Acquisition Loops Cannibalization in B2B

[00:00:00] Vipul Bansal: The next presentation is Acquisition Loops Cannibalization in B2B. And this sounds very, very interesting to me. So Philipp, can we have you on stage now?

[00:00:22] Philipp Wastian: Hi guys. 

[00:00:23] Vipul Bansal: Here he is. So Philipp Wastian, guys. Did I pronounce your name correctly, Philipp. Is it Wastian? 

[00:00:31] Philipp Wastian: Oh, of course! 

[00:00:33] Vipul Bansal: Awesome! So yeah, Philipp is the marketing specialist for growth at Satispay.

[00:00:37] And he will be sharing some knowledge around acquisition loops cannibalization in B2B. So this sounds very interesting to me as well. I will now jump off the stage. And let me also pull up your presentation. Here it is. There you go. 

[00:00:55] Philipp Wastian: Thank you. Thank you, Vipul. So yeah, the title is something to chew on.

[00:01:00] So let’s just call it Cannibalization for now. Yeah. Thank you very much for the chance to present this today to you guys. Very quickly to me, I’m a growth marketer in Italy. I’m originally from Austria. I live in Milan right now and I’m part of a FinTech company called Satispay.

[00:01:18] I have worked in a growth field for quite some time now, but for me there are many, many different interesting things to talk about if it comes to growth and marketing.

[00:01:28] I’m strongly in the marketing domain but we work in many different fields together with product and together with data engineering as well as business intelligence to optimize our acquisition. 

[00:01:41] Let me start off with a quick example. So everybody knows a graph like that. We have, let’s say, a presentation with our board and you show one of these graphs and everybody’s applauding and saying, “Hey! Crazy! Very good, guys. You do an amazing job. You scaled from zero to one in just a few months. This is your core metric.” So feed like your product sales, your signups, your new customers, whatever it is. And it’s amazing. After the meeting, you shared a presentation with other participants, and other departments and the head of sales is saying, “Hey, that’s weird! Actually, we have a decrease in our numbers of our core product. How can we have an increase in the total metrics?”

[00:02:25] Or for example, the head of business acquisition is saying, okay, “actually you have added a lot of users, but our customer acquisition costs are exploding. What’s going on?”

[00:02:36] This, can have many reasons, of course, but one reason can be Cannibalization.

[00:02:41] So let me show you these two small graphs here. On the top side, I continue the example of product sales. Let’s say, this red one is the core product. And we actually have a second product launch in the month of July which is eating up all our sales from this first product.

[00:03:04] Slightly optimized product in a different set in a different section. So it’s not an evolution. It’s actually coexisting with another product, of course, a problem for our business, which is still located in the core market. 

[00:03:17] A second example can be acquisition channel split. So let’s say we have different acquisition channels and one is eating up the other.

[00:03:25] In red here we see the old acquisition channel that worked very well. Now we see even more growth than before, but it’s also eating up all the acquisition we had on the world before. Both of these can be triggered by cannibalization.

[00:03:40] I want to go deeper into acquisition loops now, because this is also the topic I’m familiar with most.

[00:03:49] So, we can define cannibalization in many different things. And as I said, I will deep dive on the acquisition loop part. 

[00:03:55] But also, it can be the reduction in sales as just discussed.

[00:03:59] So one product cannibalizes the other. Then the second one, multiple acquisition loops that coexist and target the same audience. And the third one would be, we have also have cases where a keyword traffic could be diluted between many different pages, causing deranking effect. This is something I will not tackle here, but also know that this is also a big topic.

[00:04:18] If you talk about search engine advertising and optimization. This is not something I will go too deep on but let’s start with a real big example of how we would set up a growth loop strategy. 

[00:04:33] So, this is our current B2B acquisition loop in a HR platform tool. Let’s just say, this is an example so numbers are completely fictional, but we have an HR platform, as so many are out there and we want to acquire new users. We have decided on three loops to have active. One is a paid acquisition loop in our performance marketing domain, collecting leads for our six teams. 

[00:05:01] We also have two organic loops. So one is collecting leads from our homepage and the other one is collecting signups directly over an autonomous signup tool we built into the homepage. Now, what we’re doing next is we add another loop. So, we add the loop and say, okay, now we do paid acquisition directly autonomous and sending them directly into our tool without needing to have sales at all. What happened was, okay, we made 12,000 signups, sales stayed steady because they were driven very well.

[00:05:40] But what happened was, we ate up our whole organic acquisition loop channel. This is a problem because, of course, our CAC is now exploding because we pay for something we actually got organic before then what can we do about that? 

[00:05:58] Well, we investigate. 

[00:05:59] One good way to investigate is incrementality.

[00:06:02] So, an incrementality test. Incrementality in its meaning does very simply explain this, would the consumer have been acquired also without this loop? We have basically two ways to do that to see if this is the case. One is the control group. So we just establish a control group and see if the control group is affected by that or not.

[00:06:25] And the other one would be, we just simply switch off one of the loops and see if the channel that is affected by that is now growing in its normal pace again. Let’s say, we figured it out and we say, okay, actually paid is cannibalizing our organic acquisition loop. 

[00:06:45] What do we do?

[00:06:46] Very simply, we can optimize and relocate resources to the more efficient loops. Of course, if we just do that still cannibalization could happen. We could run more experiments to actually find out, what is causing it? Is it maybe a sequential problem? Is it a Geolocation problem?

[00:07:06] And then we can actually have different loops coexisting in different settings. So, for example, let’s decide to optimize for different Geolocations in our core markets as we have sales already active there we still keep it completely organic. In our emerging markets, we have run the paid loops. This is something, let’s say, we found out through experimentations most beneficial to this loop system. Therefore, we are still making this 6,000 signups in paid, but still could keep an organic acquisition to both 7K.

[00:07:39] I got one question, email marketing is part of this world as well? Yes, of course. If we talk about email marketing and CRM. In general, it’s a world on its own.

[00:07:51] If we talk about that, I’m more into the topic of acquisition right now. So, if you talk about email marketing in general, yes, but I do not have an example for that right now for you. We can deep dive on that if you want to jump on it on the stage afterwards. 

[00:08:15] So, designing parallel growth loops is something which is very important.

[00:08:19] So as already said, we identify the audience segments. So we are not having many, many different loops in the same domain. We actually split it by segmentation, by geolocation, by audience group, and many, many different characteristics, depending on the channel we are targeting, are available.

[00:08:38] The second thing is to have different value propositions, which are not cannibalizing each other. So customize your messaging and value proposition for each segment. And the third one is to create acquisition loops which are developed in separate acquisition loops for each segment and use different channels and tactics to reach them.

[00:08:58] So, in general, we cannot transport one strategy with one loop to the other. Transforming that into cannibalization, I can just give you some recommendations we found out in the past. 

[00:09:11] First of all, all channels and acquisition loops are connected through many, many metrics. So even though, in this very simple example, we just looked at our acquisition, we also can see that actually, one channel to another creates a higher lifetime value. A sales channel paid, is creating a higher lifetime value than an organic channel, for example, or an autonomous channel. These all can be points we should take into consideration if we want to measure correctly. Of course continuously monitoring incrementality, so switching on and off channels and also making some tests. We experimented iterate on the messaging and on the channels and as well as managed cannibalization strategically. So, not panicking, switching off something because it doesn’t work out. First, collect enough data to make an educated decision.

[00:10:02] Then you clear understanding. And, of course, also consider geographic and timing variations. I think what we tend to do is to switch on and off loops all the time and experiment everywhere. And one important quote I think is ‘Cannibalization happens when you’re successful enough to compete with yourself’. And, so in general, I think it’s also a good thing. And this concludes this talk for now and thank you very much for listening to me. 

[00:10:34] Vipul Bansal: Interesting presentation, Philipp. Thank you so much for preparing this on such a short notice, I would say. But yeah, it was indeed very interesting. Let me just quickly check if there are any questions.

[00:10:47] Guys, you can drop in your questions now. But yeah, she has an observation to share that this always gets muddy for me when their conversion path is typically two to three visits with several different channels involved. Three times paid is highest CVR path for one client. 

[00:11:05] Philipp Wastian: Yeah, it’s a very good point. It depends in which market you’re in and what kind of tool are you working with, but if you want to create your own platform, attribution channels in general are a big nut to crack.

[00:11:21] So I think especially in this multi settings, it’s very difficult to say where cannibalization is happening. Generally starting with the lasting conversion is easier. If it gets more up a funnel, I think you will have cannibalization everywhere. If you go to, for example, building a brand, cannibalization will happen everywhere.

[00:11:45] So we already, I think a step ahead if we even are able to measure it, I think as soon as you were able to track it, you were able to measure at least bits of it and can optimize also steps further up the funnel. I hope that answers your question. 

[00:12:02] There was a second question, just simply jumping on that.

[00:12:06] So in general, I think first is measure, know that it is existing and if you see a decrease in one of your channels know that this is one of the possibilities you have. So, it could be that one channel is eating up another. This is especially important if you have parallel acquisition channels or parallel acquisition loops knowing that this exists makes it measurable for you. And just try to switch off one of your channels and see if you are actually having cannibalization. After that segment intelligently. Look at many metrics so, look at the acquisition metrics, but look also into engagement metrics and then continue from there to optimize your channels. In general, you should always pay the minimum amount for the best users. So I hope, this answers your question. 

[00:13:00] Vipul Bansal: Cool! Thank you so much, Philipp, for answering all these questions.