Recession-Proofing Your Ad Mix: Measure Twice, Cut Once
The hedge fund guru Warren Buffett, speaking of naïve investment strategies, famously said, “Only when the tide goes out do you discover who's been swimming naked.”
The same could be said for marketers whose paid media investments rely on simplistic ROAS measurement.
Is a recession coming? No one can say for sure. A couple of years ago, most economic pundits thought so. Historically, recessions occur every 6–10 years, and it’s been 16 years since the last real one. The new administration’s shock-and-awe economic policies have people wondering again.
Would your organization be ready? When corporations shift into austerity mode, research departments are the first to go, followed by deep marketing budget cuts. But what would you cut?
Many marketers worry about "waste" in ad spending. Our work with clients suggests a far greater risk: cutting the wrong things—the investments actually driving the highest sales ROI. Faulty measurement often blinds leadership to what truly works.
Consider one case study: We worked with a Fortune 100 brand to measure the effectiveness of one of their biggest digital media channels. The long-time CMO had lost faith in their attribution analytics—and rightly so. He believed they were overpaying and wanted to slash the channel’s $100 million annual budget in half. But, wisely questioning his assumption, he brought us in.
Long story short, we found that the channel drove 3% of all new client acquisitions—but not where they expected. The impact was entirely through their offline sales channels, which accounted for the majority of their business. Yet all their attribution tracking was focused on online conversions.
Had they cut that $50 million in ad spend, they would have jeopardized $1.5 billion in sales. Only our rigorous, randomized experiment-based testing—leveraging anonymized first-party CRM sales data—revealed the truth. The digital media giants they were paying simply had no visibility into this.
Attribution models, clicks, propensity scores, quasi-experiments, synthetic controls, lab tests—I wouldn’t bet the farm on any of them.
Sometimes, the best wisdom comes from time-tested axioms, like the one passed down by carpenters and tailors: “Measure twice. Cut once.”
Don’t short-change your measurement. Jobs—yours included—and even your company’s survival are the stakes.