Money Monday: Don’t Fall Asleep At The End Of The Month (It’ll Cost You…Like, Actual Dollars)
This one simple step will help you avoid losing profit at the end of media buying cycles
So part of what we do at SluiceBox is in addition to doing tracking, running traffic, and making campaigns ourselves, we help clients manage their other agencies.
The way we set up our tracking allows us to help the CEO/CMO/Marketing Manager see the performance of all agencies against each other…and then we help them make sure all agencies (including us) are staying in line with their KPIs.
Well, yesterday I logged in to find that an agency for a particular client had fallen asleep at the wheel and driven some really bad results over the past two days.
They’d doubled their spend over the past two days without driving ANY incremental revenue or customers (which is not good for any campaign but TERRIBLE for a loss leader campaign).
Here’s what happened and how you can avoid the same fate.
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What Happened
To give you a little background, this client utilizes a loss leader offer on the front of their business to get people to try their product in hopes they’ll come back and subscribe.
The offer backs out incredibly well so long as the cost to acquire a customer (CAC) stays within a VERY specific range.
For the majority of the month, this agency had stayed within this range up until the 28th (as you can see below):
As you can see over the course of the month, the ratio because spend (the red line) and revenue (the green line) was fairly consistent…within a normal range of variation.
But on the 28th, everything changed and the economics shifted which I had to catch and reign them back in.
Why Did It Happen?
When you’ve done media buying for a while, you start to use Bid Caps to help you deliver more consistency in spend, CAC, and return on ad spend (ROAS).
They are awesome tools…but human nature makes us diminish their effectiveness.
We all want to see if we can game the algorithm to get a little bit more scale at the same cost…so we raise the bid caps just a little bit higher.
And then we raise them again.
And then we raise them again.
And pretty soon we see that we aren’t getting much more results…but we leave the higher bid cap in place “just in case.”
Well, during the normal course of the month, that extra padding isn’t a big deal because the auction is somewhat consistent (unless there is a major retail holiday).
But at the end of the month/quarter, that’s when things start to change.
The traditional media buying agencies push all of their remaining budgets out at the end of the month to show their client they spent it and that’s when the auction prices start to go up.
These sudden rises in prices increase CPMs which means you’ll end up spending more if your bid caps have this cushion in place.
Now, after a couple days, the ad network will see it can’t hit your target metric at these new prices and reduce the spend…but by then, it’s already too late.
So How Can You Avoid This?
First off, if you’re not using bid caps, start using them now.
Going into the end of the month without them on most of your campaigns is just inviting ad networks to steal your profits.
If you (or your agency) IS using bid caps, make sure they bring down the “cushion” at the end of the month to ensure this type of reckless spend doesn’t happen.
What Is Likely To Happen When You Play By The Rules
Once you make this adjustment, you will actually start to spend LESS THAN USUAL over the last 2–3 days of the month/quarter.
Since you know your numbers and have set your line in the sand, you’ve told the ad networks to serve your ads less frequently if the prices start to rise.
The prices are rising, so the amount of auctions you’ll win go down.
Don’t worry, the spend levels will come back once you get to the next month…it just requires a little self restraint.
What Can You Do When Spend Is Down?
I would highly encourage you to do some “end of month” promotions on social, email, and/or SMS to drive additional revenue that you may lose via reduced ad spend.
End of Month promotions are great because they can:
- Help you drive additional revenue with less expense (higher “ROAS”)
- Help you move stale inventory by bundling with hot items
- There is built in scarcity so you don’t have to build something
Conclusion
I highly recommend reviewing your profitability at the end of the month when it comes to your media buying to determine if you/your agency have a good system in place or if it’s an area you can optimize.
If you’d like some help with this, shoot us an email at info@sluicebox.xyz and we’ll see what we can do to help you.
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