Welcome to the second edition of the state of EdTech marketing report
We are proud to share the second edition of the state of EdTech marketing. At Brighteye, we believe that best-in-class marketing is essential for the success of EdTech/HRTech start-ups.
Again, a massive thank you to all the CEOs & CMOs who took the time to provide their valuable feedback. 🙏
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To help entrepreneurs understand general marketing benchmarks, we once again polled 60+ European and US EdTech/HRTech CEOs, identifying changes in strategy since 2018 and potential trends for 2020. This includes an additional 15 companies that are new to the survey introducing some variability but also stronger data going forward.
Overall marketing budget
On average, EdTech startups spend 10.7% of their revenue on marketing (vs. 11.5% in 2018).
While the overall allocation hasn’t changed much, companies targeting consumers and schools experienced significant marketing budget increases, while those serving large companies, SMBs and universities decreased their budget drastically this year compared to last year.
Does this suggest that EdTech marketers are getting more efficient at optimising their strategies? Are they focusing more on organic channels, including referrals? Are distribution channels increasingly opening up? Hopefully this report will shed some light on these questions.
Marketing budget split: 2018 vs. 2019
From a macro perspective, it is fascinating to see a clear trend over the last two years in organic marketing. The majority of respondents (49% in 2018 vs. 46% in 2019) reported investing approximately 75% of their marketing budget into organic efforts, and 25% in paid efforts.
The most effective acquisition channels
While acquisition channels are unique and extremely contextual to each business, top 3 channels from last year are still the top performers for EdTech startups this year.
Referral remains the most effective channel two years in a row, as it tends to be the “dream channel” with the lowest CAC and the highest conversion rate for any marketer. People trust people. Peer-to-peer marketing (i.e. recommendations, loyalty programs) is still the most efficient way to generate & convert new leads, and we believe referrals will stay at the top for the foreseeable future.
Social Media has become the second most effective acquisition channel this year (vs. #3 last year). A few years ago, social media platforms (e.g. LinkedIn, Facebook, Twitter, YouTube, etc.) were mainly considered as nice-to-have platforms full of vanity metrics –whereas they have now become an essential part for lead generation strategies for both B2C & B2B EdTech startups. This channel is used for two purposes: (1) lead generation to fill in the top of your funnel in the short-term, and (2) brand awareness creation. Both purposes are on EdTech marketers’ priority lists this year so it comes as no surprise.
Organic search is in position #3 this year (vs. #2 last year). This channel delivers more relevant traffic in a cheaper way in the long-run. SEO can take time and energy to bear fruit (between 3 and 12 months, depending on the competition and your field) as it mainly comes down to quality and originality of content. Being one of the channels with the highest click-through-rate still makes it attractive to EdTech marketers. We will see if organic search will still rock next year! 😬
On the other end of the spectrum, Paid Search is the channel that has seen the biggest increase, jumping from #9 position in 2018 to #7 position in 2019, and Phone the most significant decrease in less than a year. For the latter, it is safe to assume that voice calls are being replaced by emails/SMS, which are cheaper and more convenient ways to reach out customers.
Significant barriers to marketing success
The results this year were more evenly distributed compared to last year’s, which in theory means that EdTech marketers are now encountering a higher number of obstacles when it comes to successfully marketing their products/services vs. 2018.
#1 Lack of brand awareness (vs. #3 in 2018) - Cutting through the noise is getting more difficult for marketers in general – due to attention spans, overexposure to ads and channel saturation, among other factors. Focusing on branding (e.g. visual aspects, experience with your product, customers reviews) is a clear differentiator. Creating a strong brand (1) allows companies to connect emotionally with their audience, (2) improves recognition in a crowded market and (3) creates trust with new leads and existing customers. In short, brand is an essential piece of the marketing puzzle and as cost of paid advertisement increases, it’s no surprise that creating brand awareness is a big challenge for marketers.
#2 Low conversion (vs. #4 in 2018) – There are two things that are constantly on every marketer’s mind: (1) optimising conversion rate and (2) improving churn rate. Suffering from low conversion rate is generally caused by (1) an incorrect customer segmentation (= mismatch between your offering and your leads), (2) a knowledge gap between your product/service and your customers, (3) a lack of experimentation/time to optimise funnels and (4) “better” alternatives in the market (i.e. competition). In addition, there are some broader headwinds impacting conversion: On the consumer side, people are overexposed to ads as most effective digital channels (Google, Facebook, LinkedIn, etc.) are oversaturated. According to Adstage, median CPM on Facebook Audience (Q3 18: $7.44 -> Q3 19: $8.19), Google Ads Display (Q3 18: $1.99 -> Q3 19: $2.57), LinkedIn (Q3 18: $6.63 -> Q3 19: $8.23), Twitter (Q3 18: $6.18 -> Q3 19: $6.54), have increased by ~18% between in Q3 18 and Q3 19. Facebook in general for example has seen ad revenue per user increase by more than 20% in Europe and North America in the last year. For businesses, as macroeconomic trends point to recession Europe, decision makers can be more cautious about purchasing which also impacts conversion.
Marketing priorities for 2020
The marketing priorities for 2020 are very much aligned with priorities that respondents reported last year. The two new incumbents this year are sales process (ranked #5 last year) and branding (ranked #7 last year). Unexpectedly, “referrals” (vs. #3 in 2018) is not considered as a marketing priority for 2020. It is funny because the results suggested that it is the most efficient user acquisition channel for EdTech startups in 2019.
Lead generation and funnel conversion Lead generation and funnel conversion are the main priorities for early stage EdTech startups (<5M€ in revenue), confirming that EdTech marketers first focus on growth. Once the growth engine is built, results indicate that branding, customer experience and customer retention tend to become central to marketing strategies in the later stages. This major shift in priorities shows that the marketing functions tend to become more “customer centric” as companies grow.
Brighteye high-level view of the landscape
Contrasting results of last year and this year, we are observing 4 main trends:
1. No new major marketing channels emerged in the last couple of years. Marketers still rely very much on digital channels such as Google, Facebook and LinkedIn. Based on macro trends, B2B marketers are getting excited about LinkedIn & Quora, and Instagram & YouTube are growing for B2C marketers.
2. Existing channels are getting very crowded, which is leading to a cost rise in paid marketing as mentioned earlier.
3. More confidence in marketing overall and we feel that EdTech startups have moved from “not enough budget” to “what do we do with our budget now”, which is a very encouraging trend.
4. Continued pressure on marketing performance will lead to doubling down on what is working (make it less effective overtime) and a strong need for new tactics/channels.
Brighteye EdTech marketing predictions for 2020/21
We know that marketing automation is still at a nascent stage and we also know that only a few marketers know how to automate key processes properly. With that in mind, we are convinced that marketing automation is a powerful tactic that if executed properly will unlock tremendous value for EdTech marketers and empower them with a more data-driven decision making, saving a lot of time and energy in specific tasks, and allowing them to focus on more valuable marketing tasks, such as human interactions with their customers.
Increase in paid marketing
While we are strong believers in the SEO and organic marketing efforts, we feel that EdTech marketers will need to increase their paid budget in the short term in order to keep generating leads and feeding their marketing funnel in the short-term. This is not to say that SEO and content marketing (especially video marketing) will not be a central part of their marketing strategies in 2020/21 but (1) market competitiveness, (2) pressure to hit revenue targets and (3) general consumer/business sentiment might force them to step on the gas with Search Engine Marketing – and channels with highest CTRs.
Today, 99% of marketers focus on digital marketing for many obvious reasons. Thus being a contrarian EdTech marketer by going the other way may pay off in terms of differentiation. Our good old friend “offline marketing” has an interesting hand to play in order to make a comeback in the short-term. (To be clear, offline marketing = marketing efforts that are NOT happening online but in-real-life such as events, billboards, goodies). This is such an under-appreciated advantage as – if done cleverly – you get very cheap marketing (daily/weekly impressions) to remind your leads to sign up/use your product/service. We are convinced that a well thought mix of offline & online marketing efforts will dramatically increase in conversion rates over time.
Review of EdTech marketing predictions from last year
Based on the results of this year, let’s see how our EdTech marketing predictions from our first EdTech marketing report published last year played out.
Prediction #1 from 2018: 🔮 Enhanced customer experience
Last year, customer experience was #6 on EdTech marketers’ priority list and this year it is #5; it is fair to say that we got this half right (especially for later stage EdTech companies) as generally speaking its ranking increased, but not as as much as we expected.
Mark: 2.5/5 😅
Prediction #2 from 2018: 🌱 Authentic branding creation
Branding has definitely gained momentum and might even be considered as a key differentiator in order to stand out from the crowd; and lack of brand awareness is also the most significant barrier to marketing success this year. Based on this rational, we would say that we did a pretty good job on this one, right?
Mark: 4.5/5 👏
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