This is our framework for reallocating marketing budgets...
In this concise case study, we will explore the potential for enhancing profitability by strategically reallocating marketing budgets among specific products across various paid channels...
In this concise case study, we will explore the potential for enhancing profitability by strategically reallocating marketing budgets among specific products across various paid channels.
For the purpose of this study, we will be utilizing real, anonymized customer data to provide concrete insights and analysis.
How do we analyze Paid Product Performance?
At Datacop, we have developed an analytical framework that empowers us to:
Determine the amount of money spent on promoting a specific product across all paid marketing channels.
Calculate the revenue generated by the specific product promotion from a last-click perspective.
Measure the Return on Ad Spend (ROAS) at the product level.
This framework enables us to generate a report similar to the one shown below, providing valuable insights for making more profitable advertising decisions. Let's explore an example in detail.
In the table above, the products are ordered based on the marketing budget allocated for their promotion. It is evident that "Product B," "Product E," and "Product F" have significantly lower ROAS compared to "Product A" and "Product C."
Now, let's delve into the numbers. Suppose we redirect the advertising budget originally allocated for "Product B," "Product E," and "Product F" on Facebook towards promoting "Product A" and "Product C" instead.
For instance, let's reduce the advertising budget for "Product B" by $20,000 and reduce the budgets for "Product E" and "Product F" by $15,000 each. We can then allocate this saved budget to intensify the promotion of "Product A" and "Product C."
Consequently, "Product C" would receive an additional $40,000 in advertising budget, while "Product A" would receive an additional $10,000.
The question arises: How would these reallocations impact our bottom line?
In the best-case scenario, reallocating a portion of the marketing budget from Products B, E, and F to Products A and C would result in a remarkable 22.4% increase in our Return on Ad Spend (ROAS). This adjustment has the potential to significantly enhance our overall performance and profitability.
While we acknowledge that increasing the marketing budget for Products A and C may potentially lead to a decrease in their respective ROAS values, it is highly unlikely that they would plummet to the levels observed for Products B, E, and F.
Even if we were to assume a drastic 50% decrease in the ROAS for "Product C," it is important to note that, in this example, we would still generate more revenue overall.
This demonstrates the potential for improved profitability by reallocating the marketing budget strategically.
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