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July 9, 2020

How to Get the Biggest Bang for Your Ecommerce Advertising Buck

Executing an effective advertising campaign on Amazon or any ecommerce site has many challenges. In addition to the near impossible task of predicting consumer behavior given the current social and global health crisis, VP’s of Ecommerce and Marketing Directors need to ensure the actual dollars spent on advertising align with the allocated budget goals of their brand. 

Far too often, overspending and underspending occur due to the lack of granular visibility and resulting inability to plan properly.  Like programmatic, fluctuating factors like the bid amount and competitor actions in the marketplace have a direct impact on the amount being spent.  In the end, the actual investment doesn’t always align with the allocated budget. Staying on budget requires granular visibility (at a daily level or by campaign) into the impact of those decisions. 

Without fine-grained visibility and control, it’s impossible to stay on budget. An overly aggressive plan can lead to scenarios where the advertising budget is used up in the first half of the month, and there are no remaining dollars to spend in the latter half when CPCs are lower or during periods of peak consumer demand. Conversely, there are scenarios of underspend, where paradoxically, a brand has the money, they want to spend it on advertising, but they still aren’t buying the ads they need! Advertisers must also take into account different levels of seasonalities, historical campaign spend and demand, campaign performance and events data. 

Creating budget plans and monitoring actual spend in real time are critical.  Having the ability to plot planned and actual spend together, and knowing exactly where the budget is at any given time with respect to plan at multiple levels of granularity is needed. 

Learning from Mistakes:  Connecting Ad Spend to Inventory 

In hindsight, when the pandemic first hit, marketers rushed to pour ad dollars into ecommerce. Brands lost millions in revenue due to out of stock items because their advertising decisions were NOT connected to inventory decisions. Don’t fall into this trap! All of the budget planning in the world will fail if decisions are made in a silo. Advertisers need integrated visibility to ensure they can dynamically move ad spend away from products that are running low in stock and are low margin, and replace them with alternative products that have healthy inventory and profit margins. It’s a challenge many consumer brands have always had with ecommerce and one that has been exacerbated by Coronavirus demand spikes, leaving ecommerce and marketing teams with a more serious problem to fix – the damaging impact on their organic search rankings. Today, in an effort not to repeat the sins of their past, we work with clients of our Advertising Managed Service to apply the practice of using machine learning, analytics and automations to optimize their ecommerce channel across supply chain, marketing and sales operations. This approach is known as ecommerce channel optimization. 

A Word about Metrics: ROAS + SOV

One final word as it relates to budgeting. I would be remiss not to warn advertisers that measuring ecommerce requires more than just optimizing return on advertising spend (ROAS). Using this metric in isolation is a false and misleading measure of a successful ad campaign. Optimizing for Share of Voice (SoV), which ultimately translates to incremental sales and profitable market share growth, is also needed. This involves tracking thousands of constantly changing keywords impacting SoV across retailers and automatically allocating advertising spend to trending keywords with a low share of search. 

In closing, these are exciting times for ecommerce and marketing leaders to take the reins on a new era in advertising. The intersection of ecommerce and advertising is a great place to be. If you’re interested in learning how CommerceIQ can help on your journey, please contact us at sales@commerceiq.ai.

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