COVID-19 is impacting customer demand one way or another in virtually every industry, which makes this a critical time to reassess your marketing mix and make necessary adjustments to your media spend. This should include an assessment of three areas related to media spend for your small to medium-sized business:
- Overall media spend
- Media spend by channel
- Media spend by geographic area
Overall Marketing Spend
For companies in those industries seeing a spike in demand due to COVID-19 (e.g. telemedicine, food delivery, eCommerce), now is an obvious time to increase overall media spend in an effort to gain market share. It is a great time to not only target existing customers that are purchasing more but also capture new customers just coming into the market. Your expected lifetime value of a customer should influence how much you are willing spend to acquire that new customer.
On the other hand, for industries seeing a decline in demand (e.g. retail stores, restaurants, dental offices), the question of whether or how much to reduce media spend becomes more difficult. With declining or in some cases no revenue (even for a short-term period), the initial reaction is to cut media spend, especially if you are laying off or furloughing employees. That said, now is also a time where you can build brand awareness more efficiently than usual due to reduced ad costs. Based on Wordstream’s Latest Google Ads Benchmark Data, several industries have seen significant reductions in cost per click (CPC) costs for search and display advertising on both Google and Bing. For example, restaurateurs are seeing well below average CPCs as they limit their services to take out and delivery. Additionally, Facebook CPMs are at an all-time low according to MediaDailyNews:
If you can have the financial means to continue investing in marketing, it will likely pay off once the pandemic passes since you are able to continue building brand awareness at significantly lower costs that usual.
Regardless of the industry, one area that warrants additional investment at this point is search engine optimization (SEO). With the ongoing disruptions in the marketplace, now is the perfect time to invest in improving your position on search engine results pages (SERP’s) against your competitors. Additionally, it is an excellent time to evaluate potential marketing technologies, such as email solutions (Mailchimp, Constant Contact), social media management applications (Hootsuite, SproutSocial), customer data platforms (Adobe, Redpoint Global), and marketing automation tools (Marketo, Eloqua).
Marketing Spend by Channel
Whether you decide to increase, decrease, or not change your overall marketing budget, it is important to assess whether you are optimizing spend across channels. This entails building a model that incorporates your historical results by channel (if available) with industry research on channel efficiency for each of your markets. One obvious challenge with this exercise is that channel efficiency is being greatly impacted with the onset of COVID-19. Therefore, you must take into account this impact as part of your channel assessment. For example, if your historical ROAS on paid search campaigns is 281%, paid social is 268%, and direct mail is 229%, these numbers may be dramatically different going forward. Different channels are becoming more effective as people spend more time in their houses. In addition, as mentioned above ad costs are changing significantly so it is important to assess these changes for your specific markets. For example, if your PPC costs per campaign have been cut by 40% while other channels remain the same, you will likely want to reallocate budget from paid social and direct mail to PPC. Alternatively, as reported in a recent study from Mindshare, as the pandemic progresses stuck-at-home Americans are actually spending increasingly less time with friends and family, but their use of social media is expanding at an even higher rate. This may justify shifting additional dollars into your paid social campaigns. It all depends on what the data tells you!
As we have incorporated into our standard methodology, you should also create and assess the efficiency curves for each marketing channel media when building your media mix model. These curves will provide insight into the optimal spend level for each channel in a given market. In other words, they identify which channel will drive the greatest return for your next $1 of incremental ad spend. The efficiency curves (illustrated below) help to derive your optimal channel mix based on expected return and budget considerations.
Media Spend by Geographic Area
The remaining factor to consider in your media spend assessment is the set of geographic areas where you sell your products and/or services. Since COVID-19 had a greater impact in certain markets (as seen by looking at interactive maps of case counts), different markets will return to “normal” at different paces. It is important to align your spend by market with the expected increases in consumer activity. It also may make sense to jumpstart your spend in certain markets by allocating a higher amount of spend early on as the pandemic passes, which will enable you to capture a higher percentage of new customers since many competitors will most likely ramp up spending more slowly.
There is no doubt that COVID-19 is dramatically impacting small to medium-sized businesses everywhere. Although it will take some time before customer demand returns to prior levels, we should continue to see improvements as the year goes on. In order to optimize your revenue as this occurs, now is a critical time to reassess & adjust your overall marketing spend, your mix by channel, and your spend by geographical area.