In marketing, waste is often a silent killer because it prevents businesses from achieving their true growth potential without them even noticing it.
When waste occurs in marketing, the business not only loses money from the marketing expense, it also loses the money it would’ve made from the increase in sales – had the marketing efforts been effective.
This blog will help you identify waste in your marketing budget, so your marketing team can put the dollars to better use, achieve your growth potential, and avoid losing money!
Note: When we talk about waste as it relates to your marketing budget, we know we’re talking about monetary waste. However, it’s important to also consider time spent by staff or the business owner on marketing efforts since time has monetary value.
Audit Your Marketing System
Waste flows like water – sometimes it trickles and sometimes it pours, but the end result is always the same if it goes unchecked.
Conducting a full audit of your marketing system with a focus on waste will allow you to find small cracks or large holes in your system that might be contributing to a leaky marketing budget.
Before we dive into how to conduct the audit, it’s important to note that this audit assumes you already have proper tracking set up across all your advertising campaigns and marketing channels.
Here’s how to conduct the marketing system audit.
Channels
List all the marketing channels you are using for the year.
Here’s a list of channels that might be a part of your system:
Website
Social Media Ads (Paid)
Search Engine Ads (Google and Bing)
Email Marketing (Newsletters, eblasts, automations, etc.)
Direct Mail
Media Placements (Magazines, Journals, Commercials, Billboards, etc.)
Public Relations
Events (Conventions, Networking Events, Seminars, Webinars, etc.)
Social Media Pages (Unpaid)
Campaigns
Drive a little deeper into the list of channels you created by listing out the different campaigns your business is running within each channel.
For example: Your business might be running an awareness campaign via Facebook ads and two lead generation campaigns via Google ads.
This will seem tedious, but be as detailed as possible as you list all the different campaigns.
Cost
Now that you’ve identified all of your marketing channels and the various campaigns associated with them, you can start to pull in cost data.
List how much money your business has spent on each campaign. As we mentioned earlier, be sure to translate time spent by staff or the business owner on each campaign into dollar amounts, and add them to the campaign costs.
Note: The cost of time spent on marketing activities by staff or the business owner is usually not factored into the general marketing budget, so it’s important that you remove them if you reconcile your actual marketing budget with the cost of your marketing activities.
After listing the costs of each campaign, you can then total the campaign costs to determine the cost of each marketing channel.
When totaling your costs, you can easily see which campaigns and marketing channels consume the majority of your budget.
This will come in handy when you start to search for marketing activities that might be wasting your marketing budget.
Revenue
This is where your audit will begin to show you the true value of your campaigns and marketing channels.
We recognize the difficulty in attributing a dollar amount to each advertising campaign, especially if they do not generate sales directly, but we ask that you do the best you can.
When attaching revenue to advertising campaigns, it helps to define the value of a conversion first. Depending on the campaign, value might be defined as the “average revenue generated from a sale,” the “average customer lifetime value,” or some other metric.
For example: You might define the value of a Google ad campaign used to generate leads as the average customer lifetime value since the purpose of the campaign is to bring in new customers. However, you might define the value of an email marketing campaign used to upsell current customers as the average revenue generated from a sale.
Depending on your campaign, a conversion might be defined as a form submission, quote request, call, download, video view, newsletter or webinar sign-up, etc.
You might’ve realized that most of your campaign conversions aren’t direct sales. This is why it’s important to calculate the value of a conversion as it relates to sales or customer lifetime value.
To calculate the value of a conversion for a given campaign, you need to determine the average percent of conversions from the campaign that result in a sale or new customer acquisition. You’ll then multiply that percentage by the value you defined for that campaign.
For example: Your business is running an ad campaign that is gathering sign ups for your email newsletter. You know that on average 10 percent of people (every 1 in 10) who sign up for your newsletter become a customer with a lifetime value of $2,000. To calculate the value of your campaign’s conversion, you would multiply $2,000 by 10 percent to get $200.
Once you’ve determined the value of a conversion for each campaign, you can calculate the overall value of each campaign by multiplying the conversion value by the total number of conversions each campaign has generated.
This will give you a good estimate of how much revenue each campaign is responsible for generating.
You can also determine the value of each marketing channel by totaling the value generated from associated campaigns.
Compare and Contrast
At this point, you’ve calculated the costs associated with each advertising campaign and marketing channel as well as the estimated revenue they’ve generated.
You can already begin to identify areas of waste in your budget by comparing a campaign or channel's cost with the estimated revenue it has generated.
If the cost outweighs the revenue for a campaign, you should place it under more scrutiny, consider its termination, or identify ways to improve it.
Note: It’s important to consider the connectivity between campaigns and the role each campaign plays in your overall marketing system as you evaluate each campaign. This will help you avoid terminating a campaign that plays a critical role in generating sales or new business.
For example: Your business might use a Facebook ad campaign specifically to generate website visitors. Your business might then run retargeting ad campaigns through Facebook and Google to encourage form submissions for quotes.
If your cost vs revenue analysis leads you to terminate the Facebook campaign that generates website visitors, your whole system will fail because you’ll no longer have a campaign that supplies your other campaigns with people to target.
Calculating the value of a conversion for each campaign should also help this issue from occurring. Bottom line is that you need to be sure your campaign isn’t generating unrecognized value before you decide to terminate it.
Take a Deeper Look at Your Campaigns
Since you’ve calculated the cost of each campaign, you can easily see which campaigns use up a lot of your budget.
Even if the estimated revenues they generate outweigh their costs, you can still evaluate them to determine if they are wasting money.
Waste from a valuable campaign often occurs because the campaign needs a few adjustments to make it perform better (optimization).
Ad campaigns on search engines like Google and Bing are often the source of budget waste even if they are generating a ton of value for a business. This is because they might show for keywords that are unrelated to what your business offers or that are too expensive.
You will need to look into the keyword analytics to determine whether your search campaigns are wasting money on irrelevant or expensive keywords.
Social media ads can present similar issues with audiences rather than keywords. Sometimes you can target a different audience and get the same results with less ad spend.
Note: It’s important to have a professional take a deeper look at your campaigns and to implement the optimization adjustments if you are not experienced with the ad platform. It’s easy to ruin a good campaign by making what seems to be “minor” adjustments.
It’s a Lot of Work
It takes quite a bit of work to identify areas of waste in a marketing budget, but it’s definitely worth it, especially if you’re spending thousands of dollars on marketing.
This is even a good exercise for those who aren’t concerned about marketing waste because it gives you a good picture of how much each campaign and marketing channel contributes to the bottom line.
If you want to audit your marketing system, but don’t have the time, please consider Forge Marketing Group to perform it for you. Click here to request a quote and timeline.