Cutting Ad Spend Costs? Use a Scalpel, not a Machete

by Wiz

According to data recently released by Kantar Media, overall ad spending in the US essentially held steady the July-September 2011 time frame (as compared to the previous three months). Of this, however, internet media spending (which includes display and paid search ads) declined 2.9% in that same period. Even more noteworthy: paid search spend by itself dropped 14.4%.

Ad Spend Growth Q3 2011It’s too soon to tell if this is a temporary thing, or the harbinger of something to come. However, one thing’s for certain: advertisers – including b2b advertisers – are in full cost cutting mode.

However, before you start “hackin’ and slashin'” your ad campaign budgets, lay the machete down and pick up the scalpel. A little tactical cutting here and there may drop costs noticeably without necessarily reducing sales and/or leads.

Here are four key areas that are candidates for such surgery:

1. Review your paid search campaign performance.
Look at the metrics of each of your campaigns. Identify those campaigns with low conversion rates, high costs per sale/lead, and high overall cost. Look at the keywords that you’re bidding on in those campaigns, and note candidates for pausing or reducing bids. Then look at the actual search terms that are triggering your ads, marking any terms that either need to be “negatived out” or placed in a separate group. Spending time in these reports will give you a good feel for where your money is currently going – allowing you to redirect cash flow to those areas that are most productive.

2. Review your paid search creative.
Look at the performance of each individual ad. Look for those ads that: a) are not getting clicked; and b) are clicked but are not converting. Drop the ads with no clicks – they’re not costing you anything, but they’re not bringing in new business, either. Ads with clicks but no conversions need pausing until you can study why they’re not working. Then add a new series of fresh creative to test against the winners. Testing new ads and retiring old ones should always be a priority, no matter the economic climate. As a friend of mine says, “Even the best marketers in the world are wrong more often than they’re right.”

3. Review your landing page metrics.
This next one applies to all your advertising, not just paid search: evaluate the performance of your landing pages. Total sales, conversion rate and cost per sale/lead are key indicators here. If you’re testing multiple versions of your pages (hopefully you are), check to see if you have enough data to call a “winner”, and then set up a new test. (Note – don’t stop testing on the grounds of “saving money”. If budgets are tightening, then send a smaller portion of your traffic to the “test” page.)

4. Evaluate your ad spend by marketing channel.
Finally, on a more strategic level, this is a good time to be evaluating the effectiveness and performance of all your advertising channels and comparing them to each other. These might include:
– paid search:
+ Google AdWords;
+ MSN/Bing search;
+ social media (LinkedIn ads, Twitter promoted tweets, Facebook ads, etc.)
+ others;
– email marketing
– natural search
– affiliate marketing
– other direct marketing

Review the figures for total sales/leads, total costs, conversion rates, and profits. After going through all these, you’ll have enough information to rank each channel in order of descending performance. Once this is done, you’ll have a much clearer idea about where to focus your efforts. You may want to pause the lower-ranked channels while you’re using your scalpel on the others.

Cost-cutting is always a priority, but it gets much more attention during times of economic uncertainty. The key is not to react out of fear, but rather review the metrics and make decisions dispassionately. You may find that a certain amount of surgical cutting goes a long way toward bringing costs back in line.

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