Across platforms and channels, CPC and CPM were up significantly year over year in Q3, due to increased competition and the acceleration of ecommerce adoption. Large increases in CPC and CPM cause challenges for advertisers, making it harder to hit return-focused KPIs and reach potential customers while staying within budget. To adjust, marketers can employ several strategies to continue working toward their goals while dealing with more costly ads.
Lean into first-party data and audiences
A strong audience strategy enables more efficient spending, with ad dollars focused on groups of customers that are most likely to convert for your business. Most platforms offer audience targeting options based on certain user behaviors or characteristics – think affinity audiences in Google Ads – but the most impactful targeting comes from first-party data. It’s unique to your business and, as the owner of the data, you can segment it however you’d like based on what’s relevant for your customer base. Smart audience segmentation will allow you to increase or decrease spend in a granular way.
Use automation and machine learning to find efficiencies
Automation and machine learning offer additional opportunities to spend your budget more efficiently. Options like auction-time bidding on Google or automatic placements on Meta allow for placement and bidding optimization at scale, taking into account signals and information that we as marketers can’t always access. This can help identify small pockets of value that, when summed, make a significant difference to the bottom line. To fully take advantage of automation, consider removing or loosening any restrictive limitations, like campaign-level budgets or dayparting rules.
Consider return-based goals instead of impression-based goals
For many advertisers, there are particular areas where visibility or query “ownership” are important – and that’s understandable. But where there’s flexibility, consider temporarily moving from an impression-focused goal to one that optimizes toward return. If that’s not an option, test a methodical step down in your target to see if you can slowly reduce CPC without sacrificing revenue. We’ve seen success with this strategy on brand terms in particular.
Suppress lower priced products from advertising
Some brands already use this tactic, but it could be even more beneficial with more expensive CPC and CPM. Lower-priced products often struggle to meet return goals because the sales per click isn’t strong enough to make up for the cost required to drive the sale. Ceasing to advertise on those products can create cost savings.
Before removing any product from advertising, it’s important to consider a few factors that extend beyond price.
- Does the item have a high margin? A $10 item with a 95% margin should be treated differently than one with a 40% margin.
- Does the item drive toward other goals, like new customer acquisition? And if it does, what’s the lifetime value of those customers?
- What’s the average order value of the item? Though low priced itself, if the product drives customers to make a multi-item purchase then it may be worth keeping.
Block irrelevant traffic with negatives and partner management
Another evergreen strategy that’s especially important in a highly competitive environment is managing negatives and partner traffic. To stretch budgets as far as possible, it’s critical to eliminate sources of traffic that are unlikely to convert. Regularly evaluate account performance at the query or partner level and consider blocking poor performers.
While these methods may not lower your program CPC or CPM, in combination, they can help improve the efficiency of your spend by focusing on the most relevant users and removing sources of spend that aren’t contributing toward your goals. To learn more about increased competition and other trends from Q3, download our Digital Marketing Report.