DIGITAL MARKETING STRATEGIES

THE ONLINE DIGITAL MARKETING MADE SIMPLE

Sleep brand Casper is vying to make its ad dollars work harder after spending $423m on marketing in the four-year run up to its IPO filing.

The direct-to-consumer brand filed its S1 yesterday (10 January), revealing it spent $114m on marketing in the first nine months of 2019. This represented a 23% rise from the $92.7m it spent during the same period in 2018.

Altogether, the brand spent just under $423m on marketing from January 2016 through September 2019.

The company said such “sophisticated, data-driven and integrated” expenditure has meant its brand is now an “immeasurably valuable asset”.

It currently spends half its media budget online through search, social media, digital video and podcasts, and the other half on traditional channels such as direct mail, radio, TV, print, shopper and outdoor.

Casper’s quirky creative, which has challenged subway commuters to solve poster puzzles and let consumers sleep in its ‘Napmobiles’, has seen the brand ascend as one of the front runners in DTC advertising.

But despite such a sizable marketing budget, the company reported net losses of $92m in 2018, despite growing sales to $358m.

Casper noted it is “highly dependent” on the effectiveness of its marketing programs to generate sales and consumer awareness. Paid forms of communication, it added, are “expensive” and “may not result in the cost-effective acquisition of customers”.

Meanwhile, the company is cognizant its customer pipeline may dry out.

“As our brand becomes more widely known, future marketing campaigns may not attract new or retain customers at the same rate as past campaigns,” the filing read. “If we are unable to attract new customers, and retain existing customers, our business will be harmed.”

Casper’s expenditures have consequently been questioned by financial commentators, who also raised similar concerns regarding WeWork’s now-defunct S1.

However, Casper has gonesome way to mitigating concerns about the size of its marketing budget. The company believes it can improve the efficiency of its marketing investments going forward; currently, it turns over $3 in revenue for every $1 it spends on marketing.

While it admitted marketing budgets will ultimately rise in line with company growth, Casper hopes it will soon begin to utilize economies of scale.

“We believe that with larger budgets and deeper experience, we will benefit from lower media rates and increased data that will improve our proprietary models, multi-channel synergies as our retail stores and retail partnerships grow consumer awareness, purchase occasions as our product and services assortment expands, and purchases from previous repeat consumers,” it stated.

Casper’s sales and marketing expenses decreased as a percentage of net sales revenue from 43% in 2017 to 35% in 2018, according to the filing. Alongside more efficient marketing returns, the company put this down to an expanded product offering, increased consumer awareness, a higher returning customer mix, and growth in its retail stores and partnerships.

Additionally, Casper said its marketing models have grown more effective as it improves an understanding of its customer base. It has invested heavily in a data-led approach to marketing, hiring in-house statisticians and engineers to build out proprietary marketing decision models.

It also shares consumer information with third-party vendors.

Such an approach to data means Caspar is planning its European expansion with trepidation. The filing noted the limitations the GDPR and the CCPA place on analytics and targeted marketing, as well as the cost of fines imposed for failing to adhere.

“Such regulations may have a negative effect on businesses, including ours, that collect, process and use online usage,” the filing read.

Influencer marketing was also listed as a risk factor in Casper’s financial growth. It said it relies on influencers as part of its paid and unpaid marketing strategy and admitted they have the potential to portray the brand “poorly”.

Meanwhile, Casper noted governments’ crackdown on unbadged influencer advertising could also harm business.

It admitted that while it “asks” its paid influencers to comply with FTC regulations, it does not regularly monitor what they post.

“If we were held responsible for the content of their posts, we could be forced to alter our practices, which could have material adverse effect on our business, financial condition, and results of operations,” it stated.

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