Search or social? TV or radio? Desktop or mobile? Today’s retailers are faced with an ever-increasing number of marketing options that make effective budget allocation a complex equation.
As marketing opportunities fragment across multiple platforms, channels, and devices, retail marketers need to make budgets work harder. As well as setting initial spend levels, budgets also need to be adjusted in response to internal or external factors, such as special promotions, competitive activities and changes in consumer behaviour. But this is problematic if marketers don’t understand the true impact of their activities on the bottom line.
According to a recent study, the majority of marketers are not confident they’re spending budgets effectively, with only a third (36%) believing campaigns are reaching the right audiences. What’s more, 35% are struggling to track online versus offline spend, and 23% are failing to track campaign spend in any form. Almost half (47%) of CMOs are using basic methods to determine budgets, such as following the previous year’s financial plan and applying a simple increase or decrease.
To predict the future performance of marketing tactics, effectively allocate spend, and coordinate messages and experiences across online and offline channels, retail marketers must be able to precisely measure the impact of marketing activities and use the resulting insights to make smarter spend decisions. So how can retail marketers increase confidence in budget allocation?
Align in-house teams
As new marketing channels and media types emerge, retailers tend to set up distinct teams to manage them with their own budgets, key performance indicators (KPIs), and technologies. This situation inevitably leads to marketing data being collected and stored in siloes, with a strong chance of duplication, making it difficult to gain an accurate and comprehensive view of performance across all channels. Retailers may also have layers of managers and specialists managing spend for different channels, as well as multiple agency and vendor relationships, with different roles requiring varying levels of insight.
To truly understand marketing performance and allocate budgets effectively, retailers must break down the siloes and move towards a data source that offers a holistic view of performance and makes it possible for everyone to work towards shared goals.
Apply a data-driven strategy
Marketers need accurate and timely performance insights to help them allocate budget. Analytical models such as marketing mix modelling (MMM) or multi-touch attribution (MTA) can show which areas are driving results and where marketing spend should be directed. Retailers can use either of these methods to gain a deeper understanding of marketing effectiveness.
Marketing mix modelling uses summary level data to measure the effectiveness of both online and offline channels, while accounting for external factors such as interest rates and the time of year. It looks at the historical relationships between marketing spend and business performance in order to determine business drivers, so retail marketers can allocate budget effectively across products, markets and marketing programmes.
MTA tracks and de-duplicates the consumer journey across channels, and devices using an anonymous and unique identifier. It then assigns credit for specific KPIs to individual marketing touchpoints. MTA models can be rebuilt daily, allowing marketers to understand the effectiveness of marketing tactics at a highly granular level and optimise campaigns while they are still in-flight.
While there isn’t a one-size-fits-all strategy for measurement and optimisation, retail marketers that rely on both online and offline channels can benefit from both methods of analysis. When used in tandem for a holistic approach to measurement, marketers can make a broad array of strategic and tactical decisions to maximise efficiency and effectiveness across their entire marketing portfolio.
Employ scenario planning
Scenario planning is a vital part of smart budget allocation, allowing retail marketers to run simulations of multiple spend scenarios. Using predictive analytics, scenario planning tools forecast the outcome of different spend levels in a safe, virtual environment.
Scenarios can be based on either specific direct response goals such as online and call centre sales, or on brand marketing KPIs such as landing page visits and video views. The ability to model the future implications of spend allocation before putting it into market gives retail marketers the confidence to make real-life budgeting decisions, especially when business leaders want accountability and assurance that every area of marketing investment is contributing to long-term profitable growth.
As new marketing channels and media types continue to emerge, allocating budget isn’t going to get any simpler. But by aligning internal teams, employing a data-driven strategy, and making the most of scenario planning, retail marketers can gain the confidence to effectively allocate and refine budgets to achieve maximum ROI and success on the bottom line.