Performance Marketing practices that can be harmful to your business

“What is the next step in my marketing plan? Can I go with the same strategy again? How do I delegate the tasks?” Should you be familiar with any of the questions above, you might be one of those companies that inspired this article. During the last 4 years, while working on large, market leader projects within Central and Eastern Europe, these concerns always raised their head.

In order to disperse the doubts, this time we are going to take a peek into the matters of objective planning, external market expansions, HR and technology in the field of performance marketing activities. We believe that these concerns can be decimated by breaking the most common Performance Marketing practices that are harmful to your business’ progression.  Let us now categorize them and put an end to common misbeliefs.
 

Business related aspects

Misleading goals, relation of budget and results
“…we will raise the budget as the results come in”

First of all, we must understand that this is a cause-effect relationship. Even though we are trying hard to perfect the marketing strategy step by step, we might just set up a bottleneck for our campaigns by adjusting the budget to the results we are getting.  Strategies like this suggest that we have no reliable insights to the market, with the perception that we do not know the possible outcomes of the actions we take. All of this can lead to losing presence on the market from the beginning and miss out possibilities that our business might be involved in.

So, what can be done to prevent these instances from occurring?

Groundless and excessive visions will not stand, creating a loose business plan (at least) alongside a slight market research is highly recommended.

Here are some good approaches: “Our goal in 2017 is to gain market share.” or “We want to maximize our profit in the next quarter…” Try to be a little bit pessimist about the size of your goals that you possibly can achieve, this way you will not be drowning in high expectations. After setting the goal, the next step is to map your market so you will be able to define your budget in no time. Mark your target groups, gain knowledge on consumer behavior. Take the time to analyze search and click volumes, seasonality. Write down that you intend to obtain X Euro turnover, Y Euro profit and Z % ROI (Return On Investment), this way the budget required can be distributed to specific marketing channels to start with. Having this information will greatly help you set a healthy budget for your new operation that you gradually can modify when necessary.

Marching to unexplored pastures
“…we made this one work here, it surely will work abroad as well!”

Once the decision was made to move onto external markets, several factors shall be taken into consideration. If something has worked previously, it does not mean that it will work again under changed circumstances.

Problem No.1: Your brand is not known abroad.
As time passes, it might be getting easier to launch new campaigns in your home market as a result of your devoted work on the brand you represent at home. However, in the case of stepping into a new market, you will have to face the fact that no one knows you yet. Building a profitable customer relationship becomes the priority again, meaning that you will have to take actions very differently than you did for the first time.

Problem No.2: Every country has its own customs, traditions, holidays and regulations.
This is the part where things can get really ugly if not being handled properly. In order to stay polite and professional, advertisers must know the cultural and societal differences in every market they would like to step in. Do the homework and pay attention to every aspect of your impact on the new market you are about to move onto.

Problem No.3: You must know the language, or know someone who knows the language.
No surprise people tend to like to use the internet in their mother tongue, meaning that you will have to adapt to this. Thinking in the same language as the potential customers is an essential part of moving your business to foreign fields. Customer support, logistics, law, etc. are all among those matters that cannot be left alone if language differences are involved in the whole picture.

Problem No.4:  More expensive CPC (Cost Per Click) on advanced markets.
For instance: In Hungary, the CPC average is €0.33. If we multiply the amount by 4-5 times, we get the average CPC in the United States or even in the UK, resulting in a €1.45 average CPC within the borders of advanced markets. The numbers might sound frightening we know, this is why we have to take into consideration the budget we got for the expansion. Compared to the initial entering strategy in our home country, a totally new one will be required to perform a healthy start.

When it comes to budget questions on the new markets, it is essential to choose the right approach for the move. What do we want? Gaining profit or aiming for rapid market coverage? Unfortunately, the relationship between market coverage and gaining profit is inversely proportional. Either we can choose the method of fast coverage that will not be profitable in the short run or take the time and advance step by step. Each approach has its own benefit so make sure that the choice matches the business’ aspirations.
 
Do not worry, we are not leaving you without proposals, so now let us take a look at some of the possible solutions to the problems mentioned above.

• Create your USP or Unique Selling Point
• Set realistic goals (start smaller, reach further) Turnover goals first, Profit goals later
• Brute Force penetration strategy

or

• Data-driven slow paced coverage
• Face the fact that foreign expansion will be financed by domestic profit

Irrelevant, unnecessary concerns

1. Why is CPC getting higher?
2. Why is CR (Conversion Rate) only at 1.5%?
3. Why does not turnover grow the same way as spending?

As Central and Eastern European markets are catching up to advanced ones, the competition starts to ignite.  With other words, CPC will be increasing as the bidding and ranking system saturate. There is nothing to be done, external effects such as competition or seasonality are greatly influencing the shape of the market.

Conversion rate (CR): The significance of this metric remains secondary. While high CR looks very nice indeed in the results section, this metric itself does not guarantee positive turnover or return. The components of CR are depending on unique settings that can be modified at any time in order to manipulate its value. Here is an example of a fictional e-retailer.

Board meeting discussion:
“Electronics convert really bad, thus they spoil the overall CR. The margin is low too, let’s just stop selling them!”

After board meeting discussion:

What happened?

• Electronics are no longer being sold
• Conversion Rate Increased by 22%!
• Turnover decreased by 1M €.
• Base profit decreased by 100 000 €.
• The profitability of the shop decreased by 22%!

 

What did we learn?

• It was a mistake to exclude the electronics category
• Low CR can be caused by slower customer interactions (long purchasing decision)
• Faulty KPI (Key Performance Indicator) – Just by increasing the CR, the overall results will not necessarily be better

 

Suggestions for e-retailers:

• Concentrate on traditional metrics like turnover, units sold, etc.
• Application of “per session value – PSV” instead of conversion rate

 

While CR depends on predetermined values set by the marketer, PSV has the potential to show us the real and raw values that a single session can generate. The math is simple:
Revenue  /  Sessions.

About the relation between spending and results:
As we try to upscale or test out new initiatives, the efficiency of campaigns will be lower than expected. The phenomenon is due to the non-linear nature of results and cost when it comes to trying out new ideas. Do not worry, see where the results go on the longer run and act respectively. Should something not be working, feel free to pause or stop it.
 

HR observations: Whom to delegate?

“Should I do it myself, maybe delegate it to someone internally, or use external sources? Whom to trust with the duties of making a profitable online presence for our business?”
The art of juggling with time, resources and money. The task is not easy and has great importance.  What are our options here?

• Do It Yourself (DIY)
• Internal source (hire someone for the job)
• External sources (marketing agency or freelancers)

We believe that the person who knows what is best for the company is the owner or the managing director herself or himself. So, who else would be a better choice in this matter? Yes, we are suggesting managers to learn how to manage AdWords campaigns. This option is the thriftiest and probably the most reliable one in case of a regular business. Should your company skyrocket, you will have other options to choose from when you run out of fuel as a self-nominated AdWords guru.

Once you are unable to attend to matters like this, you are going to have to find someone who can. There is a shortage of professionals in the labor market, meaning that finding a good performance marketer is a tough task.

Internal solution – Hiring a specialist:

• Increasing expenditure (High net wages)
• Is it a profitable choice?
• What happens if he goes on vacation?

To make the cooperation fruitful, the management needs to have a certain level of knowledge in the world of AdWords to be able to relate to the specialist. The performance marketer requires insights, evaluation of his work, due to lack of these unappreciated specialists tend to switch jobs quite often. Full-time marketers might raise several problems, however, they are much cheaper to hire than working with an agency.

External solutions – Freelancers, Agencies

A freelancer is never only yours. He probably has other contracts to attend to, meaning that your requests and invokes may not go through immediately. On the other side, you might find an unpolished diamond with whom you are able to establish a profitable relationship. Should you find a talented and hardworking freelancer, you’d better not let them go. Make sure you create a remuneration system that is very affordable for both parties so you can keep on going.
“No more half-measures. Let’s work with an agency!”

It might seem that you have no other way than making a contract with a performance marketing agency. How do you choose one and what are the main aspects to take into consideration? First of all, try to work with only one agency at a time. Simultaneous contracts may raise unnecessary tension that no one desires. Make sure to choose a size of an agency very close to your business’ magnitude. It is much more fortunate to work together as equals, this way achieving mutual respect cannot be a problem. The key component remains the same: A promising remuneration system that drives both parties to the extent of their capabilities. Try to avoid fixed payments, take a step towards performance-based collaboration so you can both ensure that the job is in good hands.

Most important aspects from GrowwwDigital’s point of view:

• Symbiosis and joint goals, results-based remuneration
• A suitable agency must “feel the client’s business” not just the marketing part of it
• Provide and ask for insights, communication and evaluation are essential
• Similar sized parties (Client – Agency) for breathing together 

Shortage of Technology

Inaccurate measurements: We often hear the following line: “…we will measure this one later” To tell the truth, 90% of these promises remain only promises. There is only one worse thing than having bad measurements, having no measurements at all. Do not be afraid of using tools like Google Analytics or Google Tag Manager. While the first one helps you track the productivity of your social engagement, analyze your content or ad performance, the other one lets you edit and tweak your homepage without having to involve your developer.

Automatization: It is nice to have the clockwork running, just do not forget to always be on guard. Even the smoothest ad-automatization software requires human intervention from time to time in order to avoid unpleasant incidents. Watch out for seasonality, holidays, National Days, weather changes, so your ads can appear to the right audiences at the right time.

When going to unknown, foreign markets, lots of things can go wrong. Having the right agency is a game changer. If you haven’t found them yet, keep looking! When you have the right people for the job, ask the right questions and you will face much fewer distractions and problems than before. Good luck out there!