How and where to fight for your marketing budget

While many businesses should consider reduced top-of-funnel ad spend, very few should abandon it altogether. You'll want to ensure you are in a position to power back during the recovery.

Chat with SearchBot

Though digital marketers felt pressure before to justify their marketing spend, this is a whole new ballgame. Marketing is often an easy target for cost-cutting because of how frictionless it is to adjust course quickly. There’s often no contract or penalty for reducing ad spending, but that doesn’t mean there aren’t consequences for doing so. Will cutting spend in top-of-funnel and brand marketing while maintaining only the areas of highest direct ROI help in the short term, but leave the business less competitive in the long term?

If you’re finding yourself faced with the prospect of budget cuts, you aren’t alone. The majority of businesses are facing at least some impact from the coronavirus pandemic, and 65% of CMOs are expecting “moderate to significant” budget cuts still to come, according to a report published by Gartner. Clearly, marketers will face an influx of additional budgeting discussions in the coming months. Here’s how you can prepare to keep your business on track now, and be in position to power back during the recovery.

Plan around your business, not the competition

A natural instinct in times of uncertainty is to try to find out how the competition is faring. In fact, one of the most common questions we get during this time is, “What are other advertisers like us doing right now?”

Benchmarking the competition can be great for some strategy formulation, like messaging. Seeing what competitors are doing can help you understand what you need to cover with your own ads, but also what white space might exist for you to stand out right now.

But making decisions based on where and how much others are spending is a surefire path to bad outcomes. Avoid the trap of wondering how they’re doing it, and what that means about how you’re doing. Every business is unique, for everything from cash position to organizational strengths to how diversified it is, and all of those factors will determine what ads, budget, and performance standards they choose. This is unprecedented territory for everyone, so you could very well be trying to emulate a company that is making the wrong call. Let your own business metrics and needs dictate the choices you make.

Determining what to cut, and what to keep

One big caveat here: If you need to make short-term cuts, do that. We might be an ad agency, but we run a business, too. Sometimes you just need to make quick changes in triage, and there are worse things you could do than dialing back your spend. However, that should be the start of a running clock for understanding how and when to dial things back up. Making moves like that can relieve some pressure, but are likely creating losses at least on the margins. Give your team a little breathing room, but then get to work on the following steps to capitalize on the available opportunity.

1. Look beyond the top layer of data

Start by looking at the data trending, which goes beyond the ROAS of each channel, and possibly even each campaign. Even where the high-level performance is down in aggregate, some products or areas of search intent might actually be performing better. Buyer behavior is changing right now, but that doesn’t mean it’s negative for everything. Bread machine sales are up 652%! Sure, those trends are obvious, but there may be some that aren’t as obvious, or that are hidden by lower budgets due to past performance. You’ll need to dig in to find your opportunity. A children’s retailer we work with found an opportunity with their puzzles and games category, which was small before relative to clothing.

Some opportunities might not emerge through data, but rather come from listening to customers or considering how they’re impacted by the changing market. We work with an online consignment retailer that is shifting focus to attract new sellers to the site at a time when people are in need of ways to bring in a little money. Shifting demand doesn’t always equate to less demand; you’ll need to highlight the opportunity in your own product or service offering.

2. Consider your measurement strategy

Hopefully you’ve done the prerequisite work to set different goals for prospecting campaigns and closing campaigns, or in calculating how your prospecting campaigns should perform in order for you to reach your overall goals. Even if you haven’t, you may need to explain why cutting everything that’s not profitable or above a certain goal won’t deliver the maximum business result. Make sure you’re holding channels accountable with respect to their position in the funnel. Prospecting ROAS will almost always see a lower click-based ROAS than campaigns at the very bottom of the funnel. However, if prospecting performance is steady, or even stronger, compared to pre-COVID periods, then you have a good argument to keep it going.

3. Keep track of where competition is waning

Some industries are feeling the effects of the pandemic more than others, and that’s going to impact ad competition. We’ve seen CPMs on Facebook advertising across our client base decrease 40% over four weeks, while consumer buying propensity has already begun to rebound. So while that equation may not immediately work out in your favor, impressions and clicks are available at a discount, and that’s an opportunity.

4. Review and update messaging 

With buyer behavior changing, pulling back momentarily should give you time to regroup on whether your messaging is contributing to the performance decline. Is your offer still relevant? Are you potentially turning people off with your image or copy choices? There’s plenty of potential to chip away at performance degradation simply by revisiting your ads. Take B2B sales, for example. There’s a lengthy research process, so this might be a time to switch from demos to educational assets, or invest more in research campaigns than closing campaigns.

Making the case for top-of-funnel budgets

Once non-marketers get involved, it’s often the case that the first thing to get cut will be everything except that which has the highest direct ROI. In digital marketing terms, that’s often channels and campaigns like Brand Search and Remarketing. But does it sound like a winning strategy to simply try to catch whatever demand is left from pre-pandemic marketing? Maybe for a couple of weeks, but for how long?

No one knows, but at a certain point, reduced investment in top-of-funnel advertising will stunt your growth once a recovery begins. If you know that on average it’s 30 days or more from first ad impression to purchase, things could look quite a bit different at that time than they do right now. If you chose to choke off introducing your brand to new prospects, you might unnecessarily extend your business’s slump.

This is especially true of B2B marketing. While closed deal flow is slowing for a lot of firms, research and evaluation is not. If you have a 3-6 month sales cycle, then that reduction in top-of-funnel investment now will leave you out of the running in many cases when businesses make decisions on new systems in Q4.

The more you know about your path to purchase and customer journey, the easier it will be to make this case. If you know the campaigns and channels that most often contribute to new customers discovering you, then it’s logical to argue that shutting those down could do more harm to the business than good. If you’ve previously mapped the customer journey or created personas, revisit them and plan for changes to who might be involved in purchase decisions, or what might change in their discovery process. That kind of proactive strategy will help you make the case to continue investing where it makes the most sense.

Parting thoughts

When uncertainty reigns, conservatism will, too. While many businesses should consider reduced top-of-funnel ad spend, very few should abandon it altogether. Businesses ultimately need to spend money only where it makes sense, and while available budgets for testing and expansion may be scaled back in the months to come, there are probably a lot more places where it will make sense than what meets the eye. The time to start understanding that, and to start planning for the budgeting conversations down the line, is now.


Opinions expressed in this article are those of the guest author and not necessarily Search Engine Land. Staff authors are listed here.


About the author

Adam Edwards
Contributor
Adam is the Chief Client Officer at Metric Theory, where he leads a team of more than 100 digital marketing professionals across the US, expanding Metric Theory's impact with their clients by building and refining its services. With over 10 years of performance digital marketing experience, Adam has helped grow some of the most disruptive brands in technology and retail and is an alumni of the SF Egotist’s “32 under 32” list for marketing professionals.

Get the must-read newsletter for search marketers.