A Brief Guide on Media Allocation
1 year YoY decline and it's an off year.
2 years? You're questioning if you actually know what you're doing.
The 3rd year and you're in trouble, and it's time to start paying attention to the details.
1 of those details is media allocation, and 99% of ecommerce brands haven't cared about it the last 4 years.
It was an undetectable issue, but we're seeing the negative effects now.
Brands have died over much smaller things recently.
Plus, BFCM is close and your ad spend is turned up to 11 along with your anxiety.
But do you really know where your dollars are going, or how hard they’re working?
You’d be surprised with how many 7-9 figure orgs don't, so if you're clueless or wanting to learn more - you're in the right place.
This is a primer to help you digest the concept, and guide you toward applying this to your own business.
Media allocation is the process of assigning money to a marketing channel mix with the intent to drive higher revenue or profit.
It is NOT to drive higher in platform ROAS, and you'll learn that higher ROAS sometimes correlates with less revenue and profit in a bit.
Efficiently assigning money to channels and tactics is a critical discipline to master for ecommerce marketers, and the opportunity cost of not doing it well is very high.
First, Let's Identify Your Brand's Media Allocation Type.
There are 3 buckets your brand could be in:
Struggling brands stick to type 1 or 2.
1 & 2 guarantee a race to the bottom unless there's a fundamental change, and it’s HARD to break free from old patterns. But it’s EASY to see what’ll happen if you don’t change.
It's simple:
Not assigning money properly to your market doesn’t bring in new customers efficiently, and returning customers decline as a result. When new customers and returning customers decline, what happens?
...Your brand goes down and to the right.
Aim for 3.
Understanding that your goal is to drive higher revenue or profit for your business by putting dollars in certain places is very freeing, but it's easier said than done.
Why?
Because There's A Diminishing Return on your Ad Spend (DROAS...joking).
Are you noticing how the topic of media allocation is gaining traction recently?
Years of inefficient allocation led many brands down a bad path, and now they’re awake to the mistakes they’ve made. The smart brands, anyway.
Brands are usually heavy MOF | BOF, over-investing on customers ready to purchase.
But, dollars actually work much harder in upper funnel tactics once lower funnel spend is exhausted.
It’s truly a hard concept for brands to grasp for 4 reasons:
Let’s take an example:
If your brand gets a 10X ROAS on retargeting & retention campaigns it’s really easy to invest more into that tactic, right?
Actually, you’re better moving money from a lower funnel tactic towards a higher funnel tactic. It seems backwards, but here's why this works:
Investing too heavily in lower funnel ad tactics diminishes the return of your ad spend because you're spending on customers walking through the door.
It's like a restaurant owner walking out to his own parking lot, greeting people stepping out of their car to eat at his restaurant, saying "hey! would you like to come eat here?". They nicely smile, confused, and walk in the door anyways to eat.
Don’t waste ads on people checking out. Spend money on customers less familiar your brand.
Hear me, though.
I’m not asking you to cut investments from all high 'performing' campaigns across all channels.
I’m telling you to look closely at customer intent and how much you realistically should spend on touchpoints across the buying journey.
Moving money away from high ROAS, high intent tactics is step 1 in the 12 steps of attribution addiction.
But there's a catch.
You Must Graduate from 'Small Lever-Puller Academy' To 'Big-Pulls-University'.
Moving money away from high ROAS tactics creates friction inside people who don’t understand the macro of digital advertising.
The role of marketing is to drive more revenue or profit, but where people get hung up is they believe it should be immediate revenue or profit.
Some tactics drive short timeline revenue. Other's don't.
Let's discuss how you can set this up for your brand, setting goals, and touch on a few points about unit economics.
Attribution is a forever unsolvable puzzle, but for some reason, many operators clench their teeth and white knuckle against this truth.
I simply don’t get it, and I don’t try to.
Because attribution isn’t perfect, and it never has been or will be.
There will always be SaaS, agencies, and brands that believe near perfect attribution is achievable, but the ones failing to admit attribution's flaws set the market back instead of moving it forward.
They beat around the bush on a hard topic, and they’re not addressing core business issues that run through all ecommerce brands.
Don’t look at marketing channels as a way to attribute sales to.
Instead, look at them through the lens of how much revenue they’re contributing to the business.
It’s easier said than done.
You Must Unplug from The Matrix & Set Off-Platform Goals.
The majority of people reading this have an internally set ROAS goal on specific channels, or work with brands who do.
But focusing on platform results to direct your investments kills your ROI.
Say you spend $100 and it brings 10 customers.
The following month you get the bright idea to spend $200 thinking you’ll get 20 customers.
…you get 10 customers again.
Now, you have 2 choices.
Almost every brand or agency chooses #2, not realizing they’re overspending on acquiring customers.
They never think twice about where the line is drawn, and instead judge if the platform result meets their definition of “good” or not.
We’re talking about the law of diminishing returns on ad spend again.
Every brand has a limit whether they admit it or not, and realizing the limit is another critical skill ecommerce operators should know.
We have clients who spends on Amazon to meet certain ROAS numbers.
We encourage them to put LESS MONEY into Amazon because we know the intent of the channel is really high, and and those dollars would be spent elsewhere.
They care about efficient marketing.
So do we.
When our clients pull spend back on Amazon guess what happens? Revenue stays the same, or similar. ROAS goes UP.
But now, they have cash to move into a different channel/tactic.
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Telling a client who cares about efficient marketing to put less money in something that looks to be working is a challenge, but it really comes down to the understanding of incrementality.
In digital advertising, you should care about 1 thing for your business:
Does this channel or tactic drive more revenue for my business that wouldn't have happened if I didn't invest in it?
The rest is noise.
Channel mix and distribution of spend affects your ability to feel the pulse of your spend to revenue.
If your brand only spends on Meta, it’s really easy to compare the attributed revenue that Meta says to your gross revenue for your store.
Introduce another channel like Google, and you’re comparing 2 sets of attributed revenue and you don’t know how far off each one is.
Your channel stack is one of the most important pieces to building (or breaking) your business too, but the complication of attribution vs contribution grows.
What commonly happens is brands will seek an MTA / MMM solution. Sometimes they get multiple in an attempt to triangulate the truth.
What will never ever ever change is your businesses relationship to ad spend to:
So focus on the things you can control and measure, otherwise this gets messy fast.
And if you are ready to focus on the above, then you need to understand your economics.
Because If You Don't Understand Your Unit Economics Then You Will Always Revert To Fake News In Platform Data.
Knowing how much to acquire customers for ties back to your unit economics.
Advertising on multiple channels can really muddy this. Let’s take an example:
Your Facebook attributed metrics:
Your Google attributed metrics:
Your Shopify / Actual Metrics:
If you believe the platforms, you’ll invest more money into Google thinking an $83 CAC is great. That would not only diminish your ad spend, but hurt your contribution margin.
Investing in multiple channels comes with more complexity to how much you’re actually acquiring customers for but at the end of the day, dollars spent to incremental revenue / profit / new customers is the way.
"Setting up a media plan is easy. The difficult part is sticking with it." - Abe Lincoln
It's easy to “buy in” to long term thinking for media allocation, and difficult to not worry and revert to old habits if you see lower in platform results.
The hardest part of trying anything new is sticking with it for longer than a few days.
Here is How To Set Up A Media Plan.
Here's a general idea of how to approach this:
If you want to take this a step further, create a pacing sheet that shows each tactic or channel with planned / actual spend, and the underlying performance results for each tactic.
Doing this allows you to see how each tactic is performing in platform, but the most important of any media plan, pacing sheet, tracking doc, or whatever else is this:
Are you acquiring incremental new customers efficiently?
Like Q4 you typically shift towards lower funnel because of the demand in the market for your products and the high buying intent.
Here's a couple FAQs on media plan docs like the one above:
Do the media plans have to be exact on the CPMs, CTRs, and CVRs?
No, they don't. They are directional at best on what you can expect from a traffic, clicks, and conversions perspective. They can be pretty close though, but don't put your money on this guiding how much traffic and sales to expect. It's good to input L30 data on those KPI lanes to guide how traffic, conversions, and other summary metrics flex up and down though.
I see you only have 3 funnel stages on here, can I have more?
You can make 17 funnel stages if your heart desires. That doesn't matter as much as being able to identify what tactic aligns with where customers are at in the journey. You can typically understand the type of stage the tactic falls within by looking at CPM, CTR, and CVR data, but that's also directional, too. Put the tactic where it makes most sense. Above, I have ASCs in prospecting also knowing that's a full funnel tactic. Side note: TOF - Conversions is not awareness (for all you messed up media buyers out there).
What happens if I change my budget for the month?
This happens all the time with brands we work with. Budgets get cut, or they get newly found $$ they want to use towards the remainder of the month. You can apply the additional budget towards similar allocations, or you can put the additional budget on a new spread with a different intent. Example: one of our clients gave us an additional $250K in spend to be used solely for awareness so that it built up demand for December. They have a very large December goal. So those dollars were earmarked with a specific purpose.
What happens if I can't build a media plan like this?
Nobody can help you, I'm sorry but you need to go back to high school to learn basic computer skills.
Let's talk about money movement across months now.
Market Demand Dictates Your Allocation & Efficiency, Too.
The demand in every market is different every month. Q4 is a high intent period where marketers love to pat themselves on the back and say "yeah, I did that", but marketing efficiency is largely dictated by market demand.
You should move your money accordingly.
Let's take an example.
In September & October, brands will typically shift dollars towards top of funnel tactics to "fill up the bucket" and they wanna cash in November/December.
This isn't every brand, but ones with moderate to short consideration windows this works well.
Your media allocation may look like 5-10% retargeting & retention in any given month, but in November-December it may be 15-25%.
But, if you have an extremely short consideration window and what you sell easily falls within the 'impulse purchase' category then you may benefit from the cost savings of putting $$ higher in the funnel rather than more costly BOF tactics.
My point is this:
Understand the time of year and the demand of the market for what you're selling and how it affects the placement of your money.
I've seen accounts where this is in the campaign name TOF - Conversions.
What do you think is wrong with this?
P.S. if this is your campaign name you need to rethink your definition of awareness.
Bad allocation created big problems for brands over the last 4 years, and the main reason is a lack of understanding of the stages of awareness and how to market to each stage.
Reprogramming The Way You Think About Performance.
The reason we're at this point in ecommerce: learning about incrementality, diminishing returns, and efficiency is because of everyone's misaligned definition of performance.
Ask a performance marketer what their definition of performance is and they'll say in platform ROAS.
Ask a growth marketer and they'll say the same thing (also, let's stop putting slightly different names to the same role.)
Ask a CEO and they care about revenue and profit growth.
Ask a COO and they'll say streamlined operations and efficiency.
This misalignment of the definition of performance drives bad actions.
The problem with marketers today is they optimize all of the above for purchases forgetting that 90%+ of any given market is out of market, meaning they aren't ready to buy and are at different stages of the journey.
Fixing This at Your Organization Takes WORK
These are big topics that require a lot of work to create change within your organization. If I was a CMO of a 8-9 figure brand, this is how I'd approach the above into actionable steps to start creating positive change within my brand with positive long term effects on growth:
Creating organizational processes around profit first comes from macro understanding at the top, and trickles down into the actions of every person who touches marketing. It's a difficult thing to do, but it can be done and many are transformed my the renewing of their marketing minds.
How are you allocating spend across channels and tactics?