Now isn’t time to cut adspend, but to optimise instead

katrina_wongWhen hard times hit, businesses are often quick to cut ad spend. However, during the current downturn, with so many businesses favouring this approach, there is also a real opportunity for marketers that can optimise spending, rather than cutting it entirely.

To focus spending effectively, marketers first need to quantify the impact of their marketing efforts by calculating the return on advertising spend (ROAS). For instance, if you spend £10,000 on a campaign, and its drives revenue of £50,000, ROAS would be 5:1.

A broad guideline is that 4:1 or higher would represent a good performance. Typically, a ratio of 3:1 might mean you’re breaking even, once other other costs are taken into account, while 2:1 or 1:1 means your business is likely losing money.

Now more than ever, marketing teams have to be sure that they are making every last pound of their budget work as effectively as possible. Here are four things marketers can do to increase ROAS.

Understand how different channels are performing
It’s vital to know which channels are yielding the best results. For example, for a digital campaign, how is your spend on Facebook performing against Google Ads?  This sounds simple, but it can take a lot of work to get that visibility. Try loading Facebook Insights and Adwords Reports data in a warehouse like Amazon Redshift, and then use reporting tools such as Looker to compare it. This will help you to spot trends quickly.

Cut spending on what isn’t working, double down on what is
Be ruthless about reducing spend for channels that aren’t working and invest in those that are. A tool like Attribution can help give businesses a more complete picture of your advertising spend.

Build lookalike audiences
Next, expand your ROAS by making sure your advertising gets in front of individuals that you know are well-suited for your product.  Using what you know about your existing high-value customers, you can use both Google Ads and Facebook Ads to establish lookalike audiences for your campaigns, made up of users with similar characteristics to those high-value customers.

Filter out users unlikely to convert
Use suppression lists to exclude users unlikely to convert from your campaigns – you can send these to advertising tools. This will help you cut down spending and boost ROAS.

Effectively optimising ROAS is vital right now: not just because of Covid’s financial pressures but because consumers are spending more time than ever online. This means there’s an opportunity to reach massive online audiences – if you can get your digital strategy right. Businesses that use this period to review their processes and refine their capabilities will be well placed to profit, now and in the long-term.

Katrina Wong is vice president of product marketing and demand generation at Segment

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