Marketers are good at creating hyperbole. We’ve created the perception among our potential customers that digital marketing is magical, instantaneous and cheap.
Over the years, the popular narrative has been that digital marketing is a silver bullet that will bring instant results. If you don’t spend money on digital media, you’ll be left behind by the competition.
Digital marketing is indeed a powerful strategy that businesses can’t afford to ignore anymore. However, it has also been oversold as a magic solution to sales problems and branding issues. The fundamentals of brand and marketing have remained the same.
Why do you ask? The fundamentals of marketing involve customer psychology and value. They have evolved but haven’t necessarily changed.
This narrative created and propagated by marketers and agencies stands to benefit them, of course.
The post-pandemic years have seen a rapid rise in digital investment and drastic reductions in overall budgets as countries fight inflation, and unemployment issues, and businesses are tempering growth expectations for a couple of years. In this environment, it makes all the more sense to evaluate digital spending carefully, and invest in the right strategies and tactics.
Digital marketing is not an elixir for fundamental brand and marketing issues.
Because digital marketing promises instant results and can be easily seen on a digital dashboard, businesses often get carried away by vanity metrics that have no meaningful business impact.
If your brand identity or positioning has fundamental problems, spending thousands of dollars on ads will not fix them. It could mask the underlying problems and distract you from the impressive graphs on analytics dashboards.
One notable instance of digital marketing exuberance is the case of Procter & Gamble (P&G). The company drastically reduced its digital ad spending by $200 million after discovering that many ads were being shown to bots rather than consumers. This cutback was not merely a cost-saving measure; it highlighted the inefficiency and lack of transparency in digital ad placement and prompted P&G to focus on more effective and targeted advertising strategies.
https://www.investopedia.com/news/pg-cuts-back-digital-ads/
How do you find out the real problems with your marketing?
The answer starts with a comprehensive audit containing specific and actionable recommendations. A consultant or an agency that takes a holistic approach to marketing can help you prioritise the action items based on your business and address them in the short term while drawing up a medium to long-term marketing plan.
Looking for a quick audit of your digital presence?
What are some common marketing problems and brand issues impacting your campaigns?
- Inconsistent brand messaging across multiple channels
- An outdated and unoptimised website
- Targeting the wrong audience
- Picking the wrong marketing channel or picking too many
- Not considering the buyer’s journey and where they are in their journey
- Ignoring your competitors and how your product or service is viewed compared to them
- Taking an either-or approach to traditional and digital marketing
Digital marketing is not necessarily cheap
Business owners often believe that digital marketing is cheaper. It can be more cost-effective because it is easier to reach and target the audience on digital platforms. However, the cost can greatly vary from industry to industry and geographies.
Cost Per Conversion (CPC) and Cost Per Lead (CPL)
The average conversion rate across various industries is around 3.3%.
In 2023, the average cost per lead (CPL) increased to $53.52, with 91% of industries experiencing a rise in CPL along with a decrease in conversion rates. For example, the Career and Employment sector had a CPL of $132.95, whereas Automotive Repair had a lower CPL of $21.12.
The average conversion rate across all e-commerce sites is under 2% (Statista, 2023).
Email marketing is one of the most effective channels for driving conversions, with a 2.8% conversion rate for B2C brands and a 2.4% conversion rate for B2Bs (FirstPageSage, 2023).
The per-impression cost is usually much cheaper on digital media than on traditional media.
However, when you factor in the final cost per conversion, you could end up with a vastly different number. The other advantage is that there are fewer barriers to setting up and running a digital campaign. Some social media platforms do all this in a few clicks on your mobile device.
Competition increases cost.
When you bid for attention, there are more competitors, or the category is more popular, your costs will invariably go up.
- Costs invariably rise as more advertisers bid for attention, especially in popular categories. For example, in Q4 2023, Google search ad spending in the U.S. increased by 17% year-over-year, driven by higher competition. This increased competition led to a 9% rise in the cost per click (CPC) during the same period. https://searchengineland.com/google-search-ads-cpc-spend-436959
- Further supporting this, the average cost per lead (CPL) has increased for 91% of industries, with some sectors seeing significant rises. For instance, the Arts and Entertainment sector experienced a 134% increase in CPL year-over-year. https://www.wordstream.com/blog/ws/2022/11/10/search-advertising-benchmarks
Competition in digital advertising can significantly increase costs, especially in popular categories.
- Increase in PPC Costs: As more advertisers compete for the same keywords on platforms like Google Ads, the cost-per-click (CPC) rises. According to WebFX, the average CPC can range from $0.11 to $0.50, with businesses spending between $100 to $10,000 per month on PPC ads.https://www.webfx.com/digital-advertising/pricing/
- Impact of Competition on Social Media Ads: A study by Influencer Marketing Hub highlights that businesses allocate a significant portion of their budget to social media ads, spending between $100 to $25,000 per year. This high expenditure reflects the intense competition on these platforms, which drives up costs as brands vie for user attention.https://influencermarketinghub.com/digital-marketing-benchmark-report/
- Data on Bid Competition: As competition increases, so does the bid amount required to secure ad placements. A report from Econsultancy emphasises that brands using sophisticated data analysis and first-party data for better targeting have a competitive advantage. However, the overall increase in competition for ad space on platforms like Meta has led to higher costs and more strategic bidding.
Low Brand Equity increases friction.
Imagine a door-to-door salesman of a well-known brand doing the rounds of a neighbourhood trying to sell a product. Now consider another salesman from an unknown brand doing the same. Who has a higher chance of success?
A business that doesn’t invest in its brand over the long term will spend more on lead generation than its competitor, who allocated budgets for brand awareness and engagement.
Digital marketing does not always produce instant results
Digital marketing platforms provide you with instant and easy access to data. The data can be granular and precise, unlike traditional media. Mistaking many of these data points, some of which can be just vanity metrics, misleads you into believing that your money is being spent well and you’re getting good results.
Final thought: Survivorship bias is partly to blame
If your social media feeds have been inundated with incredible success stories, then blame it on survivorship bias and algorithms. For every success story that you come across, there are probably more than 1000 that have failed trying to do the same thing.