Are You Segmenting Your Marketing Campaigns to Death?

“Half the money I spend on advertising is wasted; the trouble is I don’t know which half.”

In the early 1900′s, department store merchant John Wanamaker didn’t have access to web analytics to be able to calculate an ROI on various marketing activities like we do today. While data-driven decisions are better than none, data can be dangerous.

At an ecommerce conference last week, one of the speakers gave some data analysis advice that I’ve heard over and over from countless sources. It goes a little something like this: “If you see that email marketing has a high ROI and affiliate has low ROI, funnel more dollars into your email campaign.”

In other words, use web analytics to segment marketing campaign data in order to see “which half is working” and starve the channels that ain’t. Is this sound advice?

Let’s throw some arbitrary numbers around. How about…email ROI is 255% on a budget of $5,000 per month, and affiliate ROI is a measly 9% on the same budget of $5,000.

Diminishing returns. Investing more dollars in any marketing program will eventually reach the point of diminishing returns, when each additional dollar brings in less incremental return. It can even start to decline. For example, does investing more in email mean hiring more people to create more campaigns and mailing more frequently? Over-sending could cause a spike in unsubscribes and ultimately hurt your campaign.

Crisitunity. What if affiliate ROI is poor, not because it converts poorly across the board, but because there are inefficiencies in your current program? Is it time to re-visit commission structure? Are your promotions optimal? Is your attribution system working? Do you have a problem with affiliate “parasites”? Would using the money you are tempted to throw into more email marketing be better used to hire a consultant turn the ship around?

You may be in the unfortunate position where it’s not a question of what channel to move dollars to – it’s what channel to sacrifice to fit a tighter budget. It’s tempting to simply chop the laggard because the data says it’s a “dog.” But as Henry Ford said, “a man who stops advertising to save money is like a man who stops a clock to save time.” Reducing marketing spend will likely result in revenue loss. Explore your options and opportunities to optimize a floundering campaign (low cost and no cost) before killing it off.

Looking for help with your ecommerce strategy and site optimization? The Elastic Path research and consulting division is available to enterprises selling digital goods and services. For more information, visit us at http://elasticpath.com/ecommerce-consulting/ or contact us at consulting@elasticpath.com.

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6 Responses to “Are You Segmenting Your Marketing Campaigns to Death?”

  1. I love these two marketing quotes, so classic and with today’s analytics we may be able to see which half is working but how do we really know they haven’t been touched by another channel first (updates to multi channel analytics are helping but we will never really know if people change devices / networks) so we’ll stick with John and Henry’s advice!

  2. Grants says:

    Hi Linda,
    great Post as allways. But still I have some remarks.
    If you say you have a ROI of 255% vs. 9% and start funneling your money towards the one with the higher profitability for me that would make sense even if the returns start dimishing slightly. Compare a 200% ROI on a Budget of 7500 (vs the 9% now with 2500$) Still a pretty good total increase of over 2000$. Of course if by funneling more money into you email campaign will bring the ROI down from 255% to lets say 50% its another scenario….
    keep up the good work!

  3. “If you see that email marketing has a high ROI and affiliate has low ROI, funnel more dollars into your email campaign.” Plain. Simple. Self-explanatory.:)

  4. Good post, but it sounds as if the quote from the conference is simply referring to if the situation is that your budget for email marketing and affiliate is 50/50, so yeah not very helpful if it’s not as in your example with the figures. If they are not equal and one is proving more successful than the other the key is how long do you give it before changing approach, and then how do you change the approach (at which point the unfavoured method of ‘trial and error’ springs to mind). Keeping with the quote theme, Mr D Trotter “He who dares wins”

  5. Nick Doran says:

    The problem with this approach is that is doesn’t take into account the connection between all marketing efforts and the various paths to conversion these create.

    What if the affiliate program is integral in driving email conversions? It may not drive sales directly, but drives visitors to your site who then sign up for email. Reducing the affiliate budget could have a direct impact on the ROI of your email program by reducing acquisition.

    Before reducing or increase budget on any campaign or channel, I’d suggest marketeers ensure they understand how all these channels fit together. As a bonus, this approach will likely lead to a huge change in the marketing messages you employ in each channel: if affiliates drive email signups, which drive sales, make sure your affiliate program and website optimise email signup. Simples!

  6. I think taking the idea at face value (starve the channels that aren’t providing acceptable ROI) is oversimplifying the task. As others have mentioned, you have to examine WHY the other channels are not performing and if they can be optimized to provide better return.

    However, having said that, and if the proper precautions are taken, you do need to realistically look at where you are focusing the bulk of your budget and go where the ROI is best for you or your client. Constant evaluation of processes is essential.

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