Northbeam’s Head of Strategy, Tyler Horner, breaks down media buying best practices using Northbeam’s features
There are myriad key components to executing an effective digital media campaign, among them are your targeting, creative, campaign settings, landing page – the list goes on.
However, today we’re going to focus on one often overlooked one: managing budgets and bids.
I don’t need to remind any marketers that their budget is a scarce resource, yet I often see brands who are spending a significant portion of their budget on campaigns that are not optimized for their goals or being too risk-averse and missing opportunities by keeping budget tied up in tactics or ads that are no longer performing.
Today we’re going to walk through how to avoid these common pitfalls and ensure you’re making the most of your scarce media budget.
Rule #1: Know your primary KPI and don’t forget it.
The easiest way to ensure you’re not wasting any of your budget is to focus it all towards your business’ primary KPI.
For example, if your business goal is revenue, utilize ROAS-based bidding whenever possible and allocate more budget towards the campaigns with the strongest ROAS. Likewise, if your goal is to drive new customers, optimize your campaigns towards a CPA.
The most common pushback I hear to this rule is: “Well, what about building the brand?”
While brand marketing surely has its place, 95% of the brands who ask this question shouldn’t be investing in awareness campaigns at their lifestage. Instead, they should be focused on building the brand via strong creative, messaging, and customer experience – which can be accomplished whilst running exclusively performance-optimized campaigns.
Rule #2: Understand the law of diminishing returns
The area where I see the second most wasted budget is when brands let their efficiency targets sway with the wind or when they change their budget drastically mid-month.
As marketers, budget shifts often come as an “order from above” and are out of our hands. Nonetheless, when this happens, it’s important that financial decision-makers understand the consequences.
These consequences are due to the law of diminishing returns. This law is something we know intuitively as marketers: when you scale a campaign up, efficiency will drop with every additional dollar spent until eventually your investment is no longer profitable. The law holds in reverse as well: as you scale down spend, your efficiency will continue to increase.
An increase in efficiency might initially sound like good news, but what often happens in this scenario is that brands are paying twice to three times as much to acquire a customer at certain times of the month as others due to shifting budgets and efficiency targets.
Limit this budget whiplash as much as you can: the optimal place on the diminishing returns curve is always the midpoint.
Rule #3: Use the right efficiency target in the first place
Even if you’re optimizing all your campaigns towards your primary KPI and avoiding budget whiplash, you might be leaving opportunity on the table if you’re not setting the right efficiency targets for your channels and campaigns.
There is no one-size-fits-all approach to setting your efficiency targets, which is why our paid media experts at Northbeam invest so much time upfront with customers in this process. However, there are a couple considerations to keep in mind:
Conversion lag
When we optimize performance daily, we’re typically looking at less than 24 hours of performance. This can cause extreme bias in how we allocate our budget if we don’t consider how certain campaigns have a longer lag than others. Generally speaking, as you go lower funnel with your tactics, conversion lag tends to decrease – this means that mid funnel tactics might look worse on day one, but better once the attribution is fully baked. With Northbeam, you’re equipped with the data to see how day-one performance will translate to day-thirty (and beyond): take advantage of that and set daily targets that consider the full value of each tactic rather than biasing your budget allocation to the bottom of the funnel.
Attribution models
Whether you’re looking at ad-platform-reported performance or Google Analytics or Northbeam, every model for attributing credit will have its own biases. Being aware of these biases as you set your targets is essential. For example, Google Analytics tends to bias heavily towards the last click before conversion while ad platforms tend to inflate their numbers because they’re not considering overlap with other channels. Northbeam offers multiple ways to model your data so make sure to review how Northbeam's attribution models work so you can account for how the model you’re using will impact the story the data tells you.
Customer quality
Not all customers (or dollars of revenue) are created equal. If you’re focused on the bottom line and not just the top line, you might want to consider how product margins vary across categories or how different types of customers may deliver stronger lifetime value than others. You can use Northbeam’s lifetime value tool to break down your customer data based on whatever variables might be most important to your brand. If you find that there are wide differences in margins or customer quality across your product categories, consider this when setting targets for your campaigns.
Determining the right budget to set for a channel or the right efficiency target to set for a specific channel is no easy task, but if you hold yourself accountable to these three rules and utilize Northbeam to augment your decision-making, you can be sure that you’re on the right track.