The Looming Threat of Saturation and Its Impact on Acquisition Costs
by Andrew Krebs-Smith | December 16
There’s a serious risk lurking in your blind spot
Saturation can be a blind spot for marketers, and its effects are real. But like many threats we cannot see, we don’t think of them as real or relevant until you experience it yourself. Once you experience them, you’ll have a heightened appreciation and will look to mitigate it in the future. We counsel clients time and time again about saturation and its effect on the per-unit cost of acquisition, yet when it hits–from their perspective “out of the blue”—there’s often confusion and frustration. The good news is, you don’t have to simply accept being blindsided by the effects of saturation as a cost of doing business.
Here’s a classic situation: When marketers try to scale what had been a previously successful campaign, they will almost always experience some form of saturation. Let’s say you are one of those genius marketers who puts together what we lovingly call Fabergé Egg campaigns. By this we mean campaigns with a high degree of segmentation. So, you’ve come up with a clever way of sending cute puppy ads with clever copy to dog owners, and they are leaping to your dog lover’s landing page. The campaign is very effective, meaning the cost of acquisition (COA) is low. You’ve been spending $20 or $40 thousand a month, and because it is working so well, you up the budget and expect similar results on a wider scale. Wait a second— what’s happening? You know this content works, but now, COA is going up and up. Why did the same creative have worse results on a wider scale?
The Fabergé Egg approach—where you are carefully selecting specific elements to motivate specific audiences at the lowest-cost possible–is great when you’re working with the 20,000-person audience. But if you are spending $1 million a month on Facebook advertising, you can’t create these tightly segmented flows. You need a strategy that scales, one you can turn up like a dial. That means a strategy that doesn’t involve fixed costs to customize and so forth.
To understand the effect of saturation, you really have to understand how the math breaks down, and we can see that most easily in a story-problem setup:
You live in a small town with a population of 100 homeowners, and you sell them a product or services they will only need once—or once in a great while. For our purposes, you build sheds. You decide you’re going to rent the one billboard in town, and it’s positioned where everyone in town will see it. You might get 20 conversions that first day, and maybe 10 the next day. Over the next week or two, you might get 10 or 20 more people who, as they notice the billboard again, think a shed might be nice after all. You’ve now sold to 50 the 100.
Here’s the key question: How many more would you sell to if you put up 5 more identical billboards? None. If everyone’s already seen your billboard, and everyone who wants a shed has already purchased one, adding more billboards with the same message does nothing except drain your resources. Now, if you change the billboard content you might get a few more conversions from people–but it’s not going to drastically change who wants or doesn’t want your service or product.
That’s what happens whenever you select a particular audience on a particular ad platform. The dynamic is the same whether the group is 1 million or 10,000 people. If your audience is static and you show an ad to it over and over and over again, you end up saturating that audience. You’ll have to spend a lot more to motivate new conversions. It’s no wonder your COA goes up.
There are a number of ways to anticipate and develop approaches to overcome the saturation effect, and we’d be glad to discuss them with you. Leave a comment below about your experience, or reach out through our contact page.