How to get a better return on your advertising spend in tough times

The American department store supremo and marketing pioneer John Wanamaker famously quipped that half the money he spent on advertising was wasted; the problem was, he didn’t know which half.

Many Australian business leaders know that feeling all too well. But while some degree of opacity may be considered acceptable when business is booming, it’s less likely to fly when times are tough – and, in 2020 Australia, tough they most certainly are.

As the country’s commercial sector begins the long journey out of coronavirus-induced recession, business leaders are looking to rationalise expenditure and ensure they get maximum value for every cent they outlay, across all aspects of operations.

Slash or spend?

Some companies lost no time in taking a machete to the marketing budget after the COVID-19 pandemic struck. According to a Digital Ad Impact Study published by IAB Australia in April 2020, 86 per cent of local brands had changed their digital ad investment over the previous month. Half of those polled said they were making decisions on the fly, reviewing their advertising spend at least daily.

The survey found 57 per cent of businesses had cut back and around one in five had paused ad spending entirely. Just 15 per cent reported they increased or maintained their pre-coronavirus ad budget.

Opinions on the wisdom of each approach are divided – but whether you choose to slash or spend, it’s important to ensure that the money you invest in digital advertising is delivering the best return possible, in the here and now.

Metrics that matter

That starts with calculating your Return on Ad Spend (ROAS) – the amount of revenue you gain from each dollar invested in advertising. You can do so by dividing the revenue a campaign generates by the cost of running it. Unlike Return on Investment calculations, this sum doesn’t factor in profit margins or other related

expenses. That means it’s a simple way to gauge the success of specific tactics, not a reflection of the effectiveness of a campaign entire. An ROAS of four or more means you’re likely to be making money from the money you’re spending. Conversely, a figure of two or less means the sales you’re converting are probably costing you more than they’re worth.

Getting more for your money

If your ROAS numbers look lacklustre, it’s time to act. Benchmarking and comparing the channels you use will enable you to double down on the ones which are delivering the best return and put a pause on those which aren’t driving activity.

While tough economic conditions can see sales shrink across the board, it’s important to remember that not all customers stop spending. That’s why it makes sense to home in on those who are most likely to open their wallets, based on past behaviour. Excluding those whose history indicates they’re tougher to convert can also be a sensible move. When advertising resources are limited, a targeted campaign is likely to be more cost-effective than a scattergun approach.

Using data to drive your decision making

A unified customer data platform can take the guesswork out of understanding customers and making decisions about how to allocate your advertising budget, in good times and bad.

Being able to easily analyse the effectiveness of your campaigns and channels and use that intelligence to inform your tactics can help you get the best bang for your buck, at a time when doing so has never been more important.   

Prakash Durgani, Regional Vice President – Asia Pacific and Japan, Segment

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