Traditionally, the key areas of focus with paid media have been scale and growth. Whilst there is of course absolutely nothing wrong with this, as we find ourselves in economically challenging times, this can mean a shift in focus.
The problem with focusing purely on scale is that often profitability and margins can be a secondary thought. Whilst good advertisers should and do always keep an eye on profitability, how should your approach to paid media and performance marketing shift if this becomes your primary focus?
Thankfully the tools we have available to us are numerous, meaning that there are a number of levers we can use to focus more on driving margins than purely driving scale.
One of the first steps though is to be clear if your priority has changed. Far too often, one of the biggest issues we see is that brands attempt to achieve a number of headline goals at the same time, and often these conflict. If improving margins is your number one goal, make sure everyone knows this.
So what can you do to start working towards improved margins from your performance marketing efforts?
Product Feed
One of the first things you should do is take a look at your product feeds and ensure you have custom labels / values included for margin classification. You don’t have to be 100% specific, but even having labels for ‘high margin’, ‘mid margin’ and ‘low margin’ products means you can start to split your products out accordingly.
For example, if you are running Shopping campaigns in Google Ads, you can now prioritise spend towards your higher margin products and cut out the lower margin products from your campaigns.
The key point with taking this step is gaining control over your product feed and giving yourself the ability to manage your spend against margin.
Product Sets - Social
When it comes to paid social, the theory is the same. Once you have margin data in your product feed, you can start to split your campaigns out with a focus on margin.
The mechanism for doing this in Meta Ads is the ‘product set’ feature within the commerce manager.
As an advertiser you can create product sets based on either selecting specific products (which is a very manual process), or by using data within your product feed. By adding in margin categorisation, you can then easily create and run product sets where an acceptable margin can be achieved.
Removing Non Sellers
On a similar note to the above, you also need to be aware of what products within your feed are taking spend, vs what products in your feed are actually generating revenue.
With both Google and Meta’s continued move towards AI and their ability to optimise ad delivery towards what’s selling, it’s often assumed that the platforms will take care of this. However, in the majority of cases there is always a percentage of products that take up valuable spend, without generating a positive return.
Once armed with this information you then have the ability to ensure 100% of your budget gets directed at products with the very best chance of generating revenue. Spend more on what’s working and cut what’s not. Simple!
Cutting Wasted Spend
You also need to take a look at campaign spread and identify areas of in-efficiency. By calculating margins into your ROAS figures, you should be able to quickly pull out profitable campaigns vs. campaigns that are loss making.
The word of warning here is that you have to consider the bigger picture. What you absolutely don’t want to do is cut out campaigns that on the surface have a lower profitability, but are actually generating strong demand and driving new customers into higher performing campaigns further down the funnel.
This will clearly vary on a case by case basis, but building out good attribution models and a clear understanding of your customer journey is vital as part of this decision making process.
Platform Focus
When you’re pushing for growth, it pays to explore every possible opportunity and experiment with multiple platforms.
When you’re aiming for maximum spend efficiency (AKA margin), then scaling back efforts to only your strongest performing platforms is a very sensible thing to do.
Firstly, this enables you to make sure spend is being focused on what’s working and driving the best margins. Secondly, the management time is greatly reduced, the required volume of content is far less, and so there are a lot of other knock-on savings you can make by doing this.
I very much hope the above has been useful food for thought should you find yourself in a position where driving improved margins becomes your priority.
Meet our guest author Jon Quinton
Jon Quinton is the founder of performance marketing agency Overdrive Digital, specialising in helping brands improve their returns from PPC and paid social.
Main Image Credit: Towfiqu Barbhuiya
