When media planners are running a campaign there’s a classic dilemma: do you optimize for a higher conversion rate or for scale of results? While these may seem to be the same, they have distinct use cases and will impact your campaign in different ways.
In this article we explore the differences between optimizing for conversion rate or scale, and then walk through a simple process you can use each week to optimize your ad spend.
Efficiency or Scale?
Any optimization will improve your campaign by making your ads more efficient (higher conversion rates) or better scaled (converting more users). In other words, optimizing for conversion rate should help you get more results from each dollar spent on ads across a media mix.
Optimizing for scale, on the other hand, will help you reach and convert more people with your ad spend. It’s important to understand which goal is most relevant to your campaign objectives and then optimize accordingly.
Optimizing ad spend for efficiency means adjusting your ad spend and delivery to produce higher conversion rates. This means building frequency across creatives, ad sets, and channels. Generally, the more ads a user sees, the more likely they are to convert. There’s certainly diminishing returns, but our data across clients and verticals shows that most users need to receive more impressions.
Optimizing for higher conversion rates is the ideal strategy when you don’t have new budget but still need to drive more conversions. Building frequency is one of the biggest opportunities for advertisers that’s hiding in plain sight.
A great example of efficiency optimization is delivering retargeting ads to high-intent site visitors. Improving the frequency and diversity of these ads will improve conversion rates and capture users most likely to purchase.
Another example would be seeing attribution data that shows when users see ads in Search and Social, they’re 5x more likely to convert than in either channel alone. The opportunity is to build cross-channel frequency by showing a Search ad to the Social audience and vice versa.
Optimizing ad spend for scale means deploying additional budget to channels that reach and convert unique audiences. These channels have high incremental value and work well without support from other channels.
You should focus on optimizing for scale when you have big growth goals, net new ad budgets each month/quarter, and channels that are converting users at high rates with lower reach.
An example of a scale optimization would be seeing that Google ads convert at a 0.5% and receives 90% of your Search budget, while Bing converts at 3% while only receiving 10% of your Search budget. Optimizing for scale in this case would be adding more spend to Bing until Bing’s conversion rate matches Google’s, or until the platform can’t spend anymore.
3 Steps to Optimizing Spend
There are three simple steps that every advertiser should follow when optimizing ad spend:
- Cut Waste
- Exploit Efficient Channels
- Optimize Scaled Channels
Before jumping into optimizations, you need to understand what you’re trying to accomplish with your optimizations. Get more specific than “increase ROAS”.
- What are the strategic goals the business is trying to achieve?
- Will ad budgets be increased, decreased, or kept constant over the next months?
- What results does leadership care most about from marketing?
With these answers in mind, you’re ready to begin.
Because there’s wasted ad spend in every campaign, there’s always an opportunity to take the lowest-performing spend and reallocate it to improve returns. The first step of optimizing ad spend is to cut from the bottom.
Cutting waste begins with identifying your worst-performing channels. Which channels are producing the lowest return? Where are ads delivering inefficiently? (e.g. converters have 4 frequency on average, but a channel has 1.1 average frequency)
You need to evaluate each channel on 2 factors: it’s incrementality and how the channel lifts conversion rate in the media mix. Attribution models like last-click/touch don’t tell the whole story, so be careful not to jump to conclusions.
Once you’ve identified the lowest-performing channels, we recommend cutting between 5% and 10% of your overall ad spend so it can be put to better use.
Exploit Efficient Channels
After you’ve identified and cut your lowest performing ad spend, it’s time to reallocate and get more results! The first category of channels that deserve more spend are your efficient but unscaled tactics.
As you compare channel performance, you’ll have some channels or media mixes that have lower than average CPAs, but don’t have a high conversion volume. This is the best place to optimize first.
Once you’ve identified your high-efficiency/low-scale channels, add budget here to see the most results. You can keep doing this until the channels or tactics you picked start to hit diminishing returns and CPAs rise to the average.
You should plan on adding spend to these channels every 2-4 weeks until they no longer have the lowest CPAs.
Optimize Scaled Channels
After exploiting all of your high-efficiency channels, the next strategy is to optimize your scaled channels. This is the next place to deploy your reallocated dollars.
Your ‘Scaled Channels’ will be delivering a high volume of conversion, potentially with low conversion rates. The opportunity with ‘Scaled Channels’ is to increase efficiency by adding frequency either within the channel or across other channels.
On many campaigns we observe, a vast majority of users only see one ad – what a waste! By increasing frequency to users, you can make scaled channels more efficient. This means building a custom audience that you can serve ads to across your media mix. Understanding exactly how each of your ad channels works together to produce results will make optimizing your scaled channels much easier.
Seeing Things Clearly
When you compare channels to understand each’s efficiency and scale, it’s important to see how many conversions in each channel are shared vs incremental. Once you can report on both ways a channel performs, your best and worst channels become clear and you don’t have to do any guesswork.
By seeing each channels’ Bi-Modal contributions, you can tell how often channels work together and what the iCPA is for each. This makes optimizing your channels much easier, and it will help you avoid spending on unprofitable channels. You can also see how often a channel provides incremental revenue that would not have been made without its contribution.
The best way to get this data is with Bi-Modal Attribution.
How to Pick Between Efficiency and Scale
When you have a choice between optimizing for efficiency, or optimizing for scale, it’s important to know what your goals are and what’s happening with your marketing budgets.
We almost always recommend starting by exploiting efficient channels. This will mean adding budget until CPAs increase to your baseline. Starting here is often best because this is where you can get more conversions at the lowest cost.
The best part of pushing new optimizations every month is that performance improvements don’t add up, they compound. This means that frequent, small improvements combine over time to make massive impacts. No matter how big or small your ad budgets, you should spend time every 2-3 weeks cutting from the bottom and reallocating to the top.