Getting smarter with digital ads - How to reduce overspend

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For advertising and creative professionals, 2020 was the year that changed everything. The ecommerce boom, driven largely by Covid-19, forced an unprecedented growth in demand for online retail. And with physical shopping unlikely to ever return to the same level as pre-pandemic, marketers have unsurprisingly shifted a large portion of their budget to digital channels.

According to a global survey from 2021, 76% of marketers plan to increase spend on online video ads this year, with 70% placing more investment in social media stories and 68% in social media feeds. But with more and more companies battling to capture attention online, overspend and wasted advertising budget is a growing problem. 

Karel Schindler, CEO at ROI Hunter, explains why digital marketers need to find a way to deliver more effective and targeted ads across the right channels and with the right content. Otherwise, they risk seeing their ad spend skyrocket while their revenue stays flat.

Understanding the problem


Research suggests that $37 billion a year is wasted due to ads that fail to engage the correct target market. And for sectors such as fashion where margins are shrinking, the issue is even more prominent, with thousands of brands competing for the same audience.

The challenge is exacerbated by the sheer volume of channels available. With so many channels to try, and so many products to promote, simply deciding what to advertise and where can feel like a mammoth task. It’s easy to fall into the trap of trying to cover every avenue to ensure a segment of the market isn’t lost, but this can often lead to limited or non-existent results without effective targeting.

For most digital marketing teams, the root of the problem lies in a lack of actionable insights to objectively evaluate their efforts and inform decision making. For example, from our research with hundreds of e-commerce clients at ROI Hunter, we’ve found that around 50% of their dynamic advertising impressions are going to just 1% of their product portfolio. Yet, 80% of revenue often comes from 20% of product catalogues - meaning marketers could be missing a trick to prove their value and drive more sales.

This is often compounded by the fact that data is frequently in disparate silos across organisations - marketers rarely have access to product margins or return rates, and merchandisers don’t often know the ad spend behind each SKU. Based on data from the 1B+ USD annual ad spend of our clients, we’ve found that over 70% of Meta/Google ad budgets go toward promoting only what the algorithm recommends, further limiting visibility and control.

This lack of control and central visibility means marketers are only able to see part of the picture. As a result, advertising strategy and spend is often based on a “gut feel” or best estimate from limited data sets, meaning digital marketers can find themselves throwing money into the promotion of products that offer limited value or return on investment.

Getting smarter with ads


One way that digital marketers can eradicate guesswork and improve the effectiveness of digital advertising strategies, is to use product performance data to inform promotional planning. Traditionally, digital marketers have used customer data to shape marketing strategies and make decisions on ads, but many are overlooking valuable information that is right under their nose, such as product data.

By syncing product data from across their channels with their feed, digital marketers can unlock a wealth of new insights to drive greater performance. For example, marketers can identify their bestselling products based on the amount of revenue or transactions, and ramp up promotion. Marketers can identify overlooked products with the potential to drive significant profitability by filtering their catalogue for products with high impressions on Google, but low spend on Meta.

The most simple and logical way to utilise this product performance data is with a product marketing platform. Product marketing platforms empower marketers with insight into the performance of individual products across their channels. Unlike the more well-known customer data platforms, which focus on collecting and integrating customer-level data, product marketing platforms focus on collecting and integrating product-level data like margin, generated revenue, ad spend in different channels, or number of transactions.

Marketers can even use a custom source to connect business data like stock levels and returns for even more advanced campaigns. With this cross-channel product performance data, marketers are able to create highly dynamic product sets based around their specific goals (e.g. group high margin products for a profitability campaign, group bestseller products for a scaling campaign).

By combining this product performance data from all Meta, Google Analytics, Google Shopping, and custom sources, product marketing platforms create a single source of truth, enabling digital marketers to automate, scale, and increase the profitability of their digital promotions.

Whether it’s using Google search impressions to automatically promote, (on Meta), the items that are trending on Google, or using stock-level data to avoid promoting products with low-stock variants, a product marketing platform enables marketers to create more precise, data-driven campaigns.

A single source of truth


Product marketing platforms can also connect the data they organise to campaign creation tools. Additional layers of execution built on top of the insights (a photoshop-style template editor, and a tool to turn images into product videos) makes the deployment of dynamic ads on a large scale simpler and more effective, while the data behind those ads helps bring in higher returns.

As competition rises, regulations continue to limit the usage of customer data, and consumers tighten their purse strings due to rapidly rising inflation, digital marketers can’t afford to simply stand still. With marketing budgets often the first to be cut when times get tough, demonstrating value and return on investment is critical.

Digital marketers need to deliver more effective and targeted advertisements, across the right channels, promoting the right product, and this will ultimately come down to the ability to unlock and leverage useful data. Without this data to inform their campaigns, marketers will continue to make the same mistakes, continue to overspend on products that are bringing in little revenue, and continue to underspend on their products with true, data-driven potential.

A wealth of actionable insights are within easy reach through untapped product data which, unlike customer data, is not affected by regulations. However, many are simply unaware of what is possible.

In the same way that CRM influenced relationship marketing, product data will transform digital advertising and promotional planning, enabling digital marketers to allocate budgets efficiently and achieve a better return on investment. 

But the first step is collecting and collating cross-channel product data to inform performance. By using a product marketing platform to provide a single source of truth, and collate insights in one location, digital marketers can deliver more cost-effective and impactful digital marketing campaigns with a demonstrable benefit on the bottom line.

By Karel Schindler, CEO at ROI Hunter
Header image by Cambridge PJ Matthews


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