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How To Grow An Online Business Profitably — A Private Equity Playbook

Private equity firms are in the business of being extremely financially savvy. That is how they generate significant returns for investors. To apply that same focus to running omnichannel digital marketing programs, we need to gain as much clarity as we can via data and experience in order to benchmark and build a digital growth roadmap, followed by continued measures to drive profitable growth by increasing revenue and cost efficiencies.

For online businesses with serious ambitions, I suggest approaching growth the way that most resonate with our private equity clients: With a digital marketing business case and a good “strategic partner” for their marketing efforts. By approaching digital marketing with a private equity mindset, businesses can make informed decisions and maximize their chances of success. It starts with the right foundation.

The importance of a digital marketing business case

We built our digital marketing consultancy by servicing private equity firms. The concept of the digital marketing business case was developed within the greater scope of digital due diligence in order to inform the business plan and align all stakeholders. As a result, we now develop these business cases with all our clients before spending any significant budget. To maintain focus amidst changing platforms and fast-paced disruptive innovation, we regularly refresh them to adjust for initiatives, product launches, or market changes.

A digital marketing business case, simply put, is a commercial forecast of revenue opportunities and a clear mapping of the resources required to achieve them as the foundation for a meaningful digital strategy. It reconciles leadership’s top-down strategic vision and business targets with what is actually achievable from the bottom up based on the practical realities of each digital channel. A good business case aligns all key stakeholders with the company’s digital activity and establishes a clear foundation for revenue growth. Constructing business cases for our clients has saved them tens of millions of dollars by empowering them to understand the impact of and resources required for their proposed initiatives.

How to build a digital marketing business case

Every business with a meaningful budget should create a digital business case. It is easier to eat the elephant piece-by-piece rather than whole, so establish multiple options for timeframes, budgets, and targets. Address and prioritize quick wins, which can often fund the next phase and grow stakeholder confidence. Once stakeholders agree upon the business case, project timeframes can be set, and the relevant digital strategies can be completed prior to campaign rollout.

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Specifically, a digital marketing business must address the following considerations:

  1. Calculate Opportunity in Dollars: Using a channel-specific analysis (as well as an understanding of the synergistic effects of channels), identify the gap between what revenue is achievable for a certain digital channel, and where the business currently sits.
  2. Know the Buyer Intimately: When we try talking to everyone, we connect with no one. With a crystal-clear understanding of our audience — their needs, pain points, motivators, interests, media consumption patterns and buying journey stages — we can forecast volumes and conversion rates across each channel and determine the role and KPI of each.
  3. Reverse-Engineer the Competitive Landscape:
    Competitors leading in one channel are often different from the leaders in another. Find the leaders in each channel and determine what it will take to beat them — the devil is in the details. Ask questions such as:

    • What audience/s are my competitors targeting, and what works for them (e.g., which ads have they been running the longest)?
    • What is their core value proposition and messaging?
    • What can I learn from their creative assets when implementing my own (e.g., landing pages, ads, etc.)?
    • What can I learn from their customer reviews?
  4. Calculate Effort:
    Understand the projects, budgets, timelines and expertise of internal (e.g., developers, internal marketing team members) and external resources (e.g., agency costs or media spend) required to capture the opportunity.

Defining a strategic partnership and how to find a winner

While every agency and consultancy may pitch themselves as a strategic partner, few come even close to having the skills, mindset and behavior required to earn this title. The partnership between a company and its digital agency should be akin to that of the consigliere in the Godfather movie — a trusted advisor with the commercial experience and technical know-how to guide clients toward exceeding sales targets within budget. They consult owners at the P&L level to ensure all marketing resources (internal and external) are strategically and practically aligned to achieve their key objectives.

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To find a true strategic partner and validate their claims, ask for evidence:

  • Do they have battle-scar wisdom from having run all relevant channels with great successes (and having learned from their failures)?
  • Have they mastered the trifecta of commercial priorities (i.e. generating revenue), deep technical capabilities, and cut-through creative messaging?
  • Are they agnostic in their choice of digital marketing channels and transparent with their fees?
  • Do they have their finger firmly placed on the innovation pulse?

Innovation and disruption are inevitable and, therefore, must be at the heart of any strategic partnership to stay ahead of the curve. Mitigate the risk of these changes through the traffic light system: What activities do you stop, keep doing and start right now? For example, Google’s plans to roll out Generative AI into its search results in early 2024 will shake the digital marketing world. A large portion of the real estate on the first page of a Google search may be occupied by generative results, which will have a significantly adverse impact on Google’s traditional organic listings.

Doing nothing will hit online businesses hard, but overreacting too soon could end up being a waste of resources. A good strategic partner will know best practices and risk-mitigation strategies that can be put into place early. They will both defend against these changes and exploit them while the window of opportunity is open. Many companies prefer the ostrich approach, keeping their heads in the sand until something happens, but this is clearly not a winning strategy. The evolving opportunities in digital marketing can be both exciting and confusing — but with a solid business case and a proven strategic partner, online businesses can be in a prime position to make the most of them.

Source: entrepreneur

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