Advertising pricing is based on supply and demand. Thus in times when demand for advertising inventory increases drastically, prices tend to increase significantly. Why does this matter to you? Our historical data shows CPM increases of between 30-50% during November and December compared to the rest of the year. Here’s what that means for your customer acquisition strategy.
1. Now is a good time to test
2. You should constrict budgets
3. Try non-retail channels
Bonus #4: Test Pinterest
For explanation on each of these, read on…
1: A good time for testing
Since prices are higher across the board, you probably don’t want to be scaling your advertising unless you are an online retailer who depends on the holiday rush (if that’s the case, see #4 below). So if you aren’t scaling up, it’s a great time invest in R&D and test new strategies on a lower budget. This does risk skewed results because of holiday ad pricing or consumer mindset, but the upside is that you are positioned well to scale the strategies that worked come January, when prices calm back down. The idea is that if you have $200k of leftover marketing budget going into the holiday season, which would you rather tell your boss?:
- “We didn’t spend the budget because prices were high.”
- “We spent the budget on proven channels but cost-per-acquisition was 50% higher than usual.”
- “We used the budget to thoroughly test three R&D channels, and one of them looks like it might be a game-changer for 2016.”
Agreed – the last option is probably preferable!
2: Constrict budgets
Remember – every additional dollar spent within a target audience on an ad platform is less efficient than the dollar that came before it. This is because as you approach “saturation,” you are either showing an ad to the right high-quality people who have already seen it before, or you are forced to show it to lower-quality people in the same audience who don’t want to buy your product. Thus, if you don’t have a need for marketing R&D or testing new channels, then simply constrain budget so that you maximize the efficiency of your marketing dollars.
3: Focus on funnel efficiency
If it’s too expensive to scale advertising at the top of the funnel, and you have plenty of traffic to use for data, then an extremely productive way to use your time would be to focus attention on tactics that make your funnel more efficient. For example, you can test any of the following:
- Pop-ups or exit intent
- Email nurture campaigns (if you already have one, you can A/B test subject lines or body copy)
- Steps of the purchase experience
- Retargeting (if you are already doing retargeting, you can segment messaging/bidding for more granular control)
Bonus #4: Test Pinterest
This is something that might only make sense this year. Since nobody has historical data on pricing for Promoted Pins, we don’t know how pricing will change during the holiday season. However we do know a couple of key things:
- Demand is artificially constrained in the short term
- Nascent platforms always provide more opportunity for arbitrage
- Pinterest is focused on retail (i.e. products/brands that probably have a seasonal emphasis on the holidays)
The above points are all strong arguments that Pinterest is worth trying this holiday season. Since demand is constrained, prices are much lower: our data shows an average of 70% lower CPMs on Pinterest versus the same audience on a blend of other platforms. Because the platform is young and many advertisers lack sophisticated testing/bidding/scale platforms, we have found and capitalized huge opportunities (for example, see week 36 in the chart below). And lastly – in regards to e-tailer success on the platform – we actually have data to prove our point. Our clients with consumer-focused physical products are showing average cost-per acquisitions in the range of $10-$20.
Hopefully this gives you some ideas as you move into the end of Q4. Shoot us a line if you have any questions!