In economically challenging times, business leaders frequently single out the marketing budget as a target for cost cutting. Now, the looming threat of recession around the globe and the growing cost-of-living crisis is sending many businesses into survival mode. As budgets are reviewed and even the UK Government is suggesting businesses reduce prices by cutting their marketing spend, marketing departments are struggling to avoid the spotlight.
However, organisations opting for this approach risk losing their share of voice (SOV) and share of market (SOM) to rivals. While many retailers see marketing as something to reduce during tough times, Procter & Gamble has shown that greater success can be achieved by adding to the marketing pot.
This understanding should serve as motivation to marketers to fight back when business leaders make moves to reduce their budget. But how can they best prove their value?
Convincing the board
Marketers need quantifiable outcomes to provide a solid case to the board. Business leaders will rightly 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.
This scepticism will increase if marketing can’t explain why some products are promoted and others are left out, or even answer large questions like if a campaign is optimised for revenue or true profit.
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.
However, with the right data, marketers can fully understand their performance at the product level, and even control which items the budget is spent promoting. Armed with this knowledge, marketers can walk into budget discussions with confidence and the evidence to back up their case.
Leveraging product-level performance data
Though dynamic promotions continue to gain popularity, most digital marketing teams still lack the actionable insight and control needed to optimise their campaigns for SKU-level profitability. The logic behind what the algorithms promote remains hidden, and margins, return rates, stock levels, ad spend per SKU, and other product-level information is isolated and trapped in varying departments (if it’s available at all).
This has a negative knock-on effect as marketers make decisions based on instinct rather than evidence, which leads to budget being spent ineffectively while products with true potential fall by the wayside.
The solution to making these campaigns more targeted, cost-effective and impactful is product-level performance data. By gathering and combining this data from Facebook, Google Analytics, Google Shopping and custom sources, marketers can understand how their dynamic budget is spent. They can answer questions like: 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.).
This makes for more efficient budgets, higher ROI, and a clear-cut case for keeping marketing intact. Results like these reflect why emerging technologies, such as Product Performance Management (PPM) platforms, are gaining traction.
Easing privacy concerns with product data
Another concern facing marketing teams is the developing situation around customer privacy. The urgency to take action has increased with Google announcing that its hugely popular Chrome browser will no longer support third-party cookies by the end of 2024, following similar moves by rival companies.
Retailers will need to find new ways to understand their customers, and keep communications personalised. By supplementing their customer data with product-level performance data, marketers can add additional signals from other channels while still ensuring compliance with consumer protection regulations like GDPR.
Standing their ground
History shows that those who increase their marketing investment in tough economic times are the ones who prosper. This has been the case during every recession since the 1970s. Marketers need to stand their ground against business leaders looking to cut their budget.
The key to proving the value of marketing in the maturing world of dynamic ads rests with product performance data, as privacy restrictions further limit granular audience targeting and campaign segmentation (you can see this trend with the newest formats the ad giants are introducing – Google Performance Max and Facebook Advantage+).
Using product performance data, retailers can understand the details of their campaigns, and optimise them according to company goals. They can increase ROI, reduce spend, and even begin solving the issue of customer privacy. It’s time for marketing to show that they are not the place to make cuts during hard times. Rather, marketing is what can keep the company thriving.