Don’t optimize your marketing channels!
Written by: Peter Messana - CEO
There I said the unthinkable, don’t optimize your marketing channels. Having spent almost 20 years in retail, before my current stint in technology, and the last 13 of them owning my own online retail company I have spent a lot of time thinking about marketing, it was the second largest expense at our company and what I have concluded is that I am a bit unusual, but for valid reasons.
Since I started with a bold statement, that would probably get me fired if I worked for my VP of Marketing, let me explain a bit. We set our overall marketing budget as a percentage of sales. Early on we set a target of 6%, later on we pushed this a little higher but we felt that was a healthy spend. But we didn’t set channel targets or optimize the spend at each channel, instead we focused on the overall spend knowing that each channel would fluctuate. Not to be misleading, we did measure the spend by channel by week but no one channel had a set target and if the overall was veering away from target we would then use the breakdown to determine where something went wrong or too optimal.
It is also important to note that we didn’t count the labor associated with marketing when we were measuring the effectiveness of marketing. Why? Because it was pretty much a fixed cost, it wasn’t that we were going to do away with the email marketing role if that channel was struggling. We would always have those expenses and we wanted to know how effective our spend on variable expenses was in relation to sales.
Having an overall target and not a channel goal gave the marketing team a huge amount of leeway to test different things and push different channels at different times without having anyone breathing down their neck for why one number was up while others were not. We also used wide windows when evaluating the spend, meaning while we had weekly reporting, if one week was up we didn’t have a knee-jerk reaction.
The full reason we never watched a specific channel was attribution. There was, and still is, no way to attribute a sale accurately. We would always see organic drop when we lowered AdWords spend and vice versa. If we cut retargeting because the conversion rate was dropping we would then see a drop in direct and organic traffic. I was (and still am) convinced that trying to attribute to a specific channel is a terrible idea and thus you shouldn’t measure at that channel level. Likewise, if you consider SEO/Organic “free” then you should cut your adwords budget and see what happens. There is just no good way to know if the customer saw an ad, clicked it, came to your site, then in all your retargeting, that they likely “ignored”, they someday later went to Google and made a search for you and picked an organic link. I would concede that our product was different, our average conversion was around 30 days from first visit so most of the attribution models struggled, plus they were fairly high ticket items that also caused close to a 15% phone order rate, which certainly would mess up that marketing percentage and attribution was dead in the water on those phone sales, which also happened to be 2-3x higher AOV.
Attribution is obviously the single greatest reason we did not get hung up on each channel and used the overall spend. It also was helpful that our sales were constantly increasing, which meant that marketing was always playing catch up. We grew for 12 straight years and at times we actually struggled to find the best places to spend. I am sure there are marketing people reading this just wishing that they had this problem and wished that they had their boss telling them to spend more. The reality was that the biggest struggle was how to spend more and required some creative spend that was a bit of a leap of faith.
Marketing is often joked about because determining the ROI is very difficult, but hopefully this has helped ease some of the pains of not knowing if that spend was worth it or not, just watch the overall and keep it in check.