Why Cutting Costs Could Kill Your Business
Summary
Think cutting costs will save your brand? Think again. ⚠️ Learn how short-term savings can lead to long-term disaster—just ask J.Crew.
🎧 Want more insights like this? Listen to the full episode here.
Transcript
The challenge that we see a lot is brands really try and micromanage efficiency at the channel level and incrementality at the channel level, and they manage it to death.
Yeah, I think J.Crew is a great example. Like before they went bankrupt, they they cut their catalog. You know, they saw it as like this big honking cost on their P&L. Cut it and probably like the next month got very efficient because they didn't have this cost. But what they didn't see was the longer term impact of that catalog. Like it was actually acquiring a different kind of customer than the other channels. And it was the tide that lifted all boats and that the customers that came in or they saw the messaging through the catalog also spilled over into Facebook and into email and bought through those channels and helped those channels out. So when they cut the catalog, the business fast forward a couple of months, they've got no profits, they're burning cash and they declare bankruptcy.
You stop acquiring customers and it's like, well, my retention channels look great, right? Except as you cut those other channels that were generating new customers, you now have a smaller base of folks that you can go on to retain later. So it looks like you're optimizing your marketing spend in the short term. What brands just fail to recognize over and over again is you are basically sacrificing your entire future for the short term efficiency gain.