Startups Stack Exchange Archive

For a poor performing media channel, how to decide between increasing ad buy or pulling out?

• posted by: RyanFromGDSE on 2017-07-08
• tagged: marketing, advertising
• score: 3

Some of our ad buys are getting little to no traction in the desired market. There are however no real alternatives to reach our target audience in that same market either.

I can reallocate those funds for other marketing endeavors or I can double down on them.

Is there any methodology besides trial and error that could determine at what point to just give up on a particular channel?

Answer 12976

• posted by: Denis de Bernardy on 2017-07-08
• score: 3

The main thing to be aware of when buying ads is to avoid falling into the sunk cost trap.

A real life example of the sunk cost trap would be when you’re waiting for a bus in the good old days when no one had smart phones or live updates on ETAs. You could potentially sit at the bus stop thinking “it’s coming any time now” without knowing that your bus was going to be hours late owing to an accident or something. To avoid the trap you’d want to decide “if a bus isn’t here in 10 min I’ll call a cab” - and actually do so.

Much the same holds with Ads: it’s easy to fall prey to all the money you’ve invested in it already without realizing it could have been better invested elsewhere. So decide on a play budget ahead of time. Evaluate how your media buying is performing as you do, and upon having spent your play budget decide if it’s worth continuing or not.

With this in mind, the key is to track bang for your buck (i.e. revenue earned per expense on ads) rather than vanity metrics like sign ups or sales calls. Good analytics are crucial for this, as is proper segmentation of your acquisition channels. If you’re spending on ads but merely tracking sign-ups or new leads, you can easily end up in a situation where you’re buying worthless clicks without even realizing it. If you know that X of ad spend in a specific channel yields Y profit over a Z period, then you know you can safely spend more on that channel. (Some channels will be more profitable than others of course.)

Another important bit to be wary about is ad fraud. It’s rampant - as in $15B+/year type of rampant. Prefer standalone, independent networks like Google, Facebook, Microsoft, etc. over platforms that dip into RTB exchanges. If you must get into the latter, consider using anti ad fraud technologies: several startups provide such a service to clients with a large enough budget. (If you can’t afford such techs, you can use a proxy of a source’s quality by stripping web sessions that last under 2s out of your analytics. It won’t catch all of the junk traffic, but it’ll usually be good enough.)

Editting to add: much the same applies for offline ads. Basically track everything:

• If the CTA is to give a phone call, use unique extension or number to track your different campaigns.
• If the CTA is to visit a website, use a special url. Throw in a small discount or goodie to incentivize using it if needed.
• If the CTA is to visit a store, throw in a coupon for some kind of discount or special offer or what have you.

And if the ads in question are direct mail campaigns:

• Avoid pre-stamped postage and branded envelopes. Both having someone actually write down the address by hand and slapping an actual stamp translate to higher open rates.
• Consider throwing in something physical (e.g. a plastic poker chip or something) to make your envelope stand out and be even more likely to get opened.
• Mind your copy’s opening sentence - it needs to glue whoever reads it to your copy. (The same for subsequent lines; but the opener is make or break.)

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