Marketing works the same way. Marketing spend should be allocated across channels and in the optimal ratios to drive the highest, long-term ROI for the organization. This notion, however, gets lost in many organizations. I have worked and consulted with multiple CMOs and senior leaders that appear to have forgotten this and, as a result, make investment decisions that actually undermine or minimize their own success. Marketing spend – particularly intra-year budget optimizations or scenarios where additional dollars are put in market – gets immediately allocated to the channels that produce the highest, immediate ROI or results that can be seen most quickly (typically, in my experience, more paid search). It seems that marketers tend to understand the marketing mix when it is discussed in the context of annual or campaign planning but, when things go off the rails or the company has a revenue shortfall, panic sets in and well laid plans are abandoned. It’s as if we have forgotten that marketing channels interact with one another and that the best way to drive more revenue for the organization may well be pouring more “water” into the top of the funnel as opposed to squeezing the bottom of the funnel even harder.
I believe this kind of sub-optimal allocation happens for two very specific reasons:
- Over reliance on data and measurement
- Short term thinking and self-preservation
Over Reliance on Data and Measurement
Being “data-driven” is all the rage. Do a quick search for “data driven marketing” and behold the avalanche of articles on the topic. Organizations are spending more time, effort and money on data and measurement than ever. The promise of being able to leverage said data to inform when, where and how we spend our dollars is simply too alluring. Per a recent Forbes article, marketing leaders want more and better data because it takes the guesswork out of spend decisions.
“Decisions are based on concrete data: As you learn more about your customers and their behaviors, you can make sound business and marketing decisions. Data collection can tell you who to market to, what kind of content or incentive to send and what improvements you should make to a product to increase customer satisfaction”
Makes sense on the face of it – but if you start thinking about the implications of running your company or your marketing organization entirely off the data, you start to realize a few key things:
- No matter how good your measurement is, you’re going to be using historical results to predict future performance. Even if you have up-to-the-minute systems that yield best-in-class measurement, you still can’t predict the future. All your data is going to tell you is what worked yesterday or last month. If you have years and years of data, you might even have complete confidence that it’s valid for predicting future outcomes. Except it’s not. The perfect, data-driven marketing plan that was created in February of 2020 became completely unusable by the end of March when the whole world shut down for the Coronavirus. The cutting-edge 2015 media plan that was “digital-first” and leaned into the data that said YouTube and Google were top performing channels went out the window when it was discovered that their ad verification standards weren’t up to par and the efficiency of the units advertisers were converting from that spend was completely wrong.
- Data and measurement can’t speak to what’s not there. If you’re overly reliant on data to make your decisions, how do you account for breakout platforms and emerging tactics? If you’ve never run a campaign on TikTok or SnapChat, how do you know whether you should spend there? Running a test campaign on an emerging channel is helpful – but sometimes it takes sustained investment over time to build scale and figure out what works in a specific environment. I’ve seen multiple occasions where marketers have completely bowed out of a tactic or stopped using a vendor because the test was deemed unsuccessful – but common sense said that a one month test on a tiny budget probably had absolutely no chance of being successful in the first place
- Companies are measuring the wrong things. I get it – every dollar spent in marketing should lead to a measurable ROI. I believe that too. That said, if your selling a complex product or something that isn’t bought frequently, holding your display advertising to the same standard of measurement as your paid search is silly. I have worked with organizations that do not recognize that display is designed to drive awareness and consideration over time while search is designed to harvest demand today. If you measure those two things the same way and then let that data inform where the next dollar is spent, over time you will optimize yourself into nothing but bottom of the funnel tactics (which, by the way, will get increasingly expensive as you are no longer stimulating demand or ‘filling the funnel’).
Short Term thinking and Self-Preservation
CMOs today are in a tenuous position. Average tenure is short – typically the shortest in the entire C-suite at just 3.5 years. Additionally, organizations are increasingly pulling back on marketing spend and, in many cases, expecting marketing to drive as much (or more) revenue as it did when spend levels were higher. Marketing is usually viewed as discretionary spend and treated as the organization’s ATM when dollars are needed in other parts of the organization or for the next ‘strategic imperative’. All of this creates a problematic scenario where CMOs must ‘win now’ because taking the long-term view only stands to benefit his or her successor.
The strange thing about this phenomenon is that everyone knows it is happening and everyone knows it’s sub-optimal – yet organizations do it repeatedly. We follow sports teams that mortgage their future in a desperate attempt to ‘win now’ and most would be hard pressed to cite a single instance where this approach yielded the desired outcome. The same holds true in business. Investing in short-term ROI, at the expense of cultivating customer relationships that will be accretive over time, is a recipe for future failure. Everyone in the building understands this – but in today’s environment where CMOs are gone within five years, we continue to enable the sub-optimal decision making. Yes – there’s the argument that, without short term ROI, the business could die and not even need to worry about long term ROI. I suppose if that’s the situation you’re in, different options are in order. But most companies aren’t. Most companies intend to be around in 3-5 years and, given that, should be thinking about what works best over time rather than studying the data to see which channel drives the most in-year ROI for the next dollar spent.
Good marketing is a blend of science and art. As you plan your investments, take a critical eye to ensure that you’re not overly reliant on the data and measurement. It’s part of the story – but not the whole story and leaning too far into it is a good way to optimize yourself out of business. If you need help figuring out where to spend or how much you should be spending, give New Media Advisors a call. We have 20+ years of experience designing marketing plans that achieve both short term and long-term goals.