Re-thinking how to allocate marketing spend to avoid channel over-reliance

By Suzanne Kuhl, Director of Marketing

Apple privacy, increased ad costs, homogenous spending and proliferation of smaller, more targeted channels have led marketers to rethink their Facebook spend. Here are some thoughts on how to start the process:

Invest in a multi-channel ad strategy with room to experiment to ensure you won’t fall victim to channel over-reliance and be well prepared to discover and scale new opportunities.

Many Direct-to-Consumer (DTC) brands scaled brand awareness and customers using a playbook that relied heavily on social ads. The original DTC unicorns like Warby Parker, Casper and Allbirds had the advantage of being early adopters of social ads when less competition enabled lower costs and arbitrage opportunities were plentiful.

As both large and emerging brands began to shift more of their marketing dollars to social platforms (Facebook had a 23.8% share of total US digital ad spending in 2021), costs increased significantly making it harder for brands to acquire customers profitably on these channels. In fall of 2021, Apple’s IDFA  introduction impaired digital targeting and tracking capabilities that brands relied on for efficient and measurable social ads. This, combined with other factors, led to a 24% increase in the cost of running ads on Meta properties in 2021. Many brands saw the necessity to diversify marketing spend and decrease reliance on Facebook. Brands with large marketing budgets have reacted quickly to find new channels and marketing strategies to sustain customer growth while diversification was more difficult for brands with limited marketing budgets and resources to assess and implement effective campaigns in multiple channels.

This is a good lesson for all. Brands should be concerned if they are over-reliant on any one marketing channel. In today’s digital environment, rules can change unexpectedly and a high performing channel can suddenly become ineffective at acquiring enough target customers without a significant bump to ROAS. Managing and optimizing other channels will ensure you always have alternate viable paths for new customer growth. Earmarking 10-20% of your budget to test new channels is wise and will help to monitor and identify the highest opportunity channels to invest in and scale. 

Where are marketing dollars shifting to diversify customer acquisition channels? 

Social Diversification

The need to find new ways to engage social audiences beyond Facebook and Instagram ads has motivated brands to invest more in newer social channels such as TikTok (highest user growth of all social platforms) and Pinterest (high intent for discovery) and continue to build their influencer marketing muscle. Micro-influencer campaigns have worked well for brands like Glossier while celebrity influencer campaigns have been a homerun for Gap and Athleta. Live shopping within a social platform (or within your owned properties) is another type of activation brands are experimenting with to grow new audiences as well as engage current customers in new ways. 

Other Digital Opportunities

Digital audio (podcasts and streaming for music and radio) had the largest year-over-year growth rate compared to streaming video and social media advertising. Advertisers have followed the boom of digital audio podcasts and increased investment to reach highly targeted and engaged audiences (55% YOY growth in 2021 ad revenue). Youtube continues to be a valued channel to reach a broad audience but notably has had disappointing YOY growth in ad revenue in recent months partly because its targeting capabilities were also harmed by Apple’s data limits.

Search

Product search trends are continuing to shift towards marketplaces. Over half of product searches start on Amazon vs 23% through a search engine like google. Both Amazon (if your brand is available for purchase there) and Google search ads should be considered for a comprehensive search strategy.

Retail Marketing

Retail marketing has also become a more relevant channel as more DTC brands shift to multi-channel retail and look to retail partners to help grow customers and revenue. Brands can invest in ad opportunities in physical and online stores and marketplaces like Walmart, Amazon, and Instacart to boost awareness and conversion to purchase.

Offline

While current growth in digital and alternative media advertising far outpaces traditional advertising growth (12.7% vs 3.3%), offline channels still have the highest overall spend and there has been an increased interest from newer brands to experiment there. Many DTC brands launched campaigns in both linear and connected TV as measuring attribution has improved and it enabled broad reach in target geos. Investment in direct mail has also remained an effective tactic in the DTC marketer’s playbook. Marketers like that it has lookalike modeling and trackable results like digital ads as well as high response rates. Customers like the physical touchpoint and are more likely to notice and respond to a well targeted new buyer offer.

How should a brand with a small marketing budget think about their channel mix?

Experiment often, measure carefully and allocate your resources where you have the best economics- focusing on a few channels at a time. Select 2-3 channels that show the highest return on your time and invested dollars and optimize performance there. Measure the cost of acquisition and most importantly the LTV of the customers that channel brings. Acquiring a quality customer may cost more but pay off in the long run if they have a higher likelihood to become a loyal customer and advocate. Audit your marketing mix monthly or at least quarterly to ensure it is continuously optimized. Customer behavior and preferences change often and you want to be sure to adapt your messaging, media formats and channels regularly to optimize performance. Invest in testing new content and channels as additional resources and budget allow.

Utilizing multiple online and offline marketing communications channels to target and engage prospect customers provides diversification and reduced risk to your marketing goals if one channel becomes ineffective. Multiple touchpoints can also help reduce audience fatigue and ensure you are reaching customers in their preferred channels. Just be sure to apply a highly integrated omnichannel marketing strategy that feels seamless to your prospect customer.

Want to learn more about KMG’s digital test and learn sprint? We’d love to talk.