How Changing Economic Trends Impact Digital Media – Marketing Science
Kieran Reed is senior marketing manager at Alpha Digital. He specializes in digital marketing strategies that deliver real-world success for marketers, retailers, and even help turn startups into unicorns.
Between further interest rate hikes, inflationempty shelves, sky-high lettuce prices, supply chain issues and unbelievable events in Eastern Europe, the past six months have seen a cacophony of environmental factors.
The ripple effects are everywhere. Marketers appreciate the impact felt on consumers’ wallets, which has helped support the retail sector during the shutdowns. A reduction in discretionary spending will reduce consumers in the market for most sectors. From a digital marketing perspective, we expect competition for keywords in most categories to likely increase accordingly.
Increased competition will drive up the average cost per click (CPC) for advertisers. Under these conditions, sustaining the levels of media performance we have seen over the past 12 months becomes more difficult as paid media costs will increase. We are likely to see a lower return on advertising spend (ROAS) with this increased competition, as evidenced by the fact that some customer sectors have seen branded term costs increase by up to six times.
Advertisers who used to spend $100,000 a month would now have to pay over $800,000 for the same results. In reality, most won’t increase their budget as much and will have to settle for a significantly reduced campaign reach. Conversations around the best approach to paid media have now become a priority.
What to do
The brand has never been more important
When it comes to digital and brand marketing, you will always have a competitive advantage when you focus on your own brand because you should always be the most relevant (think first rank, first page).
If you invest in your brand, more of the market will search for your brand term (demand generation), instead of a broader term, giving you a competitive advantage. Paid search marketing for your own brand will always be cheaper than the competition on industry terms. So if a shopper is searching for “buy Nike shoes online” rather than “buy shoes online”, it’s an advantage for both AdWords bidding and organic ranking and guarantees maximum visibility for this user.
Your CPC will be lower and it will be easier for you to rank higher. So it’s both cheaper and easier.
Focus on capturing market share
This next point is going to be more directed towards challenger brands than market leaders. When the whole cake shrinks, the conditions change.
One way to maintain revenue is to focus efforts on taking market share from competitors. To increase your market share, content efforts (whether on paid, owned or earned media) should focus on your unique selling points within your core group, rather than market fit – why someone should choose your brand over another when there is a purchase intent.
The decision-making process in marketing theory indicates that there are five domains: recognition of needs, search for information, evaluation of alternatives, purchase and post-purchase.
How you do this will vary, but for the most gain for the least investment in a shrinking market, you need to direct your marketing efforts more towards meeting users in finding information and refining your value proposition when evaluating alternatives. Focus on delivering real value to consumers, not just through the product, but through educating and building a relationship with them, allowing you to stand out when users evaluate alternatives.
Invest in your future
The struggle for visibility will continue. And the smartest way to approach it is to focus on your own channels. Organic reach on digital works to give you an edge, without the added costs (i.e. free clicks). And the difference in cost between paid and owned is staggering. In owned media, the cost to reach 100,000 people could be the same as 100 million. Focus on content and relevance and it’s a winning formula.
Clients want to know they’re making the right choice, so educate them on the whole field you work in and you’ll be rewarded. Make all information easy to find for Google and you will also master technical excellence.
Reevaluate your marketing mix
Many organizations still view content generation for owned media as a cost. An expense that requires an initial resource charge. It may be true. But I can tell you from experience that it pays off faster than expected.
In conversations with advertisers, I explain that if you don’t see 50% of revenue coming from organic farming, you’re leaving money on the table. There is no additional cost once the content has been provisioned and it will continue to be delivered with compound interest. Paid media won’t go away, but it will pay less than we’ve seen.
The search for how to manage the known future must begin by focusing on what you can control, your own channels.