Why You Can’t Let The Algorithms Steer All Your Product Feed Spending
As Meta and Google increasingly promote their black-box feed-based marketing formats (Adv+ & pmax), strategically controlling which products are being promoted is more critical than ever. If you don't control your marketing spend, you'll be limited to selling only the products Meta and Google deem most efficient, based on factors like timing, budget, and creatives.
The Importance of Strategic Control in Performance Marketing
To maximize profitable growth throughout the season, you must effectively manage your performance marketing spend. This means optimizing your inventory’s sell-through rate and maintaining a balanced inventory, even if your inventory isn’t perfect and most likely hurt your ROAS at the moment.
The Role of Agility in Online Sales Success
Agility is crucial for survival and success in today's online sales environment. It ensures a healthy cash balance and profitability by enabling you to sell the right products in the right market at the right time. For a marketer, this means always keeping track of the marketing spend to optimize the sell-through rate and normal KPIs such as ROAS, profitROAS, and CAC.
Maintaining Inventory Balance and Understanding the Cost of Lost Sales
Maintaining a balanced inventory throughout the season requires early and constant control of inventory levels and predicted sell-through rates. By leveraging data-driven insights, you can optimize stock levels and collaborate closely with your buying department, discussing the balance between marketing spend, pricing/discounting, and potential stock replenishments.
Additionally, understanding the Cost of Lost Sales—the revenue and profit lost when products are out of stock—is crucial for making informed decisions. This concept is vital for all stakeholders to grasp, and therefore I'll come back to it in a future blog post.
Step-by-Step Guide to Optimizing Marketing Budget Allocation
1. Identify Products at Risk of Going Out of Stock
- Why It Matters: Preventing stockouts ensures you capitalize on demand without spending unnecessary dollars on advertising.
- Analysis: Use Dema’s Inventory Prediction Model to find products likely to go out of stock soon.
- Action: Add a custom label "OOS RISK" to these products in your Google and Meta feeds and notify the buying department for timely reorders.
- Time requirement: <30 minutes
2. Boost Marketing for Slow-Moving Inventory
- Why It Matters: Keeping a healthy sell-through rate throughout the season frees up capital and lowers the risk of having to discount later in the season.
- Analysis: Use Dema’s Inventory Prediction Model to identify products likely to have excess inventory at the end of the season
- Action: Label these products as "SLOW MOVING" in your Google and Meta feeds.
- Time requirement: <30 minutes
3. Optimize Underperforming Products
- Why It Matters: Understanding why products with high views but low conversions aren't selling will help overall sell-through and conversion rates.
- Analysis: Find products with relatively high traffic from ads but low conversion rates.
- Action: Label these products "NOT CONVERTING" and inform colleagues to investigate possible reasons for their poor performance.
- Time requirement: <30 minutes
4. Address Products with Low Visibility
- Why It Matters: Increasing visibility for underexposed products can uncover hidden gems in your inventory.
- Analysis: Identify products with low views on the site, in particular from ads.
- Action: Add the label "LOW VIEWS" to these products
- Time requirement: <30 minutes
5. Implement Targeted Campaign Strategies
- Exclude products with the "OOS RISK" label from ads to avoid wasted spend. If this approach is too aggressive for you, put these products in a separate campaign with decreased spend to maximize the ROAS for the remaining products.
- Zombie Campaign: Use this for products labeled "SLOW MOVING" and "LOW VIEWS" to ensure that these products are given a chance.
- Lower Spend Campaign: Apply this to products labeled "NOT CONVERTING" but not "SLOW MOVING" to test if reduced spend can still drive conversions. This one is important to revisit when actions have been taken to improve the performance of these products.
- Time requirement: <30 minutes (perhaps 1-2 hours the first time you set it up)
Conclusion
You must manage the inventory you have, not the inventory you wish you had.
If you spend 2 thoughtful hours a week following this process, you could significantly shift your company's trajectory for the current season without depending on anyone else.
In-season adjustments and proactive engagement with your buying department are vital to keeping best sellers in stock and efficiently managing slow movers.
By being truly data-driven and focusing on fast and smart marketing budget reallocation, companies can drive much more profitable growth through a healthy sell-through rate.
Dema provides precisely this: the insights you need to become and stay data-driven. This will allow you to make these strategic decisions faster and ensure that every dollar spent contributes to your bottom line.