Can anything stop the Facebook juggernaut? Despite almost four years of bad PR; a host of government inquiries into its practices; the pandemic and this past summer's highly publicized #StopHateForProfit advertiser boycott, as an advertising platform Facebook is untarnished. While ad rates declined somewhere between 15-25 percent in March at the outset of the pandemic, they recovered by April and revenue growth resumed as some advertisers increased their spend to take advantage of the reduced rates, and tech, ecommerce and gaming advertisers stepped up to fill the void left by travel, hospitality and other sectors hit hard by the pandemic.
Even the boycott, which more than 1,000 advertisers (out of nine million) publicly joined, barely nicked revenue. No matter how you feel about the company and the platform, Facebook remains the number one most versatile, cost-effective platform to use for most products. Most advertisers are hard pressed to reach enough customers without it and/or its subsidiary Instagram, so you need to be there.
That said, here are some of my recent learnings from working for clients on the platform, some blocking and tackling, and other nuances you may not have thought about.
1. Watch for Facebook v. Instagram performance differences.
One of my clients has a beverage product that they sell in retail stores and direct to businesses. With everyone out of the office, sales to businesses dried up, so we launched some very broad campaigns in a couple of their target markets, running similar ads on Instagram and Facebook. We showed the same ads to the same group of people on both platforms.
One of the things that surprised me is that the rate that we pay to put the ads on Instagram and Facebook is about the same - about a $2 CPM - but the click through rates on Facebook ads are triple the clicks on Instagram. Maybe it shouldn't be surprising; if you've used both platforms at some level you know that Facebook is more click friendly whereas Instagram is more about scrolling and people don't click out of it as much. But it's stark to see how big the difference was in the stats from this campaign.
The key takeaway: A lot of advertisers treat these platforms as similar, and sometimes they are. What I saw in this case was if you want to have something displayed, Instagram and Facebook are similar, but to get a click through and to take an action afterwards, Facebook was three times more effective. That's a difference worth exploiting, and so it is the kind of difference worth looking for.
2. Set the right objective.
One of the things I've been reminded of recently is that when setting up Facebook campaigns it is very important to make sure you set the objective right. Facebook's machine-learning algorithms are very good at getting you what you want. There are people that are more likely to buy and there are people who like to look and to click, but never buy, and Facebook knows which each of those are.
If you say that your objective is to maximize the number of people who see your ad, it will do that for you at the cheapest possible cost. But if your objective is trying to sell products online, you want to make sure that you've got the Facebook conversion pixel set up in your online store so it can find people who buy your product.
If you accidentally say you want clickers, but what you really want is purchasers, Facebook's going to optimize towards the people who aren't going to purchase, who just like to click a lot, because you've told it you want cheap clicks. Not only that, it's going to optimize away from people who buy, because those clicks are more expensive. So, even though you're getting cheap clicks by optimizing, in the end it could make things expensive for you because you're spending money without getting what you want.
3. Mobile, mobile, mobile.
It feels like saying this in 2020 is beating a dead horse, but I wouldn't say it if some people still didn't need to hear it: you've absolutely got to be sure that your site and your cart and your payment experience work in the mobile environment or you're wasting a good part of your ad spend. Approximately 80 percent of Facebook traffic is going to be mobile, so you're wasting your investment if you don't have a good mobile experience.
And if you have a dollar to invest, invest in your app ahead of your website. You get the icon on your screen and you get push notifications and the experience has typically been designed better. When you download an app, it usually ends up being stickier in the long run.
One of my clients had both a web and an app experience. The app was fairly new and didn't convert as well and was more expensive to get customers. But, when they came in, they stayed around longer. Finally, the app just got to the point where the experience was much, much better. Now we've almost shut off all the spend against the web version of the product, because while initial acquisition costs are similar, the experience after that first interaction is two to three times better on the app. The app gets people to come back and interact with your product in a deep and meaningful way, and that is what you should always be focused on - the lifetime value of a customer.
Not every business lends itself towards being app, but if an app is in the realm of possibility, think hard about investing your effort and money there.
4. Mind your aspect ratios.
Speaking of the differences between Facebook and Instagram, and desktop and mobile, it's very important that you pay attention to the aspect ratios on your videos and images. This can be a big driver in ad performance on different platforms, because the characteristics of each platform cause people to interact with images differently.
If you don't provide the right size images, the platform will auto crop them, and you might not like the results, especially if text or other important elements are in the margins of the photo.
Many advertisers will default to square, since that will work on both platforms, but it's better to iterate images in two sizes: Square, and in a 4:5 aspect ratio. Phones are typically held vertically in one hand, which means you need a longer, skinnier photo, as opposed to a wide one that takes up more real estate. A 4:5 image will take up most of the screen on many different types of phones, and that gives your image more distraction-free space as people are scrolling.
Both platforms will A/B test the two different sizes to see which one performs the best. The preference for square is very strong on Instagram, but not always. On Facebook, the 4:5 image tends to perform better.
Be aware that once Facebook finds something that it likes a little bit better, it will then divert all resources into that image, so it's hard to perform a true A/B test because the images don't get served equally. But don't let that stop you from experimenting with how any given image will perform in those different aspect ratios in each platform. That can lead to a big boost.
5. Copy post engagement.
Here's something I learned the hard way: the same ad can have hugely different performance based upon how people have reacted to it. Comments; likes; dislikes; hiding your ad, or marking it irrelevant - all of those engagement signals are very powerful in Facebook's algorithm and they influence how it shows your ad and how much it's going to charge you to show the ad.
And so, generating positive comments and then retaining them when you make a copy of an ad turns out to be hugely important, as I learned when I failed to select "copy engagement" when copying a very successful ad. To be able to copy the engagement is a fairly new option, and it turns out it's very important to do that when you're running at scale because that engagement history is critical to ad performance.
One downside of this capability is that once you've got an ad that has tens or hundreds of positive comments, it gets very difficult to perform an A/B test with a new ad because that buildup of goodwill and credibility against that ad is so powerful.
If you want set up a good test, you can copy the ad without any of the engagement and then test it against some other piece of creative. The problem is, even if the new ad performs better on a level playing field, it will be hard to get away from the old ad with all the engagement. You should be very cautious about turning off that ad with the engagement, because that engagement is so powerful.
How can you get all this positive engagement? That's the million-dollar question.
6. Go straight for the sale.
In the last few weeks, I've come across a couple of companies about to launch a new consumer product and they wanted to build up some buzz ahead of the actual launch.
They were thinking about investing in "coming soon" type ads to collect emails, and then when the product actually comes, they'll have a ready-made group of people they can contact and get them to buy the product.
This seems logical, but I advised them both against it. I don't think it's a good use of money. Here's why: when you're paying for lead gen - to get someone to say they're interested and get their email address and permission to contact them later, that typically costs a quarter of what it would actually cost you to get someone to buy the product in the first place.
And then you launch your product a month or so later, and those people have forgotten all about it. About 10% of them open email and 10% of those click through, and then some percent of those actually buy. Unless there's something out of this world about your product, the funnel efficacy of turning an email list of interested people into buyers is going to be terrible.
You're better off spending the money when you launch and can actually sell the product. This is likely to be much more efficient than trying to do the double step of building up interest and then trying to sell them again later on.
Despite its many detractors and its ongoing PR woes as a social media platform, Facebook the ad platform just goes from strength to strength. And for good reason: It outperforms all other mediums for a huge spectrum of businesses.
So you’re ready to launch a digital marketing program. You’ve got a website with a CMS that is owned by marketing. You’ve got a hands-on digital marketing strategist on board, a design resource, and a data analyst to set up your basic measurement infrastructure, as we advised in part one of this series. You’ve checked in with your SEO person. You’ve educated your stakeholders on the digital marketing mindset and you’ve got plenty of ideas to test and start learning. Here’s how to stand up your program and grow to about a million a month in digital ad spend.
Start with the Duopoly
There is no shortage of digital advertising platforms, but you should start with the “Duopoly” — Google and Facebook. Google Ads, and Facebook and Instagram (which is owned by Facebook) have a huge amount of ad inventory, and traffic. These platforms have made ad buying so simple, and the reporting is very good. The platforms are super flexible. You can change your budgets daily, or even hourly. You can launch new ads or stop campaigns at a moment's notice. That's something you can’t do when you've got piles of direct mailers already sitting at the post office.
There's lots of room to learn and grow in those channels, and you’ll be doing lots of testing — of ads, messaging, and economics. What are the costs of getting a new customer or a new lead? Can you bring in new people and scale in a way that’s economically viable? These are the best platforms for learning fast.
Clarity on Goals and Ad Types
All of these platforms offer a wide variety of ad types, so you need to understand which types perform best in which part of the funnel so you can align your ad buys with your goals and expectations. If your goal is to generate leads or sales, display ads or YouTube ads are not going to get you there. There's not a lot of buying intent.
That doesn't mean these types of ads are not valuable. They play a role in discovery, building brand awareness and getting more people into the top of the funnel. But you have to look at them with a different lens with regard to success, because they can help you build an audience that you can remarket to or add to your email list and nurture over time. You've got to couple these types of ads with paid search campaigns, which have a much higher level of buying intent, especially on branded search terms.
A Realistic Budget
What should your initial budget be? Ideally, enough to get 100-200 conversions. That gives you enough data to begin optimizing your program with confidence. So how do you figure that out?
Seasoned marketers know that a one to two percent response rate is considered good. That applies to digital advertising as well. If you get 100 people to click through to your website, you might get two actual transactions to occur — if your product is compelling and priced right. A lot of things have to be working to even get to two percent. It seems paltry, but that's the norm.
However, it’s common to find yourself faced with aggressive growth targets and minimal budgets. For example, leadership in a B2B company might want 100 new customers in Q1 and the budget is $10,000 — an effective CAC (customer acquisition cost) of $100 per customer. That’s aggressive.
To get to a realistic number, draw up the conversion funnel, plugging in some benchmark data for each stage — traffic costs, conversion rates, and falloff at each stage. You can get data for your industry in reports from big ad networks and from agencies that publish ad metrics from the big platforms on a regular basis.
Applying that data, let’s optimistically say we're going to pay $5 a click for a targeted campaign on Google Ads. If you really can get a click for $5, then $10,000 would buy 2,000 visits to your landing page. Let’s say, (also optimistically,) that you achieve a 20 percent engagement rate — with 400 visitors downloading a piece of content or submitting a demo request. That’s 400 MQLs (marketing qualified leads), for a cost of $25 MQL. If you're lucky, sales might qualify half of those for 200 SQLs (sales qualified leads). You might close 10 percent of those. In the end, you've got 20 sales for an effective CAC of $500 — five times the original budget, and even that may be too optimistic.
But, it’s not necessarily a budget killer. In fact, it could still be profitable if the lifetime value of a customer exceeds $500 by a big enough margin, as is often the case with B2B offerings. This is why you need to understand the unit economics of what you’re advertising. Unless you’re a venture-backed unicorn with millions at your disposal to capture a winner-takes-all market, your CAC needs to be lower than your lifetime value of a customer. If you’re paying $50 to get customers for a widget you’re selling for $60, that’s not going to work. If you've got a great product, with the possibility for repeat purchases, subscriptions, upsells, cross-sells, etc., you can afford to pay more to acquire a customer than if what you’re offering is only a one-time sale.
Initially, this is all hypothetical. Once you get enough conversions, you’ll be making decisions using your own data.
Measuring and Optimizing
Buying media is just one aspect of digital marketing. Once your campaigns are launched, the work begins in earnest. One of the great things about the Google and Facebook platforms is that you have total visibility into your campaigns, so you can check performance any time you want to. However, resist the temptation to make too many tweaks early on. It takes time for campaigns to “settle,” i.e. for the platforms to have enough data to feed into their algorithms and for performance to become reliable. What you see early on may be very different from where you end up. Give your campaigns at least six weeks to run before you make any big decisions.
Initially you can just look at data in the platform interfaces and export it into a Google sheet. We recommend at this point that you evaluate ROI based on media spend only, rather than including salaries and consultant costs. These are part of the cost of the program, but they’re fixed costs, whereas media spend is a variable cost. Right now, you want to focus on understanding, and optimizing variable costs.
Once you have enough data, go back to your funnel and re-forecast. Then, look for the keywords, creatives and messages that perform well, and double or triple spending on those. Ratchet down spending on the losers, or shut them off completely. Launch some new creatives and try out some more hypotheses to see if you can find more winners. Adjust your bidding strategy, and your budgets, and see if you can do better. Run for another six weeks. Lather, rinse, repeat until you top out in these channels.
Beyond the Duopoly
Let's say that using Google and Facebook in this manner, you’ve gathered enough data to determine you're willing to pay $10 to get someone to buy your product, and you can get 1,000 people a day at that price. But if you want to get 2,000 people a day from Google and Facebook, you can't do it without it becoming too expensive. It could take a long time to get to that point, or it could happen relatively quickly. It depends how much you’re spending, and how tightly you are targeting your audiences. If you’re spending a fair amount and targeting tightly, you can quickly exhaust those channels. Now, you’re ready for phase two.
That means taking what you’ve learned and expanding into different channels. Maybe you want to try other social platforms; advertising on podcasts; in apps, or programmatic ad buys. There are many, many options and we won’t go into them all because it will depend on the audience you’re trying to reach. What we would suggest is a continual testing cadence of trying at least one new channel every month to find those that are going to perform well for your business.
Bring on the Specialists
Now you’re running Facebook and Google, and you’re also testing other channels. You might be running some geographically or demographically segmented tests. The company may be changing as well. Often, by the time you get to this point, and the product changes and/or you add new product lines. The sales process may be changing because the product has become more complex. You may be changing your positioning and messaging or refining it for different channels. You need to start developing content for multiple channels, and for multiple landing pages, and you need to be able to track and compare performance across multiple channels.
As the volume and complexity of activity increases, you will need to add some specialists to your team.
Why not just have your product marketer or another internal person do digital marketing part time? Besides not having the depth of expertise required, adding a net new function usually stretches internal people in other roles too thin to be effective. The more you spend, the more you need to feel confident you are spending it as effectively as possible and managing the channels daily. Unless you have someone internally who has the experience and can consistently devote 10-15 hours a week to it, it may be best to hire a mix of full timers and specialized consultants.
Who you need will depend again on who you have on board already; what channels you’re in, and whether you are selling directly online, or generating leads for sales. Here are some considerations:
Dedicated Data Analyst
Once you go beyond two online sources, figuring out the worth of each of these programs in relationship to each other, and to other marketing programs, will almost certainly require an analyst dedicated to your group. It depends somewhat on the organization and what kind of data you have.
If you're just doing lead gen, you may be able to continue with your part time analyst. But if you have a SaaS product where you have a free trial and you want to look at retention and billing you’re probably going to need to bring in an analyst to tie those up with the finance department, because it's all going to go into your growth projections and determine how much you can reinvest in paid advertising. Ditto if you’re on a trajectory approaching multi-million dollar spending on paid media. You’re going to need to set up even more experiments and make sure you get results that are accurate. The infrastructure is going to become more complex. You’ll want to be using a tag manager; you might be bringing in HubSpot or some other marketing automation tools, along with analytic tools such as MixPanel or Tableau. You need somebody who can set it all up, pull together data from different programs and from the business, and normalize and analyze it to determine where you should be allocating your budget.
Paid Media Specialists
If paid search is performing well for you and your spending is growing, consider hiring a paid search specialist. It is very time consuming to stay on top of your keywords and bids and be constantly testing, and you want someone who is extremely effective at it. If social is performing well, you need a specialist there too. These are not usually the same person. There are skills that are transferable, such as knowing how to structure campaigns, and the same mindset around measuring performance to make smart investment decisions.
What’s different is that search is based on targeting keywords, and social is centered on audience targeting. Then there’s just platform knowledge — someone who spends all day every day using a tool is probably going to know more of the nuanced options that can boost your program. The other consideration is size. If you're trying to manage hundreds of thousands of dollars in each channel, switching costs make it inefficient to try to do both. When you have that much spend in a channel, it requires someone’s undivided attention.
You could also consider agencies, but there are some caveats. Digital agencies charge based on a percent of media spend, so there’s a built-in incentive to increase your spending. Also, what often happens is that you’ll speak with top people with years of experience during the sales process, but on a day-to-day basis, you're going to have less experienced people managing your campaigns. The other issue is reporting cadence. Most agencies aren’t going to report out at the cadence you need when you’re testing and learning, which you should be doing constantly.
Once you have a sense of which channels are going to work best for you, it’s time to invest in creative resources dedicated to your program — as opposed to sharing with other departments or a series of freelancers. Waiting on design or copy can hold your program back, and the overhead of having to get freelancers up to speed on your brand is pretty high. Having people who know the brand is very valuable. It'll speed things up a lot. Whether these are full-timers or consultants on retainer will depend on how much you’re spending and where. If you’re spending a lot on Facebook, where you need visual assets, it may make sense to have a graphic designer and perhaps someone that can turn out videos. You might also want to have a web developer if you want to iterate a lot of landing pages.
One resource you’ll need: A copywriter or two. These are vastly underrated in terms of the value they can bring to your program, writing landing pages, ad copy, headlines and calls to action. Once budget permits, you should bring one on, especially if Google Ads turns out to be your best channel.
Digital Marketing Consultant
Your digital marketing consultant is still on board, but less hands on. The role shifts more to looking at results and setting strategy for expansion. They could be involved in hiring and/or training, project management, and coordinating with product marketing. If you do work with an agency, this person should be on point to make sure they’re executing against your goals.
You need to not restrict your hiring process to geography. One of the great things about digital is that it can be done from anywhere. There are plenty of talented individuals out there that can work as a consultant or a full-time employee. If you’re willing to be flexible and think beyond butts in seats, you can sometimes get two experts for the cost of one FTE.
Digital media has revolutionized the world of advertising and marketing, providing buyers with self-service capabilities and a huge amount of data on results. At the same time, it’s created lots more work for marketers. It’s easy enough to buy some ads on a digital platform. It’s buying the expertise to do it right that presents the greater challenge. You need a lot of specialized expertise to do a digital marketing program at scale. It’s the behind the scenes understanding of the data, the true costs and how to strategically optimize for the best results that makes the difference between a successful program and one that is ineffective, and, given the importance of digital media to most industries, between a business that succeeds or fails.
Now is a great time to launch a digital marketing program. Whether you’re a startup, or a mature company that has previously relied on PR and in-person events to generate sales, it should be very clear that digital has to be part of your marketing mix. With marketing budgets being reallocated from in-person events, and digital advertising costs down about 30 to 40 percent, there’s never been a better time to get started. In this two-part series, we’ll share with you all the tools, people and best practices you need to go from zero up to about $1 million/month in digital ad spend.
Today we’ll cover readiness — eight things you need to put in place to build a winning program.
1. Digital marketing mindset
To make the most of digital, you need to adopt what we call the growth marketing mindset, which is to continually test, measure and learn, working your way towards making decisions informed by data. You no longer need to argue over subjective decisions about which creative is going to drive the most engagement and leads. You test different headlines, CTAs, images and videos and you have tracking set up, so you have data and you know.
2. Known unit economics
One of the big advantages of digital marketing is the ability to determine your ROAS (return on ad spend) down to the penny. Many companies are unable to do this because they don’t have a firm grasp of their unit economics. Without that context, it’s impossible to know whether paying $20, or $40, or whatever it is to acquire a new customer, is profitable.
Ideally your product has a little bit of traction in the marketplace, enough to know what the unit economics are and that they’re viable. As you start to invest in paid advertising to acquire more leads or customers, this gives you a baseline from which to judge whether a program is profitable or not.
If you’re a startup and the economics aren’t quite there yet, you can still get valuable learning about acquisition costs, but you’ll want to integrate that into a more complete picture of profitability.
3. Marketing-owned website with CMS
Eventually you may require a sophisticated tech stack, but to start you just need a website that marketing owns, connected to a content management system (CMS) and Google Analytics on the back end.
If you’re on a homegrown, 10-year-old website that gets updated through GitHub, or engineering owns your site because the product and marketing site are one and the same, it’s going to be difficult to spin up 10 new landing page templates, let alone one. Another common situation: Your blog is on WordPress and the main site isn't, and your SEO effort is focused on the blog.
There are workarounds, but they’re going to slow you down and hamper your efforts. You need the ability to make changes on the fly and pull up the data you need without being dependent on engineering and development.
The ideal scenario is to have everything in a content management system where you can easily build pages and forms, and optimize for SEO and paid traffic all at the same time. If that means migrating to a better CMS, do it.
4. Dominion over SEO
While not technically paid media, your investment in Search Engine Optimization needs to be part of the conversation. As you build out your paid media strategy, it's important to know what the web marketing folks are doing with the website. What is the messaging? Who is in the target audience? What keywords are you optimizing for? You're going to want to align your efforts for organic keyword strategy with your paid media.
In smaller organizations, or organizations that haven’t done much with digital, we often find SEO under product, because the product manager is managing the website and everything related to it. Product marketing is an important collaborator, but it’s a rare product marketer that’s deeply skilled in SEO.
If you are trying to build a digital marketing mindset within the business, marketing needs to have the SEO, content and all things web in their sphere because the learnings from paid media inform SEO efforts, and vice versa, and they both inform content strategy.
5. Data analyst
Don't spend money on paid media if you're not able to measure results. Measurement is central to the growth marketing mindset, to the success of your programs, and your ability to win continued investment in your programs. You have to have a data analyst or data engineer on board from the start.
This is something you need to invest in early, before it becomes a pain point, because by the time it becomes a pain point, overhead is growing, and tools and platforms are proliferating and it’s going to be very disruptive to stop and fix it. You’ll have to change the way you work. You’ll also have to change the way you communicate with the business, and that’s going to really hurt the credibility of your program. If you've been measuring one way and it's mixed up and wrong and you start changing that, all your historical metrics are going to have to be revised. It requires a lot of political capital to change the way the company has been thinking about the metrics. Getting out ahead of that, and staying ahead, is extremely important.
In the beginning, when you've got just one or two channels and spend is low, you’ll mainly be working with data in the platforms, and in Google Analytics. You can get by with a part-time analyst. The most important thing at this stage is to validate that all your tracking is properly instrumented and all the data is flowing to the right places and reports are making sense.
You might be able to recruit help from an internal person that’s shared between departments. Another option is to find a consultant who can come in and architect it, set up basic funnels, events tracking, and tagging, and then hand it off to the internal person to manage.
6. Hands on strategist
If you plan to spend a million dollars on media, it might make sense to bring in an FTE to lead your program. If you want someone experienced who knows what they're doing, that’s easily a six-figure annual salary.
That doesn’t make sense if you’re only spending a quarter million on media. You can probably get the same level of experience and expertise from a consultant working half time or less.
Consultants tend to be more hands on, leading both strategy and execution. At this stage, it’s helpful to have a person who can come up with campaigns, messaging, and imagery; set up tests; look at data and actively manage campaigns within the digital platforms. This person may also be able to help set up tracking and attribution, or at least manage the person who’s doing so and also help validate the setup.
7. Design resource
Until you’re spending a lot of money on paid media, you probably don’t need a designer dedicated to your program, but you do need a design resource. Most organizations will have a designer working on the website, product or an app. Depending on demands on their time you might be able to borrow some of this person’s time. Or, find a freelancer who can give you 10-15 hours a week.
If you’re really bootstrapping your program, there are a lot of tools out there now that can turn almost anybody into a designer. In addition, Facebook and the Google Display Network both provide templates where you just upload a photo or graphic, add a headline, messaging and CTA and they assemble the ads for you in different sizes. Google AdWords of course, doesn’t require any images.
You may not be able to make the prettiest ads with these tools, but you can get a decent amount of testing done using these tools, stock images and DIY graphics. Sometimes you have to live off the scraps while you stand up the program, but the learning you get from that will make the money you eventually spend on a designer go further because you know what kind of messaging, imagery, or even colors are working.
Because you’ll be doing so much testing, it’s important to cultivate a steady stream of ideas to test. Recruit your product people, your designers — anyone who has a creative mindset — to pitch in. To start off, you can just “spray and pray” because you don’t know what works. But as you go forward, you’ll be looking at data and coming up with ideas based on what’s working and what’s not. You can very quickly get creative fatigue.
Even when you find a winning ad, you should always be testing it against another candidate to see if you can do even better. One of the things that makes digital marketing so fun is that it is full of surprises. Sometimes what your marketing instincts tell you should win performs dismally, and the copy the person in accounting suggested outperforms everything you run against it.
You never know what image or messaging will increase your conversion rate by another 10 or 20 percent, which can make a difference in the long run. Working continually to test and make those 10 percent discoveries is what the digital marketing mindset is all about.
By Toby Skinner, Mark Harnett and Patrick Lundbom
Do you pay your digital agency based on a percentage of the media budget they spend? If so, their incentives may be misaligned with yours, and it can lead to these common mistakes.
Red Flag #1: Blending branded and non-branded search results.
Is your search agency breaking out results by branded versus non-branded terms? If not, they are naive or and possibly even malicious. Why?
Let’s say you’ve bought the branded Google search ad for your company name, “Acme Bird Seed.” And you’re getting very cost-effective conversions on it. Your agency can take credit for the clicks as part of the overall search campaign. The vast majority of the time, the consumer had previously heard the company name and is simply using search to navigate to your site.
Non-branded search terms such as “bird seed” typically have more competition. This leads to a much lower conversion rate and hence higher cost per conversion compared to branded terms. If the paid branded search results are blended with the non-branded search terms, the average cost is low. The result is flattering to the agency… and also misleading. Always split out branded and non-branded search results.
Red Flag #2: Paying too much for branded search terms.
Branded terms may seem to drive cheaper conversions. However, once you’ve calculated their incremental lift, they’re often not cheap. If the branded ad wasn’t there, 95 times out of 100, the consumer would scroll down to find the organic, free search result for “Acme Bird Seed.”
The other five times, the wording of the ad or the position at the top of page above the competitor terms actually did drive a sale you might not otherwise have gotten. So when you buy the branded ad, in effect you are paying for 100 clicks on the ad, but only five are incremental to the organic results you would have achieved anyway. To account for the actual incremental value, you would need to adjust your bids down to 5% of the typical Cost Per Acquisition (at which point your ad will likely shut down anyway).
You can run geographic holdout tests with your campaign, then measure the combined effects of the organic and paid results to help calculate this incremental lift. I’ve worked at a couple of companies where turning off the branded search terms saved hundreds of thousands of dollars per month with no significant change in acquisition numbers.
Red Flag #3: Overpaying for customers from retargeting ads.
Are you paying too much for new customers coming from retargeting ads? Some marketing experts tout these type of ads as providing amazing click-through rates, higher conversion rates, and better ROI.
The truth of the matter is that you end up paying for customers who would have bought the product even if they haven’t seen the ads. As a rule of thumb, you should only pay about 10% of the cost per acquisition using retargeting ads compared to what you’d pay for a truly new customer.
I’ve written a separate post on figuring out the cost-effectiveness of your retargeting campaign and how to run a holdout test to measure it accurately.
Red Flag #4: Allocating budgets properly; splitting up campaigns, ad groups, and ad sets too much.
In the financial world, asset allocation involves dividing an investment portfolio among different asset categories, such as stocks, bonds, and cash. You also put the right amount of money into each one so you get the best growth over time. You can apply this concept to online ad campaigns too.
When allocating your budget, you can choose different channels and campaigns to drive sales. Some combinations of channel and campaign will drive sales at a low cost per acquisition. And some of them will drive a few sales but at a higher cost.
I have often seen hundreds of ad sets or ad groups with very small budgets and very sparse conversion numbers. After a month or two, these groups of ad sets perform very differently, but they continue to have similar daily budgets. This implies that the daily budgets have not been balanced well. Adjust the budgets often so that poorly-performing ads are starved of budget and great ones are given more to spend.
If your agency is not closely monitoring what this, you could be spending too much money on poorly-performing campaigns and not enough on ones that are performing well. Every couple of months, take a look at the big picture. Make sure you’re allocating the media budget appropriately across the different channels, then campaigns, then ad groups and ad sets. Done right, your average cost per acquisition should go down because you’re putting money in more effective places.
Red Flag #5: Optimizing campaigns towards a goal that’s too high in the sales funnel.
E-commerce campaigns are easy to track because sales happen on the website, and the pixel-based conversion tracking fires immediately. With B2B companies, the sales cycle is longer and does not necessarily happen on the website.
Let’s say a customer has filled out a form on your website, and it’s counted as a lead. If the actual sales data is not tied back to the original campaign, then you will likely start optimizing towards high volume and low-quality leads. I’ve seen this over and over again. The digital agency or internal team drives high volumes of leads (often from display or affiliate campaigns). But these leads are very poorly qualified and rarely turn into sales.
Another common refrain from the team buying the leads is, “We didn’t have access to the sales information.” If that is the excuse you’re hearing, you’ve got the wrong people working for you. You need someone who is going to dig until they have the right information to make the right decisions.
Finding the right conversion data and tying it back to the ad campaigns can be complex but possible. Personally, I’ve embedded myself into organizations sufficiently to work through bottlenecks and get the information needed to figure this out.
Bonus Red Flag #6: Spending money on a branding campaign without measuring its effectiveness.
Want to spend money on a brand campaign? You should have criteria as to whether it’s worth doing or not. If you’re trying to increase awareness and brand lift, do you have enough budget and money to move the dial?
Brand awareness campaigns can cost in the tens, possibly hundreds, of thousands of dollars. You shouldn’t start a brand awareness campaign without building in a system of measurement for its effectiveness. For example, to measure brand lift, you can use Google consumer pre- and post-campaign surveys. If your ad budget is big enough, your ad rep can help set up brand lift studies on Facebook and Google. Just don’t use the excuse, “It was for brand awareness,” to get out of trying to measure the effectiveness.
ConclusionAsk the team managing your digital budget about these common mistakes. Are their incentives aligned with yours? Do they make more money by spending more?
The EM Marketing team typically offers project- or retainer-based fees rather than charging a percentage of media spend. We are happy to conduct a high-level review of your digital account structure and practices and help ask the questions.
You may hear that retargeting provides amazing click-through rates, higher conversion rates and better ROI. (See CMO, OkDork, PPC Mode, Hubspot.) These bastions of marketing knowledge are misleading you! One thing that’s missing is that advertisers may be overpaying for customers coming from retargeting ads. As a rule of thumb, you should only pay about 10% of the CPA for retargeted ads than what you’d be paying for a truly new customer. First, let’s cover the basics then I’ll explain why.
What Is Retargeting and Why Is It Useful?
You may have experienced this yourself as a consumer. Let’s say you visited a website to buy a new bicycle. You even added one you liked to your online shopping cart, but got distracted. Or you weren’t quite ready to buy it and left it there. Here’s where clever retargeting ads come in.
For a predetermined amount of time, you see a display ad for this specific bike following you around on the internet — by your email inbox, on news websites, or in your Facebook news feed. By tagging your visit to the product page and shopping cart, the advertiser knows you are interested in that product and is keen to remind you about it.
Image Credit: Retargeter
Retargeting is useful because seeing the “reminder” ads may push a consumer, who was on the edge of buying, to cross over and make the purchase. Clearly, this type of advertising is more effective than showing ads to people who may not be interested in your products.
What Should You Be Paying for Retargeting Ads?
Retargeting ad providers sell ad space by CPM (cost per 1,000 impressions), CPC (cost per click) or CPA (cost per acquisition). The most effective campaigns are optimized on a CPA basis, where the advertiser only pays when the consumer actually “converted” or took a desired action, such as making a purchase. The trick here is figuring out how much to pay for customers coming through retargeting ads. In reality, you end up paying for customers who would have bought the product even if they haven’t seen the ads.
In the example of bicycles:
For these reasons, far too many campaigns I’ve seen have put too much value on customers acquired through retargeting. These customers should have the CPA target set at about 10% of the new customer CPA target, since 90% of the acquisitions measured would have happened anyway. Only 10% can be attributed to the retargeting campaign nudging them to purchase.
The Secret Ingredient: The Holdout Test
So how do you know if your retargeting ads actually motivated the customer to buy your products? The gold standard to determine whether your retargeting ads are influencing customers to buy is to run a holdout test. Take half of your target audience to serve the retargeting ads to, and take the other half and don’t serve them the ads, or serve them a Public Service Announcement. Then see how many more conversions one group is getting over the other.
Your retargeting groups can be based on demographics, geography, or contextual factors. In order to get a good grasp on how much lift the retargeting campaign gives you, you’ll need to track a large number of purchases. For example, you should have purchases in at least the low hundreds in each bucket you’re testing.
In different experiments I’ve run (as well as other marketing consultants I’ve asked), the lift ranges from 4% to 15% with retargeting ads over the group that did not see ads. We’ve never seen significantly more lift than that, and that’s why should discount the value of customer acquisition from retargeting.
Measuring Your Retargeting Campaign
Of course, because ad providers want you to buy advertising and make those ads better, they don’t always make it easy to not run ads. Google and Facebook do provide the tools to run this kind of test, but typically you need to have your account rep set them up on the platform’s back end.
Conducting a holdout test is a sophisticated way to advertise. It requires careful segmentation and tracking of who added to their cart, who received a retargeted ad (or not), and who purchased. Finally, how much did each customer cost you?
I would love to hear your feedback on running retargeting campaigns. How have you set the CPA? Have you measured the lift without a holdout test? Contact Drak Marketing if you’d like to determine the right amount you should be paying for your retargeting conversions.
As you may have heard in the news, “Facebook Zero” is imminent. What it means is that marketers must master Facebook ads because essentially, your free, organic traffic from the News Feed will likely dwindle down more than ever.
The Challenge with Facebook Ads
As I’ve written in the past, it has been notoriously difficult to test ad creative on Facebook. That’s because Facebook uses algorithms to pick winners and losers. Often, the losers do not get an even amount of traffic to give it a fair shot.
Advertisers have found a workaround to test what works best — to upload a large number of ads in bulk. Each ad consists of a different combination of headlines, images, and text. All ads are tracked in a spreadsheet to manually analyze which ad performed well, then the advertiser focuses on using those ads in a campaign. This solution is time-consuming and does not allow for rapid measurement, so many people shy away from testing.
New Facebook Ad Testing: Dynamic Creative
Thankfully, Facebook cares about its advertisers and continually evolves its ad platform. The latest update, called Dynamic Creative, is a welcome change currently being rolled out. In Facebook’s words, dynamic creative makes it easy to:
Dynamic creative accepts up to 10 images/videos, and five of each text asset (body text, title, description, call to action). Facebook then automatically mixes up the components and creates a series of ads, serving them up to one audience. You’ll still need to test ad variations manually for different audiences. Dynamic creative ads can be applied to conversion, traffic, and app install campaigns.
Benefits of Dynamic Creative: Speed & Better Results
Now, rather than launching your spreadsheet to analyze creative performance on a nitty-gritty level, it’s much easier to test ads at a faster pace. With Dynamic Creative, you get quick results, and you can discover the needle in the haystack of creative options.
For instance, using Dynamic Creative, my client Tinkergarten tested various elements and found a headline that had a 300% higher conversion rate than others. This amounted to significant savings of 1000s of dollars per week. They were able to home in on a message that truly works for its audience.
Have you given Facebook dynamic creative a try? Let us know how it worked in the comments.
Experienced online marketer with an analytical approach to driving profitable customer acquisition through rigorous testing, landing page and registration testing and improvements as well as customer value and retention analysis.