The Right Way to Cut Paid Media Budgets
Budget cuts are no fun, especially when they are caused by an unprecedented global pandemic and economic crisis. However, budget cuts also bring an opportunity to reset and find new levels of efficiency. What you need to avoid right now, is the urge to hit the panic button and kill everything.
If you follow the recommendations below, I can promise you the following:
- You will be able to minimize the performance impact of budget cuts
- You will come out better in the long run because you will have a lean and mean, effective marketing program poised to take advantage of the inevitable ramp-up of marketing activity in the future
Indiscriminately shutting off all of your campaigns is not what you should be doing–unless you have serious cash flow issues. If that is the case, this blog post, unfortunately, won’t help you. But here are some ideas on improving your cash flow immediately.
Henry Ford technically lived through a pandemic (the 1918 Flu) and an economic downturn (The Great Depression) so he has two legs to stand on (see what I did there?).
So the question you should be asking yourself is what do I cut? I actually believe that forced budget cuts bring about an opportunity. It forces you to carefully look at how the individual parts of your media mix are performing, how they work together and what opportunities you may have to trim the fat.
It’s all about media effectiveness (I purposefully didn’t say “media efficiency”).
When times are good–and let’s be honest, up until March of this year they were pretty darn good–most marketing budgets get a little bloated. Companies and marketing teams often loosen up ROI constraints and focus on growth industries, targets, channels, tactics, etc. In that thirst for incremental growth and the glut of expanding media budgets, there are bound to be some duds that are hidden by the overall great performance.
But what about decreasing media costs right now?
Yes, many advertisers have pulled back significantly and we have seen costs across platforms decrease for most of our clients. For example, we have seen CPCs for some clients fall by 50%:
Notice the slight pull-back this past week after the initial panic subsided
However, along with decreased CPCs you also have decreased conversion rates, so you really can’t just cut budget in half and expect to get the same results. You really need to optimize your messaging and content and stabilize conversion rates along with it.
Ok, so how to decide what marketing activity to cut?
The first part is likely the hardest, and maybe more art than science, depending on your marketing analytics tool stack. However, the general idea is that you need to look at your buyer journey, funnel, conversion paths, or whatever multi-touch data you can get your hands on and try to understand how various activities influence the overall outcome. For example, if you cut prospecting activities, that will likely decrease traffic to your site, and in turn, your retargeting pool. It will also likely decrease the volume of brand traffic (both paid and organic) because fewer people will become exposed to your brand message.
For B2B marketers this is even harder because as opposed to having to deal with a single person purchasing a product, we have to deal with a buying committee of 3 – 5 people who come into the buying process at different times. Oh, and one other wrench to throw into this… Buyer behavior has changed substantially over the past month, so you have to be careful when using past data to make future decisions.
You will need to rely on a combination of deep understanding of your customers, past performance, psychology and gut feel about how your marketing program works.
Some things you will want to consider:
- Pull records of closed-won deals from your CRM and Marketing automation systems. What content did they interact with? If you have enough data to segment this by job function and seniority, you should.
- Pull pathing analysis data from your web analytics platform to understand what path people take to finally convert into a lead.
- Better yet, if you have your web analytics data integrated into your CRM, or vice versa, then you can dig into which paths were more likely to turn people into customers.
- Review your funnel map, are there any paid media touchpoints in there that maybe aren’t necessary to the success?
Remember to carefully review the content and messaging being used because whatever was working before, likely won’t work moving forward, at least not over the next month or two.
Once you have your data and assumptions, you will want to focus on cutting channels and tactics that have the lowest marginal rate of return.
In this example, you would likely want to find ways to cut paid search spend because even though paid search is overall more profitable, based on current state performance, you will lose less revenue by cutting paid search than by cutting Facebook.
Now let’s get into specific channels:
Let’s assume you have already decided that paid search budgets need to be cut by 25%. Or maybe that mandate has been handed down to you from above. Either way, the main thing is not to evaluate paid search in a silo. You have to look at the entire search channel together.
- Look at the Google Ads paid and organic report and filter to only results where both paid and organic were shown.
This is a great way to understand where you could get away with cutting back on paid search because your organic search will pick up at least some of that traffic. You will need to cross-reference this analysis at minimum with conversion data, and ideally with your CRM data.
Google doesn’t want to make this type of analysis easy on you, because they have a vested interest in you keeping your paid campaigns running, so you will have to manually combine this with conversion data.
- If you realize that you never connected your Search Console to Google Ads, don’t worry, you can still manually get to a similar result with some simple excel pivot tables and VLOOKUPs or SUMIFs by pulling the data separately from each source. I actually tend to prefer this way better because it’s a more complete analysis. The Google Ads report doesn’t provide you with data on instances where only the organic result was shown and you ideally want that information to better understand the impact of making a paid search cut.
- If you have some time before your budget needs to be cut, consider leveraging a tool like Keyword Hero, to get a much deeper understanding of your organic search performance.
- Once you have your analysis in hand, try to focus on the lowest marginal ROI or highest marginal CPA keywords.
Once you have done any or all of the above, you can look at the following segments of queries to cut, in this order of priority:
- Those with poor paid performance (low marginal ROI or high marginal CPA), and existing top organic ranking (rank 1 – 3). These will likely have a high organic CTR based on their position and are likely costing you too much from a paid media perspective.
- Those with poor paid performance, and existing first-page organic ranking (rank 1 – 10). Depending on how competitive the query is, you may be able to make some minor SEO improvements to get them to rank higher up the page, to improve traffic and lead volume while cutting paid search cost.
- Those with poor paid performance and organic rank close to page 1 (11 – 15). As with the above, some minor SEO optimizations can likely get this up to page 1, which should have a noticeable impact on organic traffic and allow you to recoup some of the traffic loss.
Paid Social and Display
- Look at view-through conversions. While I don’t love using view-through attribution as a core metric, and we can discuss the actual impact of an ad impression and the validity of viewability, let’s leave that out for now, because we need to use the data that we have to make the best decision possible.
My recommendation is to take the shortest possible view-through period available (usually 24 hours) because assuming that an impression impacts an action taken 7+ days later isn’t realistic.
- Look at assisted conversions in Google Analytics. This can help you understand if your paid social campaigns are having an impact further up in the funnel, and what the potential impact would be if you cut those touch-points out of the equation.
For comparison purposes, take a look at paths that have a particular source, campaign or adset and ones that don’t to get at least a directional understanding of what impact they are having on overall performance.
- Granularly review audience, demographic and firmographic performance and adjust targets and budgets accordingly.
In this example from a LinkedIn campaign, you could consider cutting out the highlighted job functions from your targeting and decreasing the budget accordingly.
Consider reallocating some budget to top performers
With all of this in mind, there is one more thing to consider. Through this analysis, you should also be considering where you can reallocate budget, to lessen the impact of the budget cut.
Are there top-performing keywords with available impression share?
Are there top performing ad sets or audience with relatively low impression frequency and/or low share of voice?
If the answer to the above is yes, then you should consider cutting deeper than you need to, and reallocate the difference to those opportunities. So if you need to cut 25%, could you cut 30% and reallocate 5% to your top performers?
Let’s get to the Point:
- Don’t panic
- Evaluate cross-channel performance
- Cross-reference paid search performance with organic search data
- Check for downstream impacts of paid social and display before cutting
- Find opportunities to reallocate some budget to higher marginal ROI activity