August 24, 2022
When a business sets forth to execute a marketing plan, measuring its return on investment (ROI) should be at the forefront of its priorities. However, there comes a time for many businesses when marketing efforts can fall flat, causing ROI to sink. What can be done to identify these dud marketing pushes and pivot to something that works better for the business?
Short Term Profitability vs. Long Term Growth
When running multiple paid campaigns for an organization, it can be easy to focus on small wins instead of the bigger picture. However, a stringent focus on short-term profitability may eventually harm the longevity of one's brand awareness, leaving the company to fall behind its competition. Short-term wins and long-term goals are both essential to stable growth.
The Most Common Mistakes
When one thinks of the most successful marketing strategies ever brought to the public — for example, Nike's “Just Do It” campaign or Coca-Cola's “I'd Like to Buy the World a Coke” — it may seem like these ideas were overnight successes. However, the truth is most companies have tried many strategies to see what resonates with their target audience before they land on a winner.
Like many facets of business, marketing takes some time to weed through the process of trial and error. Here are some of the most common mistakes companies make when measuring ROI:
Focusing on Last-Click Conversion ROI
When companies fail to give enough attribution to upper funnel campaigns, messaging that reaches users before they have heard of your brand, they risk stunting long-term growth. Without investing in brand awareness and upper funnel campaigns, there's no way a brand can stay in the market for the long run.
Ignoring Channels that Drive Email Lists
Like their focus on last-click conversion, companies may be ignoring the channels that drive email lists and text marketing list growth or affiliate partner search traffic.
Ignoring Multiple Touchpoints
Attribution value needs to be distributed across multiple touchpoints. Companies can invest in tools that do this for them.
Upper-Level Marketing Campaign/ Low ROAS
When a company cuts an upper-level marketing campaign with a low ROAS (return on ad spend), the result may be a drop in higher intent traffic, leading to a decline in overall revenue.
Analyzing your ROI
When analyzing and evaluating a marketing channel mix, companies should look at their MER (Marketing Efficiency Ratio). Comparing week-by-week performance metrics will keep a company informed on weekly or monthly fluctuations for a particular channel. After iOS 14 updates, it has become easy to eliminate upper funnel channels with low reported ROI that may damage a business' growth. Companies should instead focus on analyzing the overall first CAC (customer acquisition cost) and CPA (cost per action) in addition to all e-commerce site ROAS. Companies should avoid comparing different channels to one another — especially if they target users at different stages in the shopping journey.
First-party data and attribution are more crucial than ever in making informed decisions regarding a company's marketing channel mix. If a large enterprise has a high market share, its upper funnel traffic, which traditionally has lower ROI, will generate targeted revenue in the long run. High-quality, engaged upper funnel site traffic are just as important as a high last click conversion ROAS.
Companies often report that most of their revenue is driven by email or text marketing. The answer is not always clear when asked what the source of growth for their email list may be. Some upper funnel awareness, traffic, or even conversion campaigns' ROAS, may be delayed or allocated to multiple channels. A stagnant email list can only be a source of revenue for a limited time. If a company doesn't have a clear answer to how its organic, direct, and email channel grew, it should be prudent evaluating channel performance based on last touchpoint attribution. As hard as it is to define the source of anything "non-last-click," an attribution solution can paint a better picture when analyzing the customer journey and how many channels have contributed to a conversion.
Pivoting When Necessary
Suppose a company has a healthy mix of marketing channels that deliver engaged and high-quality traffic, and its CAC and CPA are within target. In that case, it is a good strategy to scale the spending on the most profitable channels while keeping the rest of the channel mix. If a company's CPAs are getting high, and profitability or long-term growth is in danger, it will need to look at every channel's contribution to its growth and the cost of keeping or scaling that channel.
When consulting with companies, we suggest using a minimum of 5% (ideally 10%) of the monthly budget in new channel tests. That channel can be anything that looks scalable and trackable and not yet within the marketing mix. New channel tests can include TV ads, programmatic OOH (out-of-home), direct mail, Tiktok, Youtube, or anything where a company can target core customers. These tests will help support company growth when the company arrives at a point of stagnation. Tests can also be helpful when the competition is high on your primary acquisition channels.
Once a company has a list of channels and campaigns that have been tested and proven to be successful, it's faster and safer to scale on them during a time of decline. Businesses should always try to find cost-effective and unique ways to drive site traffic and conversions if acquisition costs exceed their targeted range instead of pausing everything and running the risk of harming growth.
Marketing campaigns can be a frightening concept for business owners. It can feel like throwing money into the void and hoping that all of the metrics and market analysis pays off. Having a solid plan can help cure many marketing ills, and having a finger on the pulse of ROI can help pave the way for effective marketing campaigns in the future.
Bowery Boost co-founder and CEO Fulya Uygun is a digital marketing expert with 15 years of experience. Throughout her career, she has scaled brands through seed funding to Series B in addition to working as lead digital for corporate companies. Her agency works seamlessly to build teams and profitably scale direct-to-consumer (DTC) brands. Before starting Bowery Boost, Fulya worked as the head of digital communications at online retailers and brands, including Dermstore, Briogeo and Winkly Lux, and she was brought on by L’Oreal to launch a new DTC brand. Fulya has a business degree from one of the most prestigious colleges in Turkey, Bogazici University, in addition to a postgraduate degree in Marketing from Baruch University, and an MS in Integrated Marketing from NYU. She is also a member of the Female Founders Fund, The 10th House, and the venture firm The Helm, all dedicated to investing in and supporting women and minority entrepreneurs.
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