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Hyperlocal digital ad budget for on-demand grocery delivery?

My startup is an on-demand grocery delivery service that currently serves midtown east to the upper east side of Manhattan. I'm looking for a digital marketer who specializes in hyperlocal advertising to help with online customer acquisition.
  • What kind of blended customer acquisition cost should I be looking at ballpark?
    • Based on that, I can extrapolate on what my monthly ad budget should be
  • Also what sort of customer LTV is commonly seen in that space?
    • That will help me determine whether I'm paying too much to acquire a customer.
Thank you

12 Replies

gregg Stewart
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gregg Stewart Advisor
Local & Mobile Marketing Expert
Hi Kodjo - We know a few things about hyperlocal advertising and listings optimization here at 15miles Local Marketing. In answer to your question, I have a couple clarifying questions:

Do you charge a delivery fee?
If so what?
What volume of activity are you looking to create?
Do you have conversion metrics in-place for your app/web presence?

If telephone is more convenient, we are up in Connecticut at[removed to protect privacy]

Gregg Stewart
Tom Cunniff
5
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Tom Cunniff Entrepreneur • Advisor
Founder at Cunniff Consulting, B2B Brand Consultancy
Why advertise at all, when geography is your friend? My suggestion would be to start building-by-building. Ask the doorman how many people in the building get Fresh Direct or Amazon pantry. If the building has enough customers, then conquest directly against those brands. When you get a customer, offer them a $25 credit if they refer a neighbor who becomes your customer. Lather, rinse, and repeat -- build the business neighbor by neighbor.. A virtue of this approach is that it will make deliver easier/faster: you're far better off having 50 customers between 1st and 3rd Avenue on 76th Street than 50 scattered all over your delivery map. Hope this is useful.
Kodjo Hounnake
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Kodjo Hounnake Entrepreneur
Founder & CEO at PickUpLater
Tom,
Thanks for the very good advice, especially your last point regarding the proximity of customers that results from your offline strategy. In terms of the execution of the last leg of that strategy (i.e the promotion offering), what tool would you recommend? the USPS Every Door Direct Mail service?
Lisa Cutter
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Lisa Cutter Entrepreneur
Marketing Maven making great things happen | CMO
I love your response, Tom. Kodjo, I also think it's important to focus your marketing budget on an experienced "marketeer" who will build these relationships, rather than spend the ad budget on tactics that have poor ROI. Let me know if there is any way I can help. I've got a friend just outside your delivery area too that works at Trader Joe's; I'm sure her experience can assist with other valuable prospect/customer input too. By the way, I'll be in your area in just a couple of weeks too. :)
Tom Cunniff
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Tom Cunniff Entrepreneur • Advisor
Founder at Cunniff Consulting, B2B Brand Consultancy
Kodjo, glad to help. For the promotion (recommend us to a neighbor), you would *already* have a delivery going to existing customers so you could literally put anything in the box from a printed coupon to a box of their favorite cookies. To build when you don't yet have those customers, I would consider good old-fashioned direct mail. Everybody looks down their nose at it (confession: me too, most of the time) but it's dirt-cheap, measurable, and effective. Fresh Direct uses it. Not sure what Amazon Pantry uses. Essentially, I'm recommending that you crush the costs of your marketing as close to zero as possible. Definitely until you get real traction, but it may make sense even after that.
Kodjo Hounnake
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Kodjo Hounnake Entrepreneur
Founder & CEO at PickUpLater
I do like the grassroot approach. Thanks for the contribution Tom/Lisa. I'm still curious to know what blended CPA and LTVs look like online in my space.

If I take a direct mail approach for instance and get print cost per unit at 7 cents and mailing cost at 17.6 cents (current USPS rate), that's roughly 25 cents per unit printed and mailed. A direct mail campaign of 100K pieces would cost $25K fully loaded. Assuming a 0.5% conversion, that translates to a customer acquisition cost of $50. However, that conversion can be way off.
Mainak Banerjee
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Mainak Banerjee Entrepreneur
Google Certified Freelance PPC Specialist; Available for Hire for SEM, AdWords, Bing & Brand Promotion
Really helpful stuff Tom. Appreciate that.

Kodjo, if you want to target with the right keywords - probably with one like 'buy grocery online' in Manhattan, a single click would cost you anywhere about $1.50 - $2.75.

And if we take into account the latest standard average conversion rate of 2.70%, your CPA rate for search is going to be somewhere around $50 for a single conversion.

Does it sound good to you? You could try Google's display platform for better brand visibility and perhaps re-marketing might bring you more leads.

Let me know if I could be of any help. Thanks.


Lisa Cutter
1
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Lisa Cutter Entrepreneur
Marketing Maven making great things happen | CMO
Hey Kodjo, I know you are dedicating a lot to this new venture, and clearly you're on top of your budget and trying to determine the best course of action for your marketing dollars. This is so important and I've seen many businesses fail on this aspect alone. Props to not letting this fall by the wayside. But, may I ask, do you have an Integrated Marketing Plan? if not, this is where I recommend you begin. An integrated plan will take into account every free and budget-conscious marketing, promotion, and advertising strategy and tactic while keeping on budget and providing an implementation schedule. Right now, I feel the conversation is almost heading into a stabbing contest whereby the discussion is piecemealing activities you might consider doing rather than taking into account ALL marketing initiatives that need to be accomplished and when to maximize your ROI.
Hart Hooton
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0
Hart Hooton Advisor
Content marketer/creator & digital operations expert with track record of building + integrating online media products
Hi Kodjo, Lisa Cutter has a great point. Along with other solid points of view being expressed, I'd have to agree with her that thinking above the piecemeal things you can do, planning and road-mapping all the marketing tools at your disposal can have an illuminating effect. Another point I might note, there are about 120K households in the upper east side, so when doing your estimating on direct mail, for example, you can test that tactic on a much smaller reach goal than 100K mailed. You could spend $5K to reach a smaller number and test the idea. I am not a hyperlocal expert, but I am a NYC-based digital consultant with decades of experence who is happy to offer mentorship and counsel as it doesn't sound like you can afford to pay for a consultant. lol. Hart AT Marketechnique dot com feel free to reach out.
Tom Cunniff
1
0
Tom Cunniff Entrepreneur • Advisor
Founder at Cunniff Consulting, B2B Brand Consultancy
Agree an integrated plan would be useful.

Big questions you should think about:
- How is our service different/better than FreshDirect and Amazon Prime?
- Are our advantages sustainable?
- What is our exit strategy?

This is a crowded space already and more competitors (Uber? Fairway? Even Wal-Mart?) may enter. Doesn't mean you can't win, but it does suggest you may need to find a niche or create a differentiated technology or approach that makes you a smart company to acquire.
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