What I learnt about customer acquisition buying Viagra ads on TV.

On/offline customer acquisition

In my previous roles I’ve advised on billion-dollar-plus M&A transactions, Private Equity portfolio optimisation processes and offshore VC impact fund structuring, among other vague finance related things.

Now I buy ads on TV for Viagra*

In my current role, I have been designing the frameworks for allocating marketing spend for an Australian D2C healthcare business and trying to see if the same risk and return principles apply to offline inventory, that apply in finance.

Using Pricing Inefficiency to Drive Incremental Competitive Advantage

In the advertising market the channels by which you can acquire customers differ in how they price and facilitate your access to customer attention.

When building a marketing strategy advertising assets can be broken into three broad categories. There are inventory that fall in between these categories, or that price like one but behave like another, but for simplicity these are:

Online (media)

Offline (media)

Non-Traded/Distribution (physical)

All three of these are markets of varying competition with their own nuances and complexities. The following are the broad stroke categorisations of how we think about playing in these markets

Channels

Online: Transparent (Kinda)

• Online environments such as Google Search or Facebook advertising are relatively transparent auctions with quasi-visible price discovery
• Users can back-out across these platforms with a series of methods what others could be paying and the trends of these prices over time
• The providers of customer access know all the bids, display the auction and give each bidder in that auction an opportunity to bid for users with varying degrees of intent
• The downside, is that while Facebook and Google are the best in the world at finding users, they are also best in the world at selling that inventory to companies at an increasingly lower skill-barrier to entry
• Therefore a Facebook and Google only marketing strategy for non-differentiated products are susceptible to having market share taken by well-funded competitors
• In these environments faster creative iteration and compelling product proposition relative to your competitors will drive your ability to win

Offline: Opaque

• The providers of access to offline inventory (Radio/TV/Billboards) know the prices that are being offered to your competitors and the volume at which your competitors are buying
• The inventory is sold through a thoroughly fragmented network of sales staff (think stock brokers in the 80s)
• It is far more difficult without industry or advertiser-side relationships to understand the pricing your competitors are receiving
• The competitors are both companies in different industries to yours and your director competitors bidding for the same inventory
• There is far less ability to target by customer interest, unless you use the type of media that people are consuming as a proxy (e.g. motor sport is traditionally male dominated)
• In this market you are therefore more likely to find inefficiencies both through the inaccuracy of reach forecast, and the lack of diligence of traditional agency buyers who bid on behalf of large companies (with the capital to play in these traditionally expensive channels)
• Your issue then becomes understanding your efficiency and whether you are bidding against top of funnel price insensitive legacy brands, or more established D2C businesses with more nuanced views to offline inventory

Physical Distribution, Sales and Partnership: Non-Traded

• ‘Physical’ distribution can encompass many forms, but could be thought of as a team of sales staff employed by a company or a network of third-party distributors
• In the world where you are selling a non-differentiated product, if the network of sales locations (e.g. third party stores) does not exist until after you have struck a deal to distribute, then there is no price competition for you other than the providers best next use of time
• Competition will only arise after the network of sellers are utilised by you (for example, previously unused micro-influencers) and become recognized by your competitors as a legitimate go to market strategy

Summary

The balancing of these channels is a mix of the execution speed, navigating regulatory requirements, relationship building, hazy attribution and of course, pricing.

The goal, at least for us, is to stay within our LTV/CAC thresholds and work in concentric circles from highest certainty return assets, outwards (usually from online to offline) while simultaneously adjusting our willingness to pay to reflect the offsetting factors of higher reach x lower-certainty-attribution in these channels.

In this way, we create a balanced portfolio media mix that allows us to scale the top line acquisition of our businesses.

Or at least we try to.

*

Although good for grabbing attention, it’s important to note that while ED will nearly always get a laugh in Australia among groups of people not working in the medical space, based on publicly available research and our internal numbers it is a widely prevalent often-not-spoken-about condition that severely impacts mens’ confidence, relationships and ability to relate to their partners.

By providing discreet access to this service one of our brands is allowing men to reconnect with their loved ones, reinvigorate relationships or marriages and overcome previously crippling adjacent issues such as anxiety.

That’s a vibe.