November 21, 2022
    Reding_icon 5 MINUTE READ

    BRAND DAY, Episode 15:

    What's Your ROAS (Return On Ad Spend?)

    Empower and Amplify Your Marketing to Make Your Dollars Work Harder for You

    Talk of a recession seems like it's everywhere. Many people are preaching the importance of continuing to spend on advertising, even in a market downturn. One researcher said that 95% of marketers are planning on increasing their budgets (webinar, Gumgum, 2022). 

    But the question remains: spend on what? The same thing you've been doing? 

    A perfect storm of challenges to online advertising has been brewing, the effects of which will be felt particularly strongly over the next few years. Digital marketers and business owners relying on online advertising need to rethink their budget allocations to take these challenges into account, as well as to tap into the opportunities they present.

    What Digital Marketers Are Afraid Of

    Most marketers are focused on performance marketing - campaigns that are meant to generate direct consumer action. Audience targeting and attribution (attaching dollars spent to results, such as impressions or engagement) drive budget allocation, media choices, and more. 

    But attribution-driven advertising campaigns are facing a world of trouble:

    • CPMs (cost per thousand impressions) are rising- in Q2 2022 they were 27% up over Q2 2021

    • Meanwhile, click-through rates are down - in the US, they dropped 29% year-over-year from 2021 to 2022  

    • Consumers are increasingly concerned about online privacy and how their information is being used
    • Which has led to changes such as GDPR regulations in Europe 

    • As well as Apple's iOS 14 update, which allows users to opt out of having their data tracked, and is dramatically reducing the effectiveness of tracking user behavior online
    • And Google's promise to phase out 3rd-party cookies in 2024, which will further restrict advertisers' ability to track data across websites
    • To add to the frustration, consumers are paying less attention to online ads than ever; referred to as "banner blindness," this growing trend was exacerbated by the pandemic, after which many people have expressed a desire to minimize their screen time

    • Supply chain challenges and record high inflation compound the problem 

    • Finally, the looming recession has already seen consumers tightening belts and reducing expenditures (54% of respondents in a July, 2022 survey reported they were planning to restrict spending through the rest of 2022; source: webinar, Gumgum, 2022)

    In summary, online advertising is getting more costly and less effective. 

    To reinforce this idea, speaker and author Andrew Davis  tells of a study that set out to test the effectiveness of online ads. A blank ad achieved a 60% higher click-through rate than the normal Facebook ad used as a control, and doubled the click-through rate of the control banner ad. The researchers concluded that as much as 44% of all clicks on online ads were by mistake. 

    So, if performance marketing isn't having its greatest day, what's the solution? 

    Brand Marketing Makes a Comeback 

    In a quote from the Gumgum webinar referenced above, the speaker said that "we become so laser focused on efficiency and proving that direct attribution you're talking about that we lose the impact that the brand can have on culture."

    As performance marketing gets harder and recession looms closer, companies are turning back to brand marketing. Why? 

    First, let's distinguish between brand marketing and performance marketing. 

    While performance marketing is geared towards driving direct consumer action, such as engagement, clicks, signups, and sales, brand marketing has two very different objectives. First, it seeks to shape the perception that consumers have of your business. Second, it works to keep your business fresh in the minds of your customers so they continue to think of you first when they need what you offer. 

    Noticeably, brand marketing doesn't carry the attribution and targeting abilities of performance marketing. (Although this is changing with some formats of broadcast advertising, such as connected TV and digital forms of out-of-home advertising. Targeting and tracking capabilities are quickly catching up to online advertising, especially once 3rd-party cookies go away.)

    This isn't to say that there's no way to track the results from a brand awareness campaign. From before and after recall surveys to an increase in foot or web traffic to a rise in search traffic looking up your business' name, you can approximately measure the lift in the public's awareness of your brand. 

    But it's definitely not as straightforward as performance marketing. So why focus on it during a downturn, when your business is hurting for sales? 

    The Snowball Effect

    Airbnb is leading the charge in the switch to brand marketing. In 2021, they
    slashed their ad budgets and reduced their reliance on search engine traffic, and instead began to invest in leveraging the power of their brand. 

    The result? They just announced their most profitable quarter yet, in Q3 2022. CFO Dave Stephenson reported that the company is happy with the return on investment, to the extent that they are expanding their approach across multiple countries. 

    They accomplished this through a mix of public relations and broadcast advertising. 

    This approach is smart. It hits consumers from two angles: on one hand, 3rd-party brand mentions in the media lend credibility to Airbnb, building trust. On the other side, broadcast media give Airbnb a broad voice to communicate their brand messaging, playing off of and reminding consumers of the perception they receive from seeing Airbnb in the media. 

    All of this accumulates to build the "know, like, and trust" factor that is so important for winning over skeptical customers. It associates Airbnb with the idea of "short term rentals," as well as the values they represent. 

    Focusing on brand marketing creates a snowball effect for your business. By keeping your brand front-of-mind for consumers, especially if your competitors aren't showing up in the same way, you build powerful leverage, even if they aren't ready to buy just yet. Because when they are ready, your brand will be the first they think of. 

    It's a long term approach, but one that has an accumulating impact on your brand: as more people get to know you, what you stand for, and how you're different from your competitors, it will get easier and more affordable for your performance marketing to draw ready-to-buy customers in. But it will also prime those customers to become loyal proponents of your business, spreading word of your brand beyond your own marketing efforts. This will then increase the perceived value of your brand to new audiences, who will be more likely to become customers than if they'd simply experienced your performance marketing alone. 

    Wrapping It Up

    By thinking a little less about return on ad spend (ROAS) and more about gradually building mindshare amongst your target audience, especially during any emerging recession, you put your business in a place for long term growth and sustainability. 

    Going deep to increase the perceived value of your brand, through the added credibility of PR and the messaging impact of broadcast advertising, gives you a solid foundation from which your performance marketing can deliver better results at a lower cost. Consider how you can integrate these two approaches in 2023 to empower and amplify your marketing.