Adjusting Paid Campaigns During a Recession

Posted by ryanmoothart

Our world changed dramatically in March of 2020 as a new viral threat to our livelihoods took hold in the United States and around the world. Here in the US (at the time of writing this post), COVID-19 has not relented

Some industries have been more heavily affected than others. For example, travel and tourism businesses have been hurting far more than many other industries due to social distancing guidelines and stay-at-home orders.

However, all businesses should re-evaluate their planned budgets for paid search and other paid digital campaigns for the next 12 to 24 months. Hopefully, this pandemic cedes faster than that and the economy comes out of our pending depression more rapidly at some point next year. But since nobody can know for sure when that will happen, it’s better to be safe and plan accordingly. Ask yourself the following questions:

• What assumptions did you make about your priorities heading into 2020?
• How has the global pandemic and economic recession affected those priorities thus far?
• How have your trends changed and what shift(s) have you already had to make?

You’ll be on your way to creating a more stable plan for your paid digital advertising campaigns once you’re able to answer those questions.

Now comes the most difficult part: how do you take these changes into account and plan ahead for the next year, or even two years?

To do this effectively, you need to make a choice about which overarching business goal is more important to you:

1. Drive sufficient sales volume even at the expense of profitability.

OR

2. Maintain a profitability margin even if it means losing out on sales volume.

Don’t pick both. Obviously, you want to drive more sales and maintain or increase profitability — everyone wants to do that. But if your business has struggled since the breakout of this recession, you don’t have the luxury right now of picking both. If you pursue both goals, you’re more likely to implement competing tactics in your campaigns that may result in hitting neither. So, pick one. If you can hit it consistently going forward in this new environment, then you can start striving to hit the other in addition.

Focusing on sales volume

If your primary goal is sales volume, reference the year-over-year trends you’ve witnessed since the COVID-19 outbreak and the onset of the recession. Pay close attention to the last month or two since things have started returning to a “more normal” outlook with regards to businesses reopening (albeit with strong rules around social distancing). For instance:

• Have you seen website traffic bounce back a bit since May, but not sales or conversions?
• Have these things increased in certain channels but not in others?
• How has your ad spend volume correlated with these shifts in conversions?
• Have you seen increases in cost per conversion levels that look more stable now?
• How do all of these things compare year over year?

Whatever you’re witnessing after answering these questions, plan on those year-over-year trends continuing for the foreseeable future. Take into account seasonality and plan out how many conversions, sales, and/or how much revenue you want to acquire each month or each week going forward. Once you have those hard numbers planned out, do some quick math by accounting for your cost per conversion and return on ad spend (ROAS) levels, and correlate how much money you’re going to need to spend to meet those sales targets.

Do these new budgets and targets allow you to meet your overall sales goals? You may find you’re able to hit targets for a certain channel directly (paid search, for example), but will still be behind overall. If that’s the case, reference your impression share or share of voice metrics, competitive insights, and tools like Moz or Google Trends to see if it’s realistic to push for even more sales volume if your existing forecasts don’t meet your goals.

If these things indicate little room for potential growth, revise your sales volume targets and expectations down to account for this new post-COVID normal. In this instance, your opportunity for potential growth will lie in high-funnel channels (e.g. programmatic advertising, digital video ads, traditional media buying) to reach more potential new customers. Just be sure to account for how many conversions or sales these high-funnel channels actually assist with to make sure you’re putting your advertising budgets to good use.

Focusing on profitability

If your primary goal is profitability, reference the same trends and answer the same set of questions as above. Again, pay close attention to the last month or two as the economic recession has begun settling itself in for the long haul. Whatever you’re witnessing, plan on those year-over-year trends continuing. Then, taking into account seasonality, forecast what your campaign budgets should be by month or by week given your desired ROAS or ROI levels.

Instead of having to adjust your budgets up in order to hit a desired sales volume threshold, you may find that your forecasted budget is lower than you originally anticipated coming into 2020. You’re likely going to have to cut budgets down or pause certain campaigns entirely that just aren’t profitable right now as changes in conversion costs and/or demand have negatively impacted your trends. If this is happening to you, plan on taking that budget you’re now cutting out of your certain paid campaigns and reinvest any potential remaining funds into other channels or savings (assuming such funds aren’t wiped out by lower sales volume).

This opportunity to maintain a certain profit margin will likely result in less overall revenue and return for your business as a whole. The goal here is to stay profitable enough where you don’t have to make significant cuts to your overall business. Sacrifice what you need to in paid digital advertising to stay afloat and maintain viability throughout the duration of this economic recession.

One more thing to keep in mind

As we’re still in the early stages of vast uncertainty, be nimble and reactive as economic circumstances change. You may find yourself doing a lot more re-forecasting on a consistent basis this year and next year due to fluctuation in economic climate and outlook. Just remember everyone else is in the same boat as you — nobody knows what’s coming in the next year or two, let alone the next few months.

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