What happens when you suddenly stop spending on Performance Marketing?

Once, we slashed our performance marketing spending by 70% in a month.

In a week, we increased the product discount in parallel, thinking it would hurt the revenue.

The underlying philosophy was, 'Instead of paying Google & Facebook, let's pay our customers directly.'

Do you know what happened that month?

The revenue didn't drop.

It didn't the following month.

But three months after we did this, the revenue started declining.

We increased our discount percentage to arrest the revenue drop.

The revenue drop stopped that month.

But it started declining again next month.

And it has continued since and fell to a level where we ended up with the lowest revenue in the last 30 months.

Basically, we are wiping out all the growth we achieved during the last 2.5 years, our company's fastest growth period.

Our continuous discounts changed the customer perception of our pricing.

If we hadn't increased the discount percentage in parallel with reducing the PM spending, we would have seen the revenue decline sooner and acted faster.

This is called the 'Delayed decay effect' in Performance marketing.

A similar thing happened with our brand marketing as well, albeit with more delay.

Our brand search volume started dropping and declined by 50% 15 months after we stopped all the brand marketing activities.

So whenever you increase the budget by 100% month on month, the outcome won't show up in the same month.

Similarly, whenever you scale down, your campaign ROI improves initially before dropping in a month or two.

Understanding this phenomenon is very important while growing your brand.