This is a guest post from Collin Slattery at Taikun Digital.
During the financial crisis in 2008 and 2009, I was a trader in the foreign exchange markets. Volatility in the markets was the highest it had ever been, with swings of five to ten percent happening daily.
With the rapid spread of COVID-19, we have returned to levels of volatility not seen since the financial crisis. We also have a more digital economy and a digital advertising industry that operates in similar ways to the financial markets.
With panic everywhere, we are prone to make mistakes. Here are some practical lessons for how to operate in the highly uncertain, highly volatile new reality in which we find ourselves.
Fear and panic are the enemy of rational thought.
In crises, the key differentiator between people who survive and people who die (both literally and metaphorically, depending on the crisis) is the ability to act rationally.
Breathe. Slow your thinking down. Practice active decision making.
In times of crisis, the ultimate competitive advantage is acting rationally.
Monitor & Minimize Automation
Automated systems are only as good as the inputs they receive.
There is a reason that both Google & Facebook recommend not making changes to your campaigns that are utilizing automated bidding strategies for a few weeks. It’s because they need stable, consistent parameters in order to function well.
At present, nothing is stable. All the inputs these algorithms rely on are fluctuating wildly. The automated algorithms were not designed to function under these conditions, and they are breaking down.
If you are utilizing automated strategies, you must monitor them closely, and be prepared to shift to more manual control while volatility is high.
This means potentially moving away from bidding strategies like Max Conversions, Target CPA, Target ROAS, and conversion-based bidding and moving back to strategies like manual CPC.
As always, test with your own data and make decisions for your own business.
Pause Marginal Ad Groups & Campaigns
Not all campaigns are created equal. Some campaigns have better ROI than others. We utilize a 3-tiered system for classifying revenue-generating campaigns:
- Tier 1: High ROI campaigns
- Tier 2: Breakeven to marginally profitable campaigns
- Tier 3: Speculative & pre-optimized campaigns
This structure allows us to pause less profitable campaigns when we need to boost efficiency and ROI.
If you have seen large declines in conversion rates and ROI on campaigns as a result of the pandemic, you should consider pausing these campaigns to either reduce your advertising spend or to free up budget for other campaigns.
Double Down on Brand
With ROI dropping across the board, it is vital to squeeze every last opportunity out of your highest ROI paid channel: branded search.
If you haven’t set up branded search, set it up. Here’s a resource on setting up branded search campaigns.
If your branded search campaigns are budget limited, consider increasing the budget. If you’re using a conversion or return-based bidding strategy, shift to 100% target impression share instead.
Branded search can serve as a stable, low cost, and high ROI foundation when other things are ineffective.
Simply put, branded search can keep the lights on.
Move Budget up the Funnel
It’s important to remember that this is a sharp, but temporary, downturn in economic activity. Just because people are extremely hesitant to spend money now doesn’t mean they will be three months from now.
While we have seen a steep decline in conversion rates for revenue-generating conversions for clients, we have seen almost no drop in conversion rates higher up the funnel.
People are less willing to spend money right now, but they are still willing to sign up for email lists and follow your company on social media.
You can use this fact to your advantage, by shifting budget away from now-unprofitable bottom of the funnel campaigns, and reallocating it to campaigns optimized for top of the funnel and middle of the funnel conversions, like email list signups, social follows, ebook and whitepaper downloads, and other non-monetary conversions.
Social platforms like Facebook, Instagram, and Snapchat along with the display network are particularly well suited to middle and top of the funnel advertising.
Filling the top of the funnel now means that when the crisis passes in a few months and people are again ready to buy, you will be able to capitalize on the pent up demand.
Stop Most Advertising
This is not the right approach for the vast majority of businesses, but sometimes the right choice is to play defense and pull back.
In industries like hospitality and travel which have been especially hard hit, cutting spend down to only branded and remarketing might be the right choice. This is especially true in situations where misallocated budget can be the difference between survival and shutting down.
You have to survive to thrive.
Reasons for Optimism
The next few months are going to be extraordinarily challenging. But there are reasons to be optimistic. These months will be the most challenging we live through in our entire lives, and by making it through there’s nowhere to go but up.
And even in the worst- case economic predictions, the economy will shrink ten to fifteen percent. The glass in that case is still 85% full.
Acting rationally and with a longer term outlook today can set you up for massive success when we come out the other side.