Using customer data to optimize marketing spend

The internet has changed our world in many ways, and data gathering has been one of its most significant advances. You only have to look at the differences between hit-and-hope billboard ads and customer-focused native advertising to see how granular data can maximize the efficiency of advertising expenditure. From a marketing perspective, the reams of consumer data being accumulated every day help to optimize marketing spend—provided it’s accessed and interpreted properly.

In this article, we consider ways in which companies can maximize their return on ad spend, by harnessing the power of digital data. We begin by considering where marketing spend budgets tend to come from and why this is more important post-pandemic than ever before.

A look at digital marketing spending trends

Marketing budgets have remained steady over the last decade, at just above 10% of corporate budgets. This percentage increased markedly throughout the pandemic as companies were forced to focus on trading online instead of through brick-and-mortar locations. Attempting to boost SEO and optimize their online presence also drove an uptick in marketing spend, reflecting the importance of retaining existing customers and also increasing brand awareness.

While the average marketing spend stood at around 12.5% of overall company revenues by late 2020, this masked huge discrepancies between different industries. Manufacturing and construction firms typically spent less than 3%, with wholesalers also being relatively low spenders. In contrast, consumer services companies directed almost 19% of their revenue to marketing on average. Consumer service firms sell primarily to individuals—key sectors include hospitality, leasing, utilities, ecommerce, and travel.

What does marketing spend include?

One of the challenges in calculating figures like the ones quoted above is that different companies record expenses in varying ways. Some might include marketing training as a business development expense, while sales employees are occasionally paid out of marketing budgets. Two companies in the same sector with the same consumer offering could direct different proportions of their income to marketing, depending on where they are in the business lifecycle and how aggressively they’re targeting growth.

If you’re not sure how to spend your marketing budget wisely, these are some of the areas that tend to consume any available finance:

• Marketing technology, including apps and automation software
• Social media management, including blogging and sponsored content
• Outsourced freelance assistance with photography, copywriting, etc.
• Website creation, maintenance, or revision
• Search engine optimization
• Events and hospitality
• Public relations and crisis management
• Marketing analytics and research
• Print and online advertising
• Marketing training

While spending on training and development has understandably dropped during a period of enforced home working and office closures, investment in optimizing the customer experience has increased considerably. Firms can’t take customer loyalty for granted, while newer technologies like email marketing have seen their popularity soaring as companies redirect their marketing efforts online in an attempt to simplify the buyer’s journey.

What customer data is available?

Every industry produces different types of customer data, and every company has different reporting systems in place. However, there’s no such thing as useless customer information. A change of address might suggest evolving lifestyles, for example. Every purchase made through your business should be logged and studied for patterns; a history of purchases at a particular time of year could support a personalized campaign in preceding weeks and subsequent years. This may include marketing core products or services, or upselling related items like warranties.

Customer data is being generated in vast quantities by the Internet of things—a catch-all term covering any hardware or software connected to the internet. At present, the huge amount of data being uploaded by formerly offline devices is often siloed, yet it can help to pinpoint everything from usage stats to future buying behavior. While every industry and business will have a different amount of customer data available at any one time, these are some of the leading factors companies should consider when attempting to understand their audience:

Online activity

Analytics software monitors people who visit a website, how long they spend on the site, which pages they view, and where they depart. It provides useful information about where traffic arrives from, precisely where purchases are abandoned, and so forth.

Native advertising

Native advertising places pay-per-click display ads in front of people likely to be interested in seeing them. Subsequent behaviors can be closely monitored if they click through—how long they spend on the landing page, if they leave an item in an online basket, etc.

Hardware usage

If you’re marketing an iOS-only software app, it makes sense to target existing Apple customers and overlook Android users. Being able to identify which platforms customers use is key in deciding how to spend your marketing budget.

Search results

While search engine optimization has become central in many marketing strategies, it’s vital to know what’s being searched for. Google and Bing make it easy to research what customers have looked up, when and where, how often, and what they did afterwards.

Email

Having evolved beyond a passive method of data distribution, email can be tracked and monitored in granular detail. Multiple hyperlinks determine which one has the strongest CTA, in the same way A/B testing establishes which email content resonates with consumers.

How do I use this data to optimize marketing spend?

Having listed some examples of customer data and how it’s harvested, it’s time to consider how you can use this data to influence and optimize marketing expenditure.

1. Leverage online activity

If 40% of online baskets are being abandoned at the shipping stage, it suggests “stealth” costs are leading to customer abandonment. This analysis might encourage firms to a) reduce shipping costs or b) display them more prominently earlier in the ecommerce journey.

2. Make the most of native advertising

Maximizing your return on ad spend is easy with native advertising software, which can place ads in front of carefully selected demographics. Individual users are then tracked, so if an initial ad doesn’t lead to a click-through, you can try another one later. If the customer clicks through but doesn’t buy, you can follow up with basket reminders and discounts.

3. Consider hardware usage

In today’s fragmented market, digital marketing spending trends often vary widely from one platform to another. Existing demographic data provides detailed guidance on what customers might want/need/upgrade. This can be augmented by studying which devices your customers are using, for how long, in what ways, and to what ends.

4. Use search results

If search string A is 10 times more common than string B but costs twice as much to rank highly for in search engine advertising, it’s clearly cost-effective to do so. Sifting through analytics reports is time-consuming, but it’ll ensure you don’t waste ad spend on irrelevant results. Identifying negative keywords further reduces the risk of wasted PPC expenditure.

5. Incorporate email

Customers who double opt-into email marketing are ripe for targeting, while monitoring past activity facilitates contact at opportune times. An upcoming warranty expiry is the right moment to upsell lifecycle-appropriate upgrades, for example. Even knowing when an email is opened, and on what device, is useful in optimizing future campaign scheduling.

Preaching to the converted

One of the most important factors in terms of optimizing conversions is having complete and accurate customer profiles. Yet this is often harder than it sounds. Profiles are generally compiled from multiple data sources, some of which may be standalone legacy systems that aren’t easily integrated. There could be data silos due to poor reporting or software incompatibility, inaccuracies caused by ineffective updating or customer records, and red herrings as a result of insufficient knowledge.

If someone buys a motorsports magazine subscription in December, that ostensibly suggests they’re interested in track days and racing. Yet a more detailed demographic profile might reveal an elderly lady with no record of car ownership, suggesting the subscription was a Christmas gift. By accurately profiling that customer, she won’t be targeted with irrelevant ads for goods and services she’s only peripherally interested in.

Making your budget work harder

Individually, none of these suggestions is revolutionary. But collectively, they’ll ensure your ad spend works much harder. They’ll reduce wastage on irrelevant ad positioning or unnecessary communications, potentially allowing a reduction in overall marketing budgets without diminishing their efficacy. This might free up funds to invest in app development or other revenue-boosting programs. Companies often assume they need to spend more on marketing, yet what they really need to do is spend smarter.

Optimizing marketing spend also makes it easier to justify future budget requests. Because PR and social media activities are often hard to accurately quantify, other corporate departments could dismiss them as less relevant or valuable than their own pet projects. This puts marketing managers on the defensive during budgetary discussions or when attempting to get a new project or campaign approved. If the manager is able to demonstrate efficiencies (or achievements) made through carefully targeted marketing campaigns, people from other departments are more likely to support future plans.

Hitting the target

One of the best ways to maximize profitability and optimize marketing activity is to invest in machine learning software such as Lytics. Our proprietary Decision Engine helps to deliver relevant and cost-effective communications across a variety of digital channels. These precisely targeted campaigns can deliver increased customer lifetime value, greater customer engagement, and more cost-effective digital marketing/advertising campaigns. As well as making your money work harder, it also provides detailed evidence of cost-effectiveness to underpin future finance requests.

Find out more about how Lytics can help you to understand customers in the CPG, media, and B2B technology sectors, among others.