In Q2, eCommerce sales jumped 44.4% from 2019 due to COVID-19. Meanwhile, new eCommerce platforms presented unplanned yet important opportunities, Amazon’s Sponsored Brand ads outperformed Sponsored Products, and out-of-stock and shipping delays caused greater uncertainty.
All of these dramatic changes made it clear to eCommerce advertisers that a rigid budget wasn’t going to work. Brands that tried to stick to their month-by-month budgets and who failed to adjust to the shifting performance of different ad placements struggled.
Traditional brands need to become more agile in the year ahead and enable marketers throughout the organization to make real-time decisions, or the brand risks being left behind.
What are brands missing out on by not being flexible with budgets or trying new platforms?
One trend we’ve seen this year is smaller brands gaining an advantage because they don’t have rigid processes for allocating budgets to ad campaigns. These smaller, scrappier companies were able to invest where different opportunities arose. By comparison, the massive manufacturers understand the need for more budget fluidity but struggle to work it into their existing funding processes.
One brand Pacvue works with was able to grow their share of voice during the Q2 COVID-19 spike by 300% due to budget fluidity. The home safety brand increased their monthly budget in March when they saw increasing ad performance. By comparison, their main competitors maintained the quarterly budgets they had locked in at the beginning of the year.
Taking advantage of these spikes throughout the year, the brand has maintained a significantly higher amount of sustained earned organic share. Their budget fluidity and agility allowed them to change quickly and capture significant share of voice in the industry.
How can brands be more flexible with their budgets and strategies in 2021?
2021 is sure to present new opportunities for advertisers that are able to adjust their ad strategies quickly enough to take advantage. While it is easier for smaller brands to be more flexible with their budgets, it isn’t impossible for larger companies to be agile as well. Here are a few important steps to take at the beginning of the year to help support a more flexible ad strategy throughout the year:
Get Leadership Buy-in
Setting budgets for 2021 is the ideal time to get top leadership buy-in for a more fluid ad approach. While gaining absolute control over the entire annual budget isn’t likely, have a plan and SOP in place with very clear directions and more agile processes for getting budget approval. Getting your CMO to sign off on budget fluidity at the start of the year, including giving you a relative amount of control over that budget, is key as there won’t be time to have these conversations when another opportunity arises.
When proposing budget fluidity, ensure that you are communicating what you intend to do or accomplish with the change in funding. It is also helpful to calculate a size of prize so the brand teams or account owner(s) know what they can expect with the way funding is distributed. The brand teams are looking for upside opportunities and should use KPIs and detailed reports to assess which parts of the business should receive available funding. The size of the prize is not the only factor, as the retailer/platform's strategic value is also heavily weighted. Fortunately, eCommerce is strategic for most brands right now and will be throughout 2021.
Avoid Monthly Budget Lock-in
While this is difficult for some organizations, an important aspect of budget fluidity is not being overly adherent in spending a certain amount each month. Looking at the entire year with the goal of driving the most efficient spending annually or quarterly allows you to be more or less aggressive in the short term. This ability is most important for pulling forward funding to capture opportunities as they appear. Otherwise, you end up forcing spending when the opportunity isn’t there and lacking sufficient funds for the opportunities when you could maximize sales.
Adjust KPIs and Reporting
To help with leadership buy-in and campaign budgeting, now is a good time to adjust your KPIs for next year and update your reporting practices. Start by using Share of Voice as a way to show which brand terms are getting beat by the competition – since losing brand SOV is a good proxy for competitors to out-bid brands. Share of Voice gains can also lead to market share gains, which is why Pacvue uses both data points, when available, to tell the entire story. Smaller companies might not care as much about SOV and will instead use internal growth rates vs. targets to determine what winning looks like, which can be used as an advantage for other brands.
By setting up granular metrics, brands can also easily see what time of day campaigns are running out of budget and therefore determine if additional budget should be placed to keep them running. If additional leadership buy-in is needed, start with a test to see if incremental dollars can help boost results. And if brand performance has been especially strong during a certain time period, this is a good story to share with the brand teams to try to either pull forward funding or shift funding from other channels to keep fueling eComm growth.
Flexible Budgets for New Platforms and Advertising
In addition to the changes in search volume and eCommerce sales throughout the year, 2020 also saw new platforms and ad placements establish themselves. Many advertisers setting their 2021 budgets will want to know how much budget brands should set aside to test new platforms. But how should brands breakdown budgets between Sponsored Product, Sponsored Brand, and DSP ads?
The short answer is it depends.
Depending on your industry, investing in growing platforms such as Walmart, Instacart, and Target should be factored into your 2021 ad budgets. In 2020, we saw a lot of brands set aside a small test budget for these growing platforms to determine their viability. In 2021, we expect more brands to work these platforms into their overall ad strategy and allocate budgets across Amazon, Walmart, and Instacart depending on performance. Similar to avoiding monthly budget lock-in, avoid locking in a specific amount of ad spend to specific retailrs, which may force you to miss opportunities or spend money where you aren’t seeing a strong return.
The same goes for new ad placement opportunities such as Sponsored Brand ads, Sponsored Brand videos, and DSP. If these ads are performing well, ensure you have the budget fluidity necessary to move funds from Sponsored Product or paid search ads into these emerging channels. To help estimate your budgets, use historical data from the second half of this 2020 to assess whether to pull back aggressiveness and budgets on certain ad types and reallocate them to ad types that are working and producing results.
For example, Sponsored Brand Ads may have historically performed very well, but competitors could make the same conclusion and they will make Sponsored Brand Ads a strategic investment area next year. This has two implications - one it will make Sponsored Brand Ads more competitive (higher CPC) and drive down ROAS (increase ACoS) and two, it will leave other areas vulnerable, such as product detail pages. Try investing where the current opportunity exists and to not rigidly adhere to preconceived investment ratios, but to be dynamic in shifting funding throughout the year based on what is working and what isn’t working.
With the eCommerce landscape changing faster than ever, there is no telling what opportunities will prove the most valuable for advertisers in 2021. By inserting more budget fluidity and adopting a more flexible ad strategy, you can ensure you’re ready to take advantage of the new year - no matter what presents itself.