Each month until the end of the year, this series will guide you through performance planning and budget optimisation.
If you’ve read the first instalment of this Performance Planning series and chosen to play along at home, you’ll already have a table to hand including your planned performance and budget by channel or platform (however you segment your budgets and projections). It should look a bit like this:
Now that we’re well into the year, we’ll have our performance data to hand, whether direct from the engines (e.g. Google, Facebook), from our media partners (managed services or partnerships), or from our own reporting platforms (dashboards).
Wherever your ‘actual’ numbers come from, these figures need to be collated next to your planned figures.
The resulting table will look something like this:
Let’s colour code our phasing table to make it a little easier to pull out insights and actions and avoid ‘analysis paralysis’:
Red: Significantly below target (Requires immediate action)
Orange: Marginally below target (May require action)
Green: Meets or exceeds target (No action may be required)
For red and orange rows
For rows which are underperforming against target, we have two questions we need to answer:
- Is the media activity still commercially viable at our actual CPA? (We wanted a CPA of £60 for social; if we exceed this CPA to the extent that we have, does we still make any margin on that conversion, or are we at a net loss as we’ve spent too much on marketing for a lower-than-expected volume of conversions).
- Are there optimisations that can be made within the channel that could decrease this CPA within the existing budget allocation? (Narrowing match types on search, amending audience targeting or creative in social, pausing a 30-second video in favour of the 15-second video).
Here are the actions to take based on these factors: (Remember your Punnett Squares from Biology?)
- If the CPA remains profitable (even below the target) and there are opportunities to optimise within the channel, these optimisations should be made within the original budget allocation to bring your CPA down towards your target
- If the CPA is so high we’re operating at a net loss, but there is still some improvements to make within the channel, by all means make these improvements, however consider decreasing your budget until your CPA begins to creep down. This avoids over-investing budget into a channel that’s not working at it’s best
- If the CPA is profitable and there are no optimisations possible within the channel, consider decreasing your budget if you want a CPA more in line with target
- If the CPA is unprofitable and there are no opportunities for improvement within the channel, it’s likely the budget estimate for this channel was a little high to start with, so we’ll need tor reign in how much this line is spending.
For green rows
The rows we’ve highlighted in green are the ‘teachers’ pets’ of the plan and unless we’re aiming to cut back on overall marketing spend, the budget we’ve shaved off of the orange and red rows will need to be redistributed to other rows in the plan to end up with the same planned spend you had originally.
The questions we need to answer here are:
- Have we spent all of the budget allocated to this channel?
- Is there headroom to invest more in these channels and stay within CPA target?
The answers will manifest themselves like this:
- If a ‘green’ activity has spent in full and we believe we can receive more conversions within our current plans “if only we had more budget”, increase budget allocation.
- Note: We can only expect a consistent CPA following thus budget upweight if the additional budget is spent on the same tactics. If you change tactic and budget, the CPA should be expected to rise. More on the impact of ‘diminishing returns’ next month…
- If an activity has spent it’s full allocated budget and we feel that’s all we can spend within that activity then no budget change is recommended or necessary. At this stage your budget allocation is tip-top and the focus should switch to improving the unit-cost within this channel to improve cost efficiency within your allocated budget.
- If a planned activity has failed to spend the full budget and we haven’t yet exhausted the channel potential then delivery changes should be made within the platform to encourage an increase in spend. This could include broadening your ad scheduling, increasing your frequency cap, or removing any unnecessary bid constraints.
- If your campaign has failed to spent it’s allocated budget and you feel there are no opportunistic depths yet unplumbed then this budget should be reigned in considerably until optimisations can be made in-platform to improve efficiency, or the ‘sweet spot’ budget is identified (more on this next month…)
Actioning budget changes
If you’re playing along at home, you should now have the following:
- A list of rows that need optimising within the existing allocated budget to improve efficiency
- A list of rows that need budget shaved off as it’s being spent inefficiently with no scope to improve volumes within the channel
- A list of rows that could take more budget and still perform efficiently (whether within target, or over the CPA target but still profitable)
- A list of rows that should be left alone as they have budget allocation appropriate for the performance.
Please note: If you have identified CPA targets based on what the business is ‘comfortable with’ as opposed to what is profitable at a 10% margin’ for example, be prepared to alter your ‘comfort’ level based on performance, lest you find yourself chasing a £2.50 CPA you will never achieve.
Until next time
At this stage in the year we’re using early findings to fine-tune our planned budgets (and manage and expectations!) so we can re-plan at the end of Q1. To prepare ourselves for ‘The Big Q2 Re-Plan’ we need to have actioned our early learnings and gained enough data to decide whether our early budget re-allocations have had the desired effect.
Your to-do list for this month:
- Remove budget from under-performing campaigns which cannot be optimised for improved efficiency
- Re-allocated budget to over-performing campaigns to see how much more we can squeeze out of that planned activity
- Optimise campaigns which are only slightly under-performing*
When we re-group in March, we’ll review the impact these changes have had on our performance to inform next quarter. We’ll also be talking about how to spot diminishing returns and find the ‘sweet-spot’ for each of your activities.