When the economic outlook begins to look bleak, it’s not just consumers who start to cut corners. Companies trim expenses, including marketing and advertising outlays. While online budgets are faring better than less measurable media, marketers are searching for the smart way to make fewer online dollars go further. For marketers with an existing behavioral marketing program, making those cuts without mortgaging future results and destroying the current program can be a challenge.
Multifaceted Programs Work Best
Typically, a successful behavioral targeting program includes several components: ad networks, an assortment of high-profile sites for branding purposes, and a mix of targeting and segmentation strategies with several distinct goals for each component. Each component will have a different benchmark (clicks, conversions, etc.) to contribute to the overall ROI (define). When these programs are laid out in a media grid and budgets are examined by line item, companies may be tempted to slash programs that appear to have a lower ROI and higher cost. Sounds simple enough, right?
In actuality, they could be knocking the very foundations out of their behavioral targeting program. By eliminating waste and redefining relevance, behavioral targeting can be one of the most cost-effective ways to reach potential customers and boost revenues. But to work properly and at its most efficient, a behavioral targeting program needs feeder or foundational programs powered by contextual or demographic targeting, which bring in new customers but typically score a lower ROI when examined in isolation. By maintaining these foundational programs, companies only pay for costly new consumers once and keep them in the message pool. Marketers who don’t understand how those tactics support each other and who eliminate the growth element to save short-term dollars may end up with a program that’s crippled, can’t scale, and won’t show the portfolio ROI they want. These companies think they’re saving money, but they may be destroying their long-term behavioral targeting goals.
Long-Term Impact May Outweigh Short-Term Boost
The balance sheets might not show those budget cuts’ negative impact for a quarter or two. Short-term ROI might not look so bad, but look at the customer pool down the line. If you’re not seeding the pool now, it will be pretty thin in three to six months, which is when the Christmas shopping season kicks off. For many businesses, that’s an unfortunate time to be short on customers.
Companies need to calm the panic of an impending recession (or the current recession, depending on what you read), think long term, and resist the urge to react with knee-jerk budget cuts. Organizationally, this will require people who think bigger picture — a consultant, an experienced CFO, an experienced online marketer — to work together to understand all the possible impacts both short and long term before deciding a course of budgetary action that could severely affect results in the future, regardless of the economy.
While not necessarily intuitive, a better choice may be to scale back overall on a behavioral targeting program but keep all the synergistic elements in place. Of course, the balance could shift a little in favor of the sales closers, but without the sales feeders the closers will quickly dry up.
Don’t Forget the Consumers
While your marketing budgets may be getting slashed, don’t forget your consumers’ budgets have taken a potentially bigger and certainly more personal hit. What does that mean for their behavior? There are certain behavioral changes we might expect, including more online shopping to save gas (as reported last week in a study conducted by Harris Interactive), a pullback on luxury items, substitutions of generic or less expensive brands, a preference for known brands and relationships to reduce risk on spending unless motivated by significant price differentials, and increased response to promotion and coupons. Some or all of these behaviors might be occurring in your target group, but in this age of behavioral targeting, why guess? Watch your behavioral targeting segments and use the insights from your media and agency partners to identify shifts in the consumer current — especially those you can leverage.
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