for your brand, compared to those users who see no advertising during that time.

Loyalty programmes can be key to maintaining your user base – 56% of app users said that they are more likely to return to an app that offers a loyalty or rewards program.  Members of Starbucks’ app-based loyalty scheme drive more than half of the company’s revenue. And don’t forget to consider gamification as part of that:  brands that incorporate gamification into their customer engagement strategies see a 47% rise in engagement and a 22% rise in brand loyalty.

Finally, if you’re not giving your users the opportunity to recommend your app, you really are leaving money on the table – which is the last thing you want to do during an economic downturn. 81% of consumers say their purchasing decisions are influenced by their friends’ social media posts, so it’s worth making it easy for your users to share your app on social media.

… through effective audience segmentation

Consistent marketing success comes from ensuring you have a holistic overview of your users’ entire lifecycle, deploying the correct tools as appropriate. What a new user will respond to is entirely different to someone who has used the app for a while. That’s why combating app churn should be top of your agenda.

Retargeting effectively is an important part of that and a successful app retargeting plan starts with a solid audience segmentation strategy.  RFM analysis (Recency, Frequency, Monetary) allows you to assign each customer a score on each of these measures, indicating their overall value to you. From there, you can segment customers into groups based on their RFM score and tailor activities. For instance, users that demonstrate high usage and high monetary value can be targeted with loyalty programmes. In contrast, those that have demonstrated decreasing usage should be targeted with re-engagement tactics such as personalised recommendations or incentives.

Conclusion

There’s no avoiding the fact that marketing during an economic downturn is hard – and that defending your marketing budget during a recession is really hard.

It’s worth considering whether you’re presenting the most compelling metrics when you do that. While previously you might have focused on Return on Ad Spend (ROAS), there are longer term consequences to the users you retain or attract. How much will they cost to serve? How much will they spend? What’s the value of owning that market share? By thinking more holistically about the user journey and marketing’s place in that you can bolster your value to the business.

How To Market With Mobile During a Downturn - Branch
How To Market With Mobile During a Downturn – Branch
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