Why brands should treat marketing strategies like investment portfolios

It’s no secret that digital marketing has evolved over the last decade, but what has changed the most is that having a robust digital footprint is no longer an option—it’s a requirement. Simply selling a product online is very different from having a successful e-commerce business. Deploying an effective marketing strategy in an ever-changing digital world can’t have a one-size-fits-all approach. “We analyzed hundreds of companies, worldwide, across a decade-long business cycle,” reads a McKinsey report assessing investment portfolio strategy. ‘‘The conclusion? Winners change their business mix, year after year. Laggards sit still.” Subscribe to Ad Age now for award-winning news and insight. Here’s why digital marketing and e-commerce strategies should be treated the same way as that of an investment portfolio: Evaluate the business, not just its marketing mix Determining what is going to work best for a brand requires an in-depth analysis of the company’s short and long-term plan as well as the industry landscape. Most agencies look at the brand through the lenses of their current and past marketing strategies, compared to those of their peers. But that is only one piece of the puzzle. The whole puzzle reflects a holistic view of the company (revenue, profitability, business strategies, product differentiation), the sector and the company’s place in the market. A marketing strategy can be benchmarked the same way as an investment portfolio. Having a breadth of knowledge about the brand’s P&L over time is vital to the economics of the brand and therefore, a critical piece of its marketing spend. Run at market pace and be agile For the same report, McKinsey “created a baseline of industry momentum to consider how a starting portfolio would have evolved had each constituent part performed in line with its peers. This allowed us to measure whether changes within a portfolio either sped up or slowed down performance.” Here is a case in point in digital strategy and marketing. Digital acceleration throughout the pandemic has made the e-commerce playing field more competitive across sectors. While the number of digital natives continues to rise, many brands that already have some online presence are increasingly relying on e-commerce. It is imperative for brands to ensure that their marketing strategy enables the brand’s channel mix to deliver the projected ROI cohesively, while also meeting predetermined key performance indicators (KPIs) for each individual channel. For new d-to-c brands, the first five years of growth tend to be based on how successful a brand’s paid media is, which requires agility and minimizing expenditures on strategies that do not improve cost per acquisition (CPA), optimize conversion rate (CVR) and are not meeting their return on ad spend (ROAS) potential. Similar to an investment portfolio, monitoring and understanding each channel’s performance enables d-to-c brands to measure whether changes within a channel mix either sped up or slowed their performance. Every dollar not spent efficiently is a dollar wasted, so it’s important to deploy effective channel testing, learning and optimization. Treat every spend as a two-way transaction CPA, CVR, and ROAS are key performance indicators that should be evaluated on an ongoing basis and each channel in the mix should be thoroughly analyzed. If a channel isn’t meeting its revenue projections but is helping the brand grow and engage with customers, it may still be important to continue investing in that channel but monitor its contributions to the overall strategy. Like investment advisors, brands rely on digital marketing strategists to know when it’s time to change the approach and when to stay the course. Having a thoughtful strategy that puts the brand’s objectives first and meets the brand’s customers where they are is critical to the longevity of the success of any digital marketing campaign. When a brand’s campaigns are consistently not meeting KPIs, that’s when it’s time to reevaluate your approach. To do this, media efficiency targets and expectations should be defined with the brand from the outset. This way, they are benchmarked against both the brand's ongoing performance and industry expectations. With KPIs as “guardrails,” campaigns can be tested regularly—as often as every week, if necessary. If multiple consecutive periods outside of those targets exist, it’s time to reallocate the brand’s marketing investments. Knowing what’s working and isn’t working, what assets can be leveraged and how much of a risk the client is willing to take, are all key to reworking the strategy to create the best outcome. Still, it’s impossible to beat the market. Achieving optimal return for a brand’s investment, no matter what external factors are at play, is achieved by having an effective multi-channel mix, ensuring the budget is allocated in the highest-performing channels and keeping a pulse on the spend. Marketing experts, like investment advisors, can anticipate the estimated return on a brand’s campaigns, but the ability to make tweaks to the program, without over-engineering the strategy or spending on a channel that isn’t sustainable, to maximize the return is what truly makes a sustainable e-commerce operation. The ability to trust the team that is creating and fine-tuning the plans for maximizing results while minimizing budget is fundamental. Brands should keep an open mind in the evolving world of digital because the marketing channels that matter the most today, may not deliver the same returns tomorrow. Agencies developing these strategic plans must have deep expertise in the industry landscape and set realistic growth rates to deliver results consistently. Subscribe to Ad Age now for award-winning news and insight.

Why brands should treat marketing strategies like investment portfolios

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