Anyone who follows current events knows that there are market forces at play right now that indicate a bit of an economic downturn is on the horizon.
No one knows for sure yet what will happen, but hypothetically, there are just a few possible reactions for brands concerning how they handle their marketing budgets.
- They can keep spending to plan. The old business adage, you have to spend money to make money, is still at play here. While brands may eye their marketing budgets as a place to cut, they may realize that doing so could put them in a worse position, so it’s full speed ahead on the annual plan.
- They can spend more. We saw this during the recession in the late 2000s. While many companies decreased marketing spending, some saw the crisis as an opportunity. As a result, despite a recession, marketers spent 14% more on online ads over the first three quarters of 2008 than they did over the same time frame in the previous year.
- They can cut back. This is a common reaction to economic downturns. With consumers buying less and revenue forecasts down, all business units in a company may be asked to spend less.
There are many reasons companies should not cut back on marketing spending or even spend more during a downturn. But that’s for another blog post. Today, I would like to explore the topic of cutting back marketing expenditures and how best to do that if required.
Test and learn your way through rough waters
Measurement solutions, like incrementality testing, can help you identify where you might be under-or-over valuing your marketing campaigns. Historically, incrementality-based legacy solutions—such as media mix modeling—only produced lift reports and results after weeks of the campaign has ended. This led to delayed insights, wasted media, and money left on the table.
But, today, with new innovations in AI and machine learning, incrementality testing is now faster, less expensive, and doesn’t require a data science degree to garner potent insights. This means that now you can tap into sophisticated solutions and techniques to see the incremental impact that your campaigns produce in near real-time. Using these insights, marketers can easily target and make better spending decisions based on test-and-learn intelligence from their active campaigns.
Here are two ways our clients are already using incrementality testing to evaluate their marketing campaigns for myriad benefits, including how to reduce budgets effectively:
Understand the media impact on customers across the funnel
While the classic marketing funnel may be a bit outdated as a model to explain the modern and complex customer journey, it still holds some value as a way to think about media programs.
When thinking about where to reduce spend, what we don’t want to do is collapse any
part of the funnel. Think of sand flowing through the funnel at the top—if one part of the funnel is “blocked”, it doesn’t matter how wide the rest of the funnel segments are, no sand can get through.
While marketers can plan specific funnel marketing strategies, the fact is that this is truly hard to really know where each part of the media plan is working to drive each stage.
Using incrementality testing, it is possible to scale your campaigns by measuring how any part of your funnel is impacted by any high-level or low-level marketing tactic and media channel. For example, you could use incrementality to test how Amazon DSP impacts campaigns built for awareness and consideration impact your YouTube progams downstream.
Results from an incrementality test can indicate where you can pull back spending where it’s not working and push more budget to where you’re seeing the best results, then tie everything together with a robust plan.
Our clients test questions like these:
- How much upper-funnel spend can we save without negatively affecting short-term revenues?
- How much paid search spend can we shift from [bottom-funnel] brand campaigns into [top-funnel] non-brand campaigns without negatively affecting short-term performance?
- What would happen to repeat purchase volume if we cut back on our [mid-funnel] display retargeting?
You can also optimize campaigns for the short-term and maximize immediate cash flow. Incrementality test results take as quick as 3 to 4 weeks; therefore, you can revamp and boost your strategies rapidly and meet consumer behavior and changing demands in real-time.
“With Kenshoo Impact Navigator, we can measure the real impact in the marketplace before starting significant investment and focus on where there’s really incrementality.”
Determine ad impressions versus true incremental value
One of the biggest benefits of using incrementality testing over other measurement solutions—like multi-touch attribution (MTA)—is that it can truly tell you where the real value of your media plans exists.
For example, MTA solutions almost always assign some value to every ad impression or click that is detected within a converting customer’s journey. But consider this example: every morning, a consumer stops by a national coffee shop chain’s store and buys the same cup of joe. They may see all sorts of ads from this company throughout the week—billboards, social ads, emails, etc.—but they have virtually no impact on their daily purchase.
MTA would assign credit to all of those ads even though the purchases would have happened without them. Meanwhile, incrementality testing can determine if those ads had any value at all.
Knowing where your marketing is truly driving impact versus is a key component that will help you find pockets of spending to cut.
If short-term campaigns are not your thing, you can run experiments to determine the point of diminishing returns on a spending increase or decrease and confidently use the insights to allocate the rest of the budget to another tactic or campaign. RBC ran a test and found the optimal balance of spend between search and social, resulting in a 10% boost in new account signups.
With incrementality testing driving their decision-making, we see our clients asking themselves questions like:
- Do we need to invest as much into both prospecting and retargeting?
- How much incremental value do we get from each of those tactics?
- How does brand search drive demo requests?
Don’t just cut—intelligently reduce
Sometimes there is no choice but to trim your budget. However, with incrementality testing being the most effective and surest way to measure success—that’s where the true value lies. Geo-testing is an excellent way for any brand to evaluate impact instead of laying low and not marketing at all.
A strong example of this is how Fjallraven, an outdoor clothing and equipment company, increased revenue by 10% and ROAS by 6X by using Skai’s Impact Navigator to run an incrementality test of how brand ads on YouTube and CTV will impact immediate revenues.
So, before you pull the plug, stop, test and learn, and consider that marketing during a crisis could lean in your favor.
Employ always-on testing with Skai’s incrementality tool, Impact Navigator
Skai’s Impact Navigator solution measures a marketing tactic’s effectiveness, or incrementality, in the only place that matters: the real world. We’ll help you design and monitor testing for any channel in your marketing mix to measure results and optimize ad spending. Impact Navigator surfaces intelligent insights in real-time, so you can make data-driven decisions, boost productivity, and drive powerful brand growth.
Insights learned led to client results including:
- 5x increase in ROAS for LaserAway
- 10% increase in new account openings for Royal Bank of Canada
- 12% increase in monthly net revenue for Native Instruments
To learn more, reach out today and schedule a brief demo to see the innovation of Impact Navigator for yourself.
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