“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 firstname.lastname@example.org.