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Legendary investor Bas Godska on how the C.A.S.H.C.O.W. B.O.M.B.E.R. algorithm can take marketing to the next level

Thursday, September 17, 2020

How the right picture next to the search box can increase sales by $400K? Why should brand queries be excluded from your SEO contractors' KPIs? Do we need brand banner advertising during a crisis when every penny counts? Read on to find out!

Startup Jedi

We talk to startups and investors, you get the value.

Our guest today is Bas Godska, one of the most successful business angels in Europe, the founder of Acrobator.com consulting agency and Acrobator Ventures fund. He has previously led marketing and business development in such companies as Travelocity.com, Lamoda.ru, Lastminute.com, KupiVIP, etc. Back in 2003, Bas invented the C.A.S.H.C.O.W. B.O.M.B.E.R. formula, that has helped hundreds of companies ranging from recognized market leaders to startups to comprehensively boost marketing over the years.

In turbulent times, it is competent marketing that becomes the key to survival and growth. Together with Bas, we analyzed a part of the C.A.S.H.C.O.W. B.O.M.B.E.R formula. Read on if you want to take your company’s marketing to the next level.

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Why crisis is not always the end

Companies and consumers around the world are fed up with restrictions and social distancing measures. Marketers had to rethink their communications approaches. They cannot be stopped completely, but need to be seriously changed. I believe we are in the middle of the crisis.

At the start of this crisis, many expected startups’ valuations to fall. But it turned out that they remained the same or even increased — though not at an early stage.

In general, market segments react to the crisis differently. Fears and worries clearly affect people’s ability to spend, but we cannot categorize everything into black and white. I have a travel company in my portfolio. Everything was very bad for them after the borders were closed, they had little sales and income. Another startup from the IoT sector, Aura Aware had a huge increase in sales: over ten thousand of expensive devices were sold just over a month. Another portfolio company, Miro, saw its customer acquisition costs plummet and sales went through the roof.

This is why there is no universal advice in a crisis. Marketers and business owners need to act according to the situation. Is the demand growing? Increase advertising budgets, hire additional sales managers. The market collapsed? Cut and optimize costs. And in any case, you need high-quality analytics.

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Инвестор Бас Годска

Do I need to invest in brand promotion during a crisis?

In general, all marketing activities can be divided into measurable ones, like performance ads, and branded, which impact is very difficult to measure. In a calm and growing market, I recommend spending up to 20% of your budget on brand promotion. Raising awareness, maintaining loyalty, “warming up” the audience is very important. But you should invest much less in this direction during a crisis, only up to 5%. And all the rest should be directed to clearly measurable instruments. But this advice does not apply to all companies, and that’s okay too. In marketing, there is no single methodology at all: everything needs to be tested, hypotheses are to be checked and counted. Imagine that your company is a yacht — it now must have three sources of energy: wind in sails (organic traffic), a diesel engine (paid traffic), and a spare electric battery (e.g. no cure no pay deals, partnerships).

In one company, we carried out large-scale A/B testing with banners (100 million ad serves). Some were just branded, without a click incentive, others had calls to action. When we removed branded banners from the overall impressions, our last click conversion figures dropped by 30%. This means that a simple regular mentioning of the brand brings a part of results.

In another case, when we ran branded ads on TV, the cost of acquiring customers online dropped by 25%. The recognition and trust of the company has grown, and people are more willing to buy.

A brand as such is a very expensive and unpredictable item. So, if your product is inexpensive and solves a specific need of a person here and now, contextual advertising and promotion in social networks will be more useful for you. Companies that are just entering the market also need to be careful with branded advertising. I remember creating Lamoda in Russia. First, we had a marketing “valley of death” with a conversion rate of less than 0.5% and a very high CPO (“order value”). Metrics have gradually improved and Lamoda became market leader fast, but at the current times it would be wrong to invest large budgets in brand promotion (in this case). Brand banners on the Internet are cheaper, but they work according to the same rules as in other media. Therefore I advise using, for example, affiliate networks where you pay for the result if possible.

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Investor Bas Godska

What is C.A.S.H.C.O.W. B.O.M.B.E.R. and how it can take your marketing to the next level

I came up with this “cash cow” formula (a reference to the “cash cow boomer” from the BCG matrix, a tool for strategic analysis and planning in marketing) back in 2003. It systematizes various marketing tools and directions. In fact, everything is known, but it is a systematic holistic approach and competent analytics that help to achieve results.

Over the past 17 years, our Acrobator consultancy has helped hundreds of companies strengthen their marketing and sales. Portfolio companies of Acrobator Ventures fund also get boosted according to this formula with the participation of our 15 growth-hack and growth-marketing specialists.

C.A.S.H.C.O.W. B.O.M.B.E.R.

Ideally, you should develop all areas of C.A.S.H.C.O.W. B.O.M.B.E.R., but in times of crisis you need to be careful with your marketing costs. Direct your main efforts and money to the most profitable aspects. The situation can change frequently, so test your approaches.

So, let’s get back to C.A.S.H.C.O.W. There is no priority in the letters in its name, the last positions are just as important as the first ones.

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C.A.S.H.C.O.W. B.O.M.B.E.R Бас Годска

C for Cost per click (context advertising)

When launching such pay-per-click ads on Google Adwords, GND, Facebook, or Instagram, a startup must evaluate the unit economics of that channel. And a lot depends on the product here: B2B, SaaS often don’t sell very well on Instagram. For this social network, I recommend making short videos. Here they get a good click rate of about 2%. You can use stock videos as a basis — not every startup can order the production of such content in a studio.

At the same time, it is worth testing advertising on YouTube where impressions can cost one cent. The disadvantage of such advertising is weak analytics capabilities. We often see that brand traffic on the site increases after you have posted on YouTube, but it is difficult to understand which audience has placed an order. It’s good if a person follows links with utm tracking tags in the video description. But many people google the site by name or click on other ads after a while.

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C.A.S.H.C.O.W. B.O.M.B.E.R Бас Годска

A for Affiliate marketing

For a budget-conscious startup, affiliate marketing is basically a credit line. It is ideal to find partners willing to work on a “no cure no pay” basis: in this case, you will pay only post factum, and only for real leads. The same utm-tags will help track traffic sources, and xml-feed of goods will help you promptly update your advertising messages dynamically.

You can’t build good affiliate marketing with a simple injection of money. You will have to invest a lot of time in communication with future partners, building an image, getting positive feedback ratings and PR in the first 2–3 months. But the result will be a network effect that works without active investments. I advise almost all startups to try affiliate marketing.

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C.A.S.H.C.O.W. B.O.M.B.E.R Бас Годска

S for Search Engine Optimization

This is potentially a very effective, but somewhat opaque tool: search engines do not disclose all the criteria for ranking websites. Such “alchemy” gives rise to charlatans who skillfully spend your budgets, but are not responsible for their actions.

Ideally, SEO should be done by a person within the team employed at least part-time. Due to the constant changes in the industry, this specialist should attend specialized conferences, watch webinars, liaise with outside experts and take courses. But if you can’t afford to hire a specialist, you can find out how good your website is in terms of SEO yourself.

Ahrefs will help you audit your website, analyze competitors and study customer preferences. There are tools for content marketing and for comparing progress — both yours and that of your competitors.

Ahrefs recommends 44 proven SEO-tools. They help you compose a semantic core, track search trends, evaluate the quality of individual pages of the site, analyze backlinks, correct errors … An ordinary good webmaster will cope with these tasks.

If you sign a long-term contract with an agency, be sure to take the linear growth rate that you already have without the services of a contractor into account in the KPI. If your traffic is already organically growing by X per month, then the contractor should provide, for example, 1.5X. In general, from 15% to 40% of the traffic from the general marketing mix with investments in different directions can be generated by SEO.

Be sure to check that the agency’s KPIs do not include brand queries. Many other tools can work for recognition, PR and advertising of your company and products. People will hear the address of your site on the radio or from a friend, remember and open it in a browser. There is no merit to the SEO contractor in this, but a number of agencies are trying to attribute this traffic to themselves. To understand the value of an agency, look only at non-brand queries.

The cost of a SEO contractor should be fixed. I worked in a company once where they began to cooperate with an SEO agency not based on a retainer, but on a click deal — they paid for each transition to their site from a search engine. This may seem profitable at first glance, but soon the company spent 600 thousand euros on such CPC SEO traffic! Yet, traffic to a website and its conversion into customers are very different things.

The first consistent results from investments in SEO will appear in roughly 3–4 months. But if you don’t see any results after three months, something is probably going wrong and you may want to consider having a tough chat with or replacing the contractor.

Don’t be afraid to do SEO! If your site is user-friendly and works correctly from desktop and smartphones, this already seriously helps it comply with the rules of the search engine game.

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C.A.S.H.C.O.W. B.O.M.B.E.R Бас Годска

H for Human interaction

This is especially true for startups that have grown into b2c and b2b companies with sales departments and call centers. Don’t look at your call centers as cost centers. On the contrary, these are profit centers, your eyes and ears in your business. Especially in e-commerce, where they can give a 20% conversion on inbound calls and a higher order value, which is much higher than on the website. Of course, a lot depends on the sector, but in general, communication with a real person, and not a chatbot, helps to sell more.

Even if your site is technically perfect, the human factor won’t hurt. It can be some kind of corporate character, an appeal from the author of the project, a friendly tone of voice in the texts, etc. If you have a purchasing department, it can explain on the site to visitors why there are these particular products on the site and why they are good, in a short video. This is what Zappos does, for example. Storytelling is very important for building trusting relationships with existing and potential clients. This is a strategic element for the future, but it pays off.

Simple visuals can also “humanize” your contacts with customers. I once worked in the USA for a very large travel company. Once we noticed that a photo of a couple holding hands on the beach placed next to the flight search form added $400 thousand to the turnover every hour!

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C.A.S.H.C.O.W. B.O.M.B.E.R Бас Годска

C for CRM (Customer Relationship Management)

In a sense, the previous (Human Interaction) and the next, Email Marketing points are included in this one, because all this is about building relationships with customers.

CRM is a general name for a tool and it can be very different: tooled for sales, for communication within the team, solving problems, etc. Therefore, choose the solution you need carefully. For Eastern Europe, I personally like the functionality and price / quality ratio of amoCRM, but its functionality in analytics is limited, so it is often convenient for smaller projects.

There is HubSpot, the “SUV” of CRM. It’s powerful and comfortable, but expensive. Yet you can get a very large discount through funds and accelerators. For example, our fund as a HubSpot partner can give portfolio companies and clients a 90% discount for the first year and 50% for the second. In the third year, the discount will be about 30%, but the startup will by then probably be able to afford more for a CRM.

HubSpot is especially good at allowing marketers to leverage all the multichannel features. Tools for email marketing, social networks, retargeting are all collected in one place… This CRM allows you to see the client in 360 ° and understand them well. In this respect, it is the most advanced one in the world. I have no commercial interest in promoting this software: if I’m talking about it, it means it’s really good.

It is very important to understand that if you are going to work with a complex CRM system like HubSpot, you will need a specialist to help you set up the software correctly, digitize business processes and train employees.

This point of the algorithm, in addition to CRM, includes commercial creativity. It is during a crisis that an entrepreneur must be open to new ideas. It may occur to you in the shower or right before going to bed. And it may be something simple, something you didn’t think of in “normal” time, because there was no particular need to strain. For example, there is a high traffic site that you are not competing with. But your product or service is quite relevant to the audience of that site. Try to integrate with this resource on a rev share basis, it can become a profitable source of sales for you.

Now, during the crisis, I see that the founders of my portfolio companies have become stronger, more decisive and flexible. This is one of the few advantages of turbulent times. There is a good saying by Churchill that everybody's now using: “Never let a good crisis go to waste.”

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C.A.S.H.C.O.W. B.O.M.B.E.R Бас Годска

O for Optimize usability

A common mistake startups make is driving traffic to a not user-friendly website. Work on your landing pages well before you start spending money on traffic. Stylish design, clear usability, clear presentation of information, copywriting, tracking — everything is important.

Think about what the customers are interested in, what trigger can attract them. One wants a discount, another wants to feel like a VIP, someone wants to show off to neighbors, and others are just curious. Your landing page should have posts and banners that take all the main triggers into account. Of course there can be one at a time in certain cases.

The site itself should explain and catch on from the very start. A person determines whether they want to stay on the site within 0.2 seconds, then they quickly scroll the page to understand whether it is worthy of their attention for another three seconds. 

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C.A.S.H.C.O.W. B.O.M.B.E.R Бас Годска

W for Web analytics / Data

This is always very important, and even more so during a crisis. Any click, any traffic you pay for — always use utm tags. Measure exactly the paid traffic that was going to your site using Google Analytics or other tracking. Do not save money on the work of an expert who will set up goals, metrics, events in the Google Analytics office correctly. Make good use of usability tools like HotJar or Lucky Orange, they show in video what people exactly do on  your site and fix obstacles. 

If now, at a time when everything can be measured from A to Z, you will not properly deal with your data, it is almost better to just close the company! And if you are engaged in analytics, try to get the most from the data, and remember: live emotions and decisions of people are hidden behind dry numbers and percentages. Always look from the client’s perspective. For example, too many users refuse to order at the checkout stage. What can confuse them? Possibly shipping cost. Test what happens if you cut it in half. You may not have a margin on delivery, but conversion and turnover will increase, so your customer acquision costs drop.

This was the 1st part of the С.A.S.H.C.O.W. algorithm. Do you want to learn about B.O.M.B.E.R. as well? Download the algorithm presentation from Acrobator.

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Acrobator Ventures

Acrobator Ventures Fund

The C.A.S.H.C.O.W. B.O.M.B.E.R. algorithm is the core of the smart money fund. Acrobator Ventures (www.acrobator.vc), as a Dutch early stage growth-hack-fund, is still the only one of its kind in the world.

They focus on entrepreneurs from Belarus, Ukraine and Russia. You don’t have to live in these countries but have to be born in one of them. R&D in this region is also a reason to apply.

Your project must have a global strategy and market. There is a threshold for revenue: monthly MRR from $30 thousand. At the same time, Bas Godska, as a business angel, invests in earlier stage startups.

The volume of the fund is 40 million euros. First round checks are up to € 0.5 million and up to 1.5 mln in follow-on rounds.

Acrobator Ventures invests in promising startups from a variety of sectors in which it adds growth hack value, but not in the sectors like IoT, biotechnology, cryptocurrencies, adult sites and gambling. The fund and Bas' portfolio as a business angel includes companies from deeptech (respeecher.com), computer vision (letsenhance.io), productivity (miro.com), edtech (studyfree.org), marketplaces (zakaz.ua), e-commerce (ChocoFamily), adtech (Newzmate/piano.io), hrtech (Harver.com, 6nomads.com). 

You can learn more about the fund and apply here.

Our story about one of the startups from the portfolio: The story of a Respeecher startup, which got into Techstars and is now working with a Hollywood TOP-5 film studi

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Click on the image to learn more about investclub.vc

 

17 Sep 2020

 

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