“Simplicity has a way of improving performance by enabling us to better understand what we are doing.” — Charlie Munger
At h street, we have reduced digital advertising campaign optimization to its most simple form so we can be as effective as possible.
We have found that most digital advertisers and agencies tend to get overwhelmed and distracted by the multitude of metrics and optimization levers available to digital advertisers.
Advertisers become confused, inconsistent, and ineffective with this wealth of opportunity. They default to recommending hot trends, or they spew mindless garble chock-full of mouthy industry terms.
This is a five-step process that guarantees predictable, continuous improvement.
First: establish goals and key performance indicators
While seemingly simple and painfully obvious, it’s surprisingly difficult for most companies to actually understand what their business goals are for advertising and how they are contextualized by key performance indicators.
- Identify why our client wants to leverage digital advertising
- Ex: new customers, app installs, lead form completions, or donations
2. Establish the metrics that determine if a paid advertising campaign will be successful
- Ex: unit economics, customer acquisition cost, customer lifetime value, cost per lead, cost-per-install, churn rates, and conversion rates
3. Plug advertising cost and conversion rate metrics into business metrics to determine our goals for advertising performance
- Ex: how CPMs, CTRs, and CPCs affect cost-per-purchase
4. Create projections baseline for all cost and conversion rate metrics for the entire customer journey
- Ex: Facebook CPM, CTR, CPC, cost-per-landing page view, landing page conversion rate, average order value, repeat purchase rate, and customer lifetime value
Second: plan media based on goals and KPI projections
All media should be planned to allocate the most budget to areas with the most impact. Anything else is ignorance or vanity.
- Identify which digital advertising channels will provide the most value in the context of the client’s goals
- Ex: Facebook, YouTube, Google search, Apple search, TikTok, Linkedin, programmatic
- Objectives by platform: awareness, conversions, lead forms, clicks, purchases
2. Research and compile groups of placements, audiences, and keywords that most align with the client’s goals and customer base
3. Research and devise creative content, formats, and copy that provide an expansive set of themes and concepts to test
4. Generate a media plan for the first set of tests
Third: launch tests in a framework that creates marginal gains
Tests are most effective when you can generate a large set of assumptions about customer behavior and preference and execute a systematic process to validate or disprove those assumptions in an iterative process.
- Determine what levers impact KPIs
- Ex: CPM arbitrage by channel reduces CPCs, audience segmentation by likelihood of becoming customers reduces CPCs, landing page conversion rate optimization decreases bounce rate, and creative themes that qualify for intent increase CTRs
2. Order test cadence by projected impact
- Ex: advertising creative themes are projected to have a 30% impact on cost-per-purchase, vs. creative format is projected to have a 5% impact on cost-per-purchase
3. Determine what has the greatest spread between the idea benchmark metric and what the client is experiencing
- Ex: typical CPCs for this type of Google search campaign is $2, but the client currently has $14 CPCs
4. Identify areas that have the greatest potential for scale
- Testing behavioral audiences vs. 10% Lookalikes on Facebook allows us to have predictable metrics for a 50MM audience
5. List friction points in the customer journey and order these drop-off points based on what creates the greatest amounts of friction
- Ex: lead form completion rates are 7% and this is the first step in the customer journey
6. Pick the top three areas to improve based on expected impact and develop a test structure that confirms or rejects a single hypothesis:
- Ex: Customer testimonials will perform better than a product montage
7. Run tests for a predetermined amount of time, based on an established budget and expectations around projected KPIs
- Ex: At a $2,000 budget, we expect to drive 50 purchases at a $40 cost-per-purchase. With an estimated 5 purchases per day, we will run this test for 10 days
Fourth: learn from tests and apply learnings
At the end of this process, the advertiser will hopefully have identified the combination of variables (and presentation of those variables) that are effective enough to drive a profitable outcome for paid advertising.
- The test format needs to be designed in a way that has a measurable impact on your KPIs
- Ex: before our landing page CRO A/B test we had a conversion rate of 2%, and now we have a 4% conversion rate
2. A successful test will clearly disprove an assumption, or confirm it
- Ex: adding an extra qualifying question did not improve down-funnel conversion rates for our client’s prospects
3. The test should give you a new baseline of what to expect for a specific optimization tactic or strategy
- Ex: Increasing bids on high intent keywords by 20% increased daily average conversions by 10% over two weeks
4. Tests should be designed in a way that allows you to build upon learnings; they should never be the disjointed “throw it against the wall and see if it sticks” chaos that consumes most digital advertisers
- Ex: The success of testimonial videos proves that we should further iterate on this theme to continually increase CTRs and drive down CPCs
5. Tests should be constructed in a way that generates consistency for KPIs
- Ex: our new baseline for cost-per-leads is $5
6. Tests should take external factors into account
- Ex: product-market fit, seasonality, market trends, customer stage, and competitor activity
Five: apply learnings and update or enhance goals…then start over again!
This five-step process is designed to identify the most harmful areas to growth, address those areas with a measurable test with actionable insights, and iterate from there. This allows for a path to consistently grow and improve over a long period of time.
- Update projections and benchmarks for goals and KPIs based on test performance
- Use these updates to build out a new media plan
- Use the budget distribution from the media plan to build a new test framework
- Execute the next set of tests
- Analyze the tests
If you want to learn more about this process, or see examples of projections and media plans, visit hstreetdigital.co and send us a message!