How to Reduce the Cost of Marketing in Physical Retail

November 14, 2022

Every brand builder needs to be aware of CPG marketing costs. For many CPG brand managers, measuring costs can seem as simple as comparing customer acquisition costs (CAC) to customer lifetime value (LTV). However, the importance of customer experience and engagement may be missing from this equation. Measuring the impact of customer experience and engagement can be tricky, and these metrics are often overlooked because they sometimes come across as intangible. How are you supposed to plot out customer engagement, and how does it relate to revenue when it comes to raw data? What metrics should be measured to track customer experience and engagement, and more importantly, does customer engagement affect your CAC?

Lessons from eCommerce

To appreciate the significance of CPG marketing expense, consider the CAC metric in an eCommerce setting. As a general rule, a ratio of three or greater is the goal when dividing Life Time Value of a Customer by the Cost of Acquiring this Customer. This ratio can be captured by analyzing the total marketing investment to acquire a new customer compared to the lifetime revenue of the average customer. Some eCommerce companies spend as little as 7% on CAC, but many spend more than 20% of their revenues marketing to acquire new customers. 

A conversion rate of 3% is considered quite good in the online CPG space. Still, you have to consider that an online marketing strategy is based on much larger traffic volumes than a physical retail marketing strategy. Online marketing of CPGs involves utilizing tools like SEO and social media engagement whereby a brand will actively interface with consumers to provide an experience. Additionally, tools like dedicated apps create a customer experience that draws shoppers into an ecosystem of sorts. This means that CPG retailers need to have tools available to deliver customer engagement in traditional stores to compare marketing costs with eCommerce. More importantly, CPG retailers need to be able to market using customer engagement as an anchor point in order to see where money can be saved when using this comparison.

Translating the Value of Customer Experience to Traditional Retail

For a traditional retail business, the numbers are a bit different. The goal is to create customer experiences that bolster customer acquisition, extend LTV, and reduce marketing costs. Physical retail CAC tends to be about half of the eCommerce Cost of Customer Acquisition, and the goal for conversions should be about 35%. 

Reducing CAC Costs Through In-Store Demos

Store demo events offer an effective solution to reduce CAC costs in a physical retail business. This is because in-store sampling events answer the engagement sought after in an eCommerce environment with real-world engagement that promotes word-of-mouth marketing opportunities. When you look at the numbers for a store sampling event, it’s relatively easy to see why this retail marketing strategy is effective. Based on data gathered from in-store events in California alone, the total cost for an average in store demo event only comes to around $260. This cost includes factors like brand ambassador labor, scheduling, and management, the cost of the product samples, and travel expenses. On average, 75 customers are engaged per event. Considering the average conversion rate of 35%, field marketing can net just over 26 new customers during an average demo. All told, the numbers work out to generate a CAC of just $9.15. This is a far cry from the figures posted for eCommerce, and most of these savings are due to customer experience in retail being supported by store demo events.

Engagement Through Store Demos to Save Money

All told, store sampling and field marketing events have the ability to engage shoppers and convert them into customers while also saving money. As an added benefit, these marketing events also have the power to generate word-of-mouth marketing opportunities that can effectively work to lower CAC costs even further. Because the initial marketing investment multiplies each time a shopper tells someone about a retail store and the CPG brands they experienced, your costs go down because this is one less shopper that requires direct acquisition. Of course, this is on top of the lower overall CAC compared to digital. When you take advantage of a retail marketing management software solution like Demo Wizard, you spend less time worrying about managing the details of each event. As a result, you have more time to concentrate on managing other aspects of your marketing efforts. This directly correlates to happier shoppers who are more likely to spread the word about their experiences through word-of-mouth marketing.

Lower CAC Marketing Costs With Demo Wizard

To learn more about how your organization can save money on in-store marketing costs through store demo events, contact Demo Wizard today to schedule a free consultation. We can provide you with a customized store demo management solution to help you reduce marketing costs while increasing the value of each customer experience. Call today at 510-859-8919 to get started, or click matteo.fabbiani@hotmail.it now to reach Demo Wizard online.