Marketing strategy

Understanding Channel Capability for a Better Digital Marketing Strategy

To create any digital marketing strategy, it is essential to have a good understanding of what the channels do and who they can reach.

It sounds simple, but I regularly see businesses relying on channels that represent a race to the bottom (in terms of price/margin) or pay more than once to convert a customer. This is often a sign that they are primarily targeting low value customers and/or even their own existing customers.

Yard looks at the different marketing channels available.

I will discuss the matter in general terms for the purposes of this article. Of course, there are exceptions to almost every argument, but that shouldn’t diminish from the general point.

Before optimizing any advertising, the strategy must make sense. For this to make sense, channel capacity must be understood. What is the capacity of the channel, you ask?

Channel capacity

Customers can be divided into three types:

a) Existing or expired customers – They have bought, are considering or will buy your product or service.

b) Competitor’s customers – They have purchased or will purchase your competitor’s product or service.

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vs) Potential new customers – They haven’t bought from you or your competitor yet, they haven’t heard of you. They now have or will need a service/product like yours and may or may not know it.

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The most valuable customers tend to be those who are newer to the market. If you manage to reach them at this stage, they will pay more on average and be more loyal.

Customers from competitors can be attracted, but you will have to do something special. Few companies have a brand, product or service that will sell themselves, but the reality is that for the most part they accept a lower margin to entice the customer. It might work if you can keep them around long enough, but usually you attract the type of customer who will keep looking for something better – and by that, I mean cheaper.

Your existing customers are a goldmine and you need to focus on the right channels to extract that gold. Your existing customers don’t need additional advertising, nor do people who have already decided to buy from you. Overall, branded PPC and retargeting are exercises in margin reduction and ROI. Maybe not always, but if you think they are or could help, be sure to plan some thorough testing to prove it.

Off-brand research (SEO & PPC)

Unbranded search is where the world airs its dirty laundry. Used effectively, it’s a database of customer intent and both SEO and to a lesser (but still huge) extent PPC allow you to tap into it. You can determine what potential customers might be looking for and get your content seen in those areas. What might a new customer be looking for who has never purchased before? Write content that meets this need and you have a chance to make that first contact with someone who could become a client.

PPC allows you to pay to be visible wherever SEO does. It also has the advantage over other forms of advertising that search engines disguise it, so up to 60% of people don’t know they are clicking on an ad. If the brand is happy with this sleight of hand, there are plenty of opportunities there. Typically, brands will focus their spend on high-budget keywords that primarily target competitors or their own customers. Experimenting with lower CPC terms that boost top-of-funnel visibility can provide better TTL returns.

Content Marketing

Content marketing is such a wide and varied channel that it is difficult to give an overview. It’s fair to say that when done right, it’s possible to get fantastic, useful content in front of potential new customers who have never heard of you before. The key is to measure performance and it’s almost never just a last-click conversion.

Display

The display is either completely ineffective or (at best) a reminder for people who were already considering becoming a customer. Often, your ads are not seen or even did not occur at all. If you are lucky, they are seen but ignored.

Generally speaking, display is favored by the big, old-school media buying agencies. The language and function is more like printing, TV, etc. There is almost as little transparency attached. Programmatic advertising was seen as a great hope for display, but ad fraud, a complex and opaque ecosystem, and the inability to show positive results nearly killed it for serious marketers. The exception is retargeting which is the “recall” I mentioned earlier; showing your ad to people who are already familiar with your brand, including anyone who has already decided to buy. Identifying the effect this has is not straightforward and requires AB testing.

Affiliate Marketing

Affiliates were explained to me years ago and I thought it sounded like a great marketing opportunity: you pay websites a commission for any conversions they drive. This encourages them to promote your service or products.

In theory, that sounds good, you’re almost guaranteed to make money, you don’t have to lift a finger, and you only pay when you make sales. Too good to be true? Yes. In fact, most affiliate sales are comparison sites like Moneysupermarket, Skyscanner, etc. you also pay fees and discount prices on sales you would have received anyway. In short, affiliates usually get you low value sales and also eat into your margin on other channels. In many verticals, they dominate and it can be difficult to do without them.

Advertising on social networks

Social media advertising has claimed similar legitimacy to paid search in recent years, but the reality is that it’s not normally an effective way to reach new customers. It’s much better for reaching the kind of people who have already decided to buy from you or your competitors. Ten times better, to be precise, according to experiments conducted by Facebook. The ratio of ad effect to selection effect was found to be 1:10, which means that for every ten people who buy after clicking on your ad, nine would have bought anyway. This makes a huge difference when calculating ROI. If I spend £10 on ads and sell 10 widgets x £10, my ROI is 1:10. If nine of those sales had happened anyway, I would have spent £10 to generate £10 of income.

This number varies widely across Facebook’s experiments, confirming how much you need to understand what’s really going on in order to determine how much return you’re getting.

social media

Social media is an interesting channel in that different people often mean completely different things when using the term. In some ways, it can be an exciting way to draw attention to your brand and it could bring you new customers or increase your sales. Paddy Power and Burger King are good examples of creative and courageous brands that know how to use it well. However, 99.9% of the time, social media for brands means outdated corporate social media accounts with nothing to say. Accounts are targets for disgruntled customers and generally ineffective at managing them. Ultimately, for most businesses, social media accounts are only followed by existing customers, randoms, and bots. They are unable to reach and convert new customers.

Brand Paid Search

People searching for your brand already know who you are. This is a navigational search – they just want to get to your site. There are legitimate uses for branded PPC, but leaving it on all the time is not one of them.

What might seem like a review of the channels above is not. The intent is to highlight where, hypothetically or mistakenly, marketers believe certain channels can reach types of people they typically don’t. This leads to poor strategy and wasted budget.

I’m not saying you don’t use any of these channels, but to use them effectively you need to understand what they do, who they can reach, how to test them, and how to measure success.

It might be tempting to look at your report that says affiliates cost x and earn 20x and stick with that, but you would ignore both the loss of margin in other areas and the wasted affiliate fees. You could spend a ton of money on a great social media strategy and be glad it looked good and brought in sales, but you might not know that sales were coming from existing customers who were most likely to renew. in any event.

I am aware that the “how” of measurement is not answered in this article. The short answer is that it involves AB testing, lifetime value measurement, and effective channel allocation. I’ll leave the details for next time.

Richard Falconer is CEO of Yard.