Can Benchmarking Your Ad Spend Change How You Calculate Your Social ROI?

Advertising on social media is growing into a $100 billion business. Budgets for social media spend are increasing, and CMO’s are expecting their teams to divert more time and resources to demonstrating that their efforts on social are making a business impact. Being able to link media activity to business benefit - the elusive ROI of social - has become the central task in marketing.

But for the most part, these efforts have been measured in isolation, without a clear understanding how their spend benchmarks against competitors - creating a very incomplete picture.

Measuring social media success today has become an exercise of comparing your current performance to your historical performance. It is a tactical game of uncovering which variables will lower your costs.

Over time, marketers can narrow down what is the ideal balance between content quality, targeting, ads objectives and further tactics that will help them get the most desired conversions and maximize social media ROI.

That’s just one part of the story. However, knowing you have doubled or tripled your ROI does not tell you if it is good enough to be competitive in your industry or your region. What if your competitors are outperforming you on advertising efficiency and their share of advertising spend?

That’s why it’s important for marketers to understand that buying advertising space on social media is not entirely different from the concept of competitive pricing. If we compare apples to apples: let’s say you are selling apples, and you have estimated your price just based on what it costs you to grow your fruit plus a profit margin for yourself, without knowing the pricing of your competitors, then it could mean that you’re underselling or overselling your product.

Advertising on Facebook isn’t far off from this model. The difference is that you’re paying for advertising space to reach the same audience that your competitors are.

The certainty of knowing whether your advertising efforts are competitive enough is only achieved through benchmarking. More precisely, by measuring your industry ad spend costs and ad efficiency compared to yours.

Image

Having access to this information adds an extra level of insight to your ads efforts. To give an example, in the graph above you can see that if you’re an FMCG Food brand and your ads are costing you $0.20 per click, you have to uncover why and how to improve it. Ignoring this insight means your competitors are converting customers more efficiently, even if your ad spend of $0.20 CPC might be enough to prove advertising ROI internally.

Image

The same applies when benchmarking your click-through-rates. Having low-converting content might be enough to generate revenue for your brand, but if you are converting at a 0.5% rate and your competitors are maximizing it at 2.00%, you need to take a step back and re-evaluate your social media strategy.

As with everything else you do on social, to stay competitive, you always have to gain insight into what your competitors are doing and adjust the variables that are impacting your performance.

Benchmarking advertising effectiveness isn’t new to marketing. In traditional advertising strategies, marketers relied on the cost of knowing the return they would get from an ad placement in terms of viewership and frequency. They also knew what it’s costing their competitors to advertise in the same magazine, broadcast or billboard space, in combination with third party data providing ad share.

The different level of insight that social media has given marketers is that of knowing the granular components that are affecting your costs. Adapting a cost efficient content strategy, precise targeting, and tracking your customers effectively from brand awareness to conversion all affect the end result. It’s easy to understand how these variables impact your own performance, but to benchmark the ads performance of your competition requires third party insight - and the accuracy of those insights depends on having access to the most complete data.


You May Also Like