You’re wasting your marketing budget

Marketing teams are wasting part of their marketing budget— or at least, that was our hypothesis going into episode eight of our video series, The Hypothesis. In this episode, we define waste vs learning, why trusting automation too heavily leads to more waste, how the wrong KPI’s and targets incentivize waste, and more. Watch the full video below or listen to the episode here to get this conversation in its entirety. More of a skimmer? Keep reading for our top takeaways.

Top takeaways from this episode 

What do we mean by marketing budget waste?

• It’s important to understand that some waste is inevitable in marketing. As marketers, we don’t expect every impression in digital advertising needs to be doing some kind of heavy lifting. There's a certain amount of waste just in the distribution of ads on the internet, of bot traffic, of wasted clicks, of noise and waste in the system itself. 
• We also like to differentiate between legitimate wasted spend and money spent learning. Learning meaning spending where the outcome was less profitable or efficient than you hoped, but there was still some value because you learned something about your marketing program or your targeting. Learning can take the shape of intentional experimentation and tests. 
• There are two main, contributing factors of waste (that go hand in hand):
  • 1) Too much trust in the recommendations of systems and vendors who don’t have the same objectives as you (for example, Google wants vs. Meta).
  • 2) Oversimplying marketing goals.
  • These factors work together to cause scenarios like overspending in channels or tactics because they appear to be performing, but only because other indicators of success (or failure) like traffic quality, diminishing returns, incremental value, or business growth are being ignored.

How and where are marketers wasting budget?

• A lot of marketers are incentivized to optimize for specific metrics that don’t help them meet their goals and end up overspending to meet those arbitrary goals.
• When leadership teams get too focused on measuring absolutely every portion of the advertising program, those incentives cause a race to the bottom pushing all of the ad dollars into engaging with pre-existing customers or prospects already interacting with their brand. Why? Performance is stronger and there’s less evidence of inefficiency. But the attributed numbers in your reports are higher than the true impact driven towards the business. So in this race to the bottom, you end up actually wasting dollars because you’re trying to make the report look positive.

What tools or processes are useful to reduce or identify wasteful spending?

• Measurement is crucial for detecting overspending and determining where to cut back or scale up.
• Geolift and conversion lift testing help us assess the profitability of current channels.
• Marketers must be analytical and concerned with wasted spend, applying curiosity to their campaigns.
• Running scripts can reveal where dollars are spent and if Performance Max campaigns are duplicating search campaigns.
• Check what available insights advertising platforms offer, including: wasted spend, audience overlaps, incremental reach, placements and frequency of ads.
• Modern platforms are machine-driven and optimized to focus on one signal at the expense of others which can increase waste, or pull focus away from valuable future customers. It's vital to explore and validate other success signals tied to the health of your program and business growth, beyond just return on ad spend (ROAS) targets.