Today, our industry sits at an impasse. Our reliance on the major platforms to fuel our voice and distribute our products means we are on borrowed time.
Media inflation over the last 12 months has hit over 31% with all major platforms increasing prices. This has lead to increased customer acquisition costs making many brands that are reliant on these channels, unsustainable.
This also runs completely counterintuitive to the way we think as marketers.
You see, we benchmark ourselves against an average CAC and then expect that over time we will become more efficient in our spending. Our hope is we reduce our CAC and then we will be profitable. I call BS.
There are two reasons this will never happen.
1. As demand for digital media rises, so will costs. Simple supply and demand. And we know that digital has now overtaken other mainstream channels. So in the future digital channels will only get more expensive not cheaper.
2. As you scale you hit what has been coined by Tom Roach and Dr Grace Kite as the ‘performance plateau’. Once you achieve a certain level of customer acquisition, you will hit diminishing returns with the channels that have worked previously (due to audience saturation) and you will need to seek other more expensive channels to grow.
Using this approach you are essentially shackled in Leasehold zone and in a spiral. You are tied to the platforms to generate demand and you are not in control of costs as they get dictated to you. Your “landlord” can give notice at any time, subject to rent increases, termination notices or even short-term eviction (and believe me it happens!).
This zone is where you have build little equity or stickiness in the brand. Been over reliant on a few performance driven channels and not invested enough in your own real estate.
Leasehold zone characteristics:
The Freehold Zone is where you become less reliant on performance channels and are able to increase both efficiency and effectiveness of your brand performance over time.
It puts you in the marketing driving seat, with the following benefits:
- Create stickier customer relationships
- Protects you from burgeoning media inflation
- Reduces your overall customer acquisition costs
- Opens new revenue models
You are able to move to this in two ways:
1. Build brand equity so you gain mental availability
2. Build your own Freehold real estate that is not subject to continual rent
Freehold zone characteristics:
Combining Leasehold and Freehold Zones
Now, I appreciate it may appear like I’m gunning for one side. I’m not. I recognise the intrinsic value of both zones.
In fact, no one can actually argue that there is not a time and place to rent or lease. It’s convenient, it’s affordable and ofcourse it’s likely they offer the best places and spaces to ‘be where your customers are’.
However, the real nugget is to blend the Leasehold and Freehold zones to create a continuum funnel from one to the other. For example, you can use the Leasehold Zone to attract new customers and then the Freehold to nurture and deepen the relationship.
Let me leave you with a final thought;
Can you turn your Freehold Zone into a Leasehold Zone?
Once you have generated enough consistent and sustained organic traffic and brand equity, it actually creates an opportunity to have new revenue generating opportunities.
Here are just a few:
- Become a publisher of content and earn advertising revenue
- Forge partnerships with other brands
- Diversify your product ranges
Staying in the Leasehold Zone is a one-way ticket to an unsustainable business model. Unleash yourself and your brand by getting into the Freehold Zone. It’s a journey but it’s a journey worth undertaking.