Standing up for marketing during periods of economic pressure
Karel Schindler, CEO at ROI Hunter
In times of economic downturn, business leaders commonly aim to trim the marketing budget. A report from Sapio Research discovered that half of businesses in the summer anticipated future cuts to discretionary marketing spend. The UK Government also ran a campaign urging brands to slash prices by cutting marketing.
However, without a strong marketing presence, businesses risk their share of voice (SOV) and share of market (SOM). Some businesses have even increased revenue by doubling down on marketing spend. For example, Proctor & Gamble achieved a 5% rise in net sales during the first quarter of its 2021/22 financial year. It’s a rallying cry to marketers to fight any reduction to their budget by business leaders.
Building a business case
To provide a strong case to the board, marketers require evidence of quantifiable outcomes. Business leaders will question the value of investing into marketing if the budget is spent on products that still don’t sell, have one size variant available, or are out-of-stock. If marketers can’t justify the promotion or non-promotion of certain products, this will also raise scepticism.
Unfortunately, this visibility is difficult to achieve when it comes to some dynamic ads, where the selection of products being displayed to each user depends on a Google or Facebook algorithm.
With product performance data, marketers can understand the performance of their product catalogue and even control which items are promoted. Armed with this knowledge, marketers can walk into budget discussions with confidence and the evidence to back up their case.
Making use of product performance data
Many digital marketing teams are held back by lack of insight and control to focus on SKU-level profitability, despite the increasing popularity of dynamic promotions. The logic behind what the algorithms promote remains hidden. Margins, return rates, stock levels and other product-level information is isolated and trapped in varying departments (if it’s available at all).
With no evidence to fall back on, marketers end up applying their instinct to major decisions. Budget is then misspent and products with potential are ultimately missed.
Product performance data holds the key to targeted, cost-effective and impactful campaigns. By combining data from Facebook, Google Analytics, Google Shopping and custom sources, marketers can understand how their dynamic budget is spent. They can answer questions such as: what’s the ratio of spend between discounted and fully priced products? How much spend is wasted on products with one size variant? How much spend goes to products with high return rates?
With this understanding, retailers can control where the budget is spent by creating separate campaigns focused on specific product segments (reduction of loss-leaders for profitability campaigns, top revenue products for scaling campaigns, etc.).
The result is a higher ROI, more efficient budgets and a clear argument to keep the marketing budget at the same level. Results like these reflect why emerging technologies, such as Product Performance Management (PPM) platforms, are gaining traction.
While protection of their budget is a top priority, marketing teams also need to consider consumer privacy. The urgency to take action has increased with Google announcing that its Chrome browser will no longer support third-party cookies by the end of 2024.
The onus is on retailers to adopt new methods to understand customer behaviour. Product performance data provides additional signals from other channels while still ensuring compliance with consumer protection regulations like GDPR.
History has proven that those who increase marketing investments in difficult economic times are the ones who achieve success. Since the 1970s, this has been proven during every recession. It’s another call to marketers to protect their budget at all costs.
Product performance data is the gateway to communicating the value of marketing to decision makers. The relevance of this data will increase as privacy restrictions limit the value of granular audience targeting and campaign segmentation. Google Performance Max and Facebook Advantage+ are following this trend.
Retailers can understand their campaigns inside out and tweak them to suit company goals with the help of product performance data. ROI can be increased, spend can be reduced and customer privacy can be upheld. To make these benefits a reality, it’s time for marketing to shine.