As we approach the end of the year, marketing leaders are under pressure to conclude 2023 on a strong note and proactively prepare for 2024. While the new year is still weeks away, planning the budget should not be a last-minute endeavour.
Budgets are created based on company goals, historical data, and forward-looking considerations. However, CMOs are confronted with challenges heading into 2024, including:
- Escalating inflation rates compared to recent years and economic uncertainty.
- The need to achieve more with constrained budgets and workforce.
- Urgency to realize productivity gains promised by AI and other emerging technologies.
- Complications arising from messy data and inadequate measurement, exacerbated by the deprecation of third-party cookies.
According to WARC’s Global Ad Spend Outlook 2023/24, global advertising spending is projected to grow by 8.2% in 2024, surpassing $1 trillion for the first time ever. Despite this optimistic forecast, budget cuts are prevalent, and the competition for ad inventory will persist, leading to increased CPCs and a heightened emphasis on efficiency.
Noteworthy events such as the Summer Olympics and the US presidential election offer opportunities for brands to seize the spotlight. Advertisers are advised to refrain from cutting back on spending, provided they can afford it, and instead capitalize on these high-profile events.
Keeping these considerations in mind, creating the ideal PPC budget should commence with a focus on your targets.
How To Set Your Objectives
To establish attainable goals, begin by focusing on the overarching objectives and then dig into the specifics. Recognize that different channels yield distinct outcomes, needing a collaborative approach across platforms. Targeting, ad formats, and costs per action vary from one platform to another, underscoring the importance of a robust cross-channel strategy to fulfil business goals.
For instance, if the organizational objective is to improve revenue, marketing channels can contribute by:
- Improving efficiency in cost per acquisition to optimize budget utilization.
- Reducing sales cycle durations.
- Amplifying brand awareness and/or competitive distinctiveness.
- Generating higher-value sales.
- Diminishing churn, engaging in upselling with existing customers, and/or elevating the retention rate.
How can each channel leverage its strengths to contribute to these goals? Engage platform managers in brainstorming sessions. Develop a roadmap to maintain clarity on objectives and tactics within the media industry, considering how success metrics may differ across channels.
For example, if the aim is to shorten sales cycles, incorporating additional touchpoints into the buyer journey may be necessary to prompt users to make faster decisions.
Evaluating the Possibilities
Once you’ve established your goals, it’s time to assess the potential outcomes. Tools such as Google Performance can assist in this process. However, evaluating available market share on channels like display, social, and YouTube is more complex. Each channel provides its own performance forecasting tool to give you a rough estimate of the expected return for a specific budget.
For instance, the Google Performance Planner uses a slider to illustrate the potential within existing campaigns. It’s beneficial to compare this with your current or past expenditures.
Consider the amount you’re willing to spend per result. There will inevitably be a point of diminishing returns. How aggressively are you prepared to optimize efficiency?
Evaluating The Media Mix Across Channels
Analyzing the effectiveness of past performance across channels becomes crucial, especially when confronted with budget constraints. While a surface-level assessment might suggest that a channel is underperforming, a more thorough examination could reveal that incremental value has not been fully considered.
For example, although LinkedIn’s cost per lead may appear higher than other advertising channels, it’s essential to consider:
- How does the quality of leads compare?
- Is there brand value in delivering ads to users fitting your desired B2B targeting, even if they’re not yet ready to convert?
- Does this channel exhibit a shorter time from opportunity to closure?
- Does it generate higher-value sales than other channels?
While multitouch attribution is advantageous, it can be intricate. Investing in an attribution tool can provide clarity on which channels perform best and enable informed optimizations. The effectiveness of a marketing team is closely tied to the quality of data-informing campaigns.
Data cleanup is slated to be a top priority in 2024. The adoption of data clean rooms is expected to rise as organizations seek to standardize their data, providing marketers with a singular source of truth for performance. Holding your team accountable for using appropriate tracking measures, such as platform conversion tracking, UTMs, proper CRM routing, and attribution, will be more critical than ever.
Understanding what has proven effective or ineffective in the past guides the development of a cross-channel media mix for the upcoming year. Adjustments should be made as necessary to align with your ROAS (Return on Ad Spend) goals. It’s important to discontinue strategies that aren’t yielding results and reallocate funds where they can generate a more significant impact.
Allocating Budget for Testing
The advertising industry is in a constant state of evolution, with new features regularly emerging for PPC channels.
As advertisers navigate this dynamic environment, it’s prudent to earmark a portion of their budget for testing in the upcoming year, dedicating a minimum of 10-15% of their budget to experimentation. Rather than resorting to last-minute efforts to enhance results, proactive planning for tests can prevent unnecessary scrambling.
When deliberating on a testing budget, consider the sizes of your target audiences:
- Hold-out tests, with smaller sample sizes, don’t necessitate a substantial budget.
- Tests aimed at a broader mass audience require a more substantial budget to achieve statistical significance.
Allow your tests sufficient time and budget to comprehensively grasp the genuine incrementality of the changes being tested.
Projecting Results
Once you’ve assessed the opportunity, established your channel mix, and outlined the tests you intend to conduct, consolidate this information to project the anticipated outcome. Take into account the following factors:
- Historical metrics.
- Variance for potential increases in costs.
- Identifying the point of diminishing returns or market saturation.
- Seasonal trends.
- External changes unrelated to digital advertising (e.g., upcoming product launches, alterations in attribution methods).
While forecasting for new launches can be challenging, many platforms offer forecasting tools based on audience size and budget. Consider integrating historical key performance indicators (KPIs) from comparable campaigns or channels.
Connect with channel representatives to acquire industry or competitor benchmarks, or seek input from your network regarding key performance indicators and prevalent trends. If you collaborate with an advertising agency, rely on them for estimates and valuable industry insights.
Requesting Additional Funds
As discussions about the budget for the upcoming year unfold, make your request for additional funds persuasive. Requesting additional budget entails:
- Mastering the art of storytelling.
- Leveraging historical data.
- Presenting a forecasted return.
- Integrating industry trends.
- Providing competitive insights.
Company executives set objectives, and they may require assistance in comprehending what to anticipate from digital marketing channels and how success is measured. It’s essential to recognize that not everyone in leadership speaks the marketing language, and offering executive-level training can help align expectations.
Construct an executive-level perspective for assessing performance. This approach encourages your team to think on a larger scale and address the varied questions that matter to the C-suite.
Decision-makers need to grasp the reasons behind your request for a budget increase. Clearly articulate what opportunities are being overlooked with the current budget. The more data you can furnish to substantiate your arguments and forecast outcomes, the greater the likelihood of securing executive buy-in.
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