July 2022 Retail Media Roundtable: How to Reduce Budgets the Right Way

Market trends, strategic changes, and other factors may sometimes require advertisers to reduce some of their planned spending. These decisions are generally made with full awareness of the impact that budget reduction has on sell-through, and calibrated with any spend commitments made with retailers. 

Of course, the task is not just to decrease spending, but to do it in a way that has the least negative impact on overall program performance. It’s important that marketers treat budget reductions as an optimization exercise by using data to identify underperforming spend in their retail media program. 

I’d start with sponsored ad spend, where I typically spend the majority of my budget. Analysis of search query reports tends to yield strong insight into where you can optimize, and this would be the first type of report I’d use as a way to expand negative keyword lists and reduce spend on broad and phrase match keywords. (Selfishly, I’d use Skai’s Search Term Analysis feature to help me automate this process).

I’d also follow up on search query report analysis by making budget and bid price reductions on Automatic targeting campaigns, which typically serve on detail pages. I’d also gather any data I can on intraday performance, including insights from Amazon Stream (formerly FEADs), and devise a dayparting strategy. Depending on how much I need to reduce spend, I’d either pause campaigns during non-peak shopping hours or reduce budgets to focus my reduced advertising budget on the times when I believe customers are most likely to purchase. I’d execute dayparting not only on my sponsored ad spend but also on my upper- and mid-funnel retail media spend as well.

Lastly, I’d pivot my data to find underperforming segments and pull different levers to reduce investment in those segments. In general, I would strive to maintain spend focused on each level of the funnel, and look to optimize for each primary KPI against my benchmarks, while limiting investment in net-new test & learn tactics.

Cutting back is never easy, but if you do it carefully, I believe you can mitigate the impact until your budgets go back up while also maximizing each dollar you invest during the period of reduction.

– Kevin Weiss (Industry Lead, Retail Media @ Skai)

Max Schneider (Vice President of Advertising @ beBOLD Digital)

Budget maintenance is one of the most important functions of a digital advertiser. We see budgets shift all the time. When a client wants to cut budgets the first thing we ask is “why?”

Is it a profitability issue? Are those additional funds going to be moved elsewhere? There is no cookie-cutter approach, so as always, understanding the client’s goals is paramount to making healthy decisions for the brand.

We often recommend leaving as much budget as possible in low-funnel activities. If your budgets are too top-heavy you can spend a ton of money attracting people at the top of the funnel only to lose them to competitors that have secured the bottom. This means keeping budgets on the platforms that the brand sells on. If the brand sells on Amazon and Walmart we will cut budgets from Facebook or Google before cutting Amazon budgets. 

In the case that the brand is only advertising on a single platform, to begin with, we usually start by cutting competitive targeting. This typically sees the least return and does the least to help the brand organically. If that doesn’t free enough of the budgets, we may cut into some branded or category spending depending on the brand’s goals.

As with all questions around digital advertising, understanding goals is the first step. The why of the action is almost always as important as the action itself.

Sara Ginal (Expert Services, Global Lead Search & Retail @ Skai)

The easy approach would be to cut spend on the keywords and/or ad types with the lowest return. This would ensure return is prioritized and your program maintains its efficiency.  However, I would argue that that approach is short-sighted. You may end up cutting keywords or ad types that drive strong awareness or consideration, and without the awareness, you’ll lose your share of the market over time.

Advertising with a strong product strategy is important. Before you even start the cost-cutting exercise, determine your priority products. These are the products that are most important to your business from a strategic standpoint.  What determines these priorities may be profitability, seasonality, product life stage, inventory or other factors important to your business.  Once you have this list of priorities, you’ll have a better understanding of the products where you have an opportunity to pull back.  

Share of voice reporting will help you get an understanding of where you rank compared to competitors in both paid and organic listings.  Are some products dominating natural search?  You may have an opportunity to pull back advertising spend on these products.  Do you lack competition on some keywords?  Perhaps you can pull back here as well.  Inventory on hand should also always be a consideration.  If inventory is limited, consider pulling spend from these products.