As the digital landscape evolves, Direct-to-Consumer (D2C) companies increasingly rely on feed-based ads through platforms like Google Shopping, pMax, Meta Catalog, and Advantage+. While these algorithms do much of the heavy lifting in finding customers, they also pose a significant risk: the potential for misalignment between your marketing spend and your overall inventory and brand strategy.
This misalignment can have far-reaching consequences for C-suite executives—especially those responsible for the P&L, such as founders, CEOs, CFOs, CPOs (purchasing/buying), CMOs, and Heads of E-Commerce. This blog post will outline a practical approach to analyzing and correcting this issue, ensuring that your marketing investments align with your business goals.
Why Controlling Feed-Based Ad Spend is Critical
In some cases, when we onboard customers to Dema, they allocate as much as 80% of their marketing budget to feed-based ads. While these algorithms can be incredibly effective, they must be carefully managed. Without proper oversight, you may find that your ad spend is heavily concentrated on a single-digit number of products, leading to an imbalance that can hurt your overall inventory sell-through rate and profitability.
This is not just a marketing issue—it’s a strategic business concern affecting everything from cash flow to brand perception. As a C-suite leader, it's crucial to understand where your marketing dollars are going and ensure they are working in tandem with your inventory and broader business strategy.
I would argue that you should prioritize this asap if you have the sllightes doubt that your spend is not allocated correctly today. Most likely, it isn't. This analysis can be done in less than a day with a decent data setup. Here's how you can approach it:
Step-by-Step Guide to Analyzing and Aligning Marketing Spend
1. Performance Review (1-2 hours)
- Why It Matters: Understanding how your marketing spend has translated into actual performance is the first step in identifying any misalignments.
- Action: Compare your sales, profit, and sell-through goals for the last 3-6 months with the actual results broken down by market. Identify any significant deviations that could signal a problem.
2. Ad Spend Awareness and Understanding (1 hour)
- Why It Matters: Even if you know how Meta and Google Ads algorithms work, you must assess whether you truly have control over your budget.
- Action: Read up on how these algorithms function and reflect on how potential customers see your brand—often through these feed-based ads rather than your website.
3. Extract Marketing Spend Per Product (<1 hour)
- Why It Matters: Knowing how much you spend on each product is crucial for understanding the effectiveness of your marketing.
- Action: Pull data on your marketing spend per product across feed-based ad formats from Google and Meta. This will give you a clear picture of where your budget is being allocated.
4. Analyze Deviation (1 hour)
- Why It Matters: Correlating your ad spend with sell-through rates and inventory investments can help you pinpoint where your marketing may be misaligned.
- Action: Focus on the products and markets where you’ve seen significant deviations between your goals and results. Investigate how your ad spend correlates with sell-through and inventory. It’s not uncommon to see 80% of marketing spend concentrated on just 5% of products, which may not represent 80% of your inventory.
- Bonus: Take an additional 1-2 hours to review the creatives used in your ads and the performance of the landing pages they direct to. This can provide further insights into whether your marketing efforts align with your broader strategy.
5. Consolidate Findings (<1 hour)
- Why It Matters: Communicating your findings effectively is critical to making data-driven decisions as a team.
- Action: Clean up your analysis, perhaps in an Excel file, with supporting text to make your findings understandable. This will allow you to share your insights with your team so they can act on it.
6. Strategy Meeting Post-Analysis
- Why It Matters: Aligning your team with these insights will be crucial for making adjustments that improve performance.
- Action: Hold a strategy meeting to discuss your findings, review the analyzed period, and identify opportunities for improvement moving forward, what changes are needed, and some of the downsides that are likely outcomes of this strategy shift.
Conclusion
As a C-suite leader in a D2C company, understanding and controlling your marketing spend is more critical than ever. By following this analysis process, you can ensure that your marketing budget is aligned with your inventory and brand strategy, setting your company up for a more profitable and strategic future.
The beauty of this approach is that it doesn’t require a massive investment of time—just a few hours can yield significant insights.
And for those using Dema, you get all this data served as often as you like, streamlining the process further. Pretty nice, right?