Who should manage performance marketing and how should the spends be classified?
In the era of radio, print and television, the communication medium itself did not lend itself to be a shopping destination, brands would build awareness but the eventual call to action would take place in a retail environment, this kept the life fairly simple, marketing teams would manage communication with consumers and shoppers. Shopper marketing and trade marketing would manage the retail environments and the spends would get classified into 2:
Advertising spends - any spend that is towards the consumer but has no direct impact on sales
Trade marketing spends - any spends that would be in the form of margins, discounts, ToT etc. that would go to the retailer or any other channel partner
But, try to imagine this in terms of e-commerce. Do performance marketing campaigns classify as shopper marketing campaigns? Do brands use the shopper path to purchase and how do we classify advertising, promotion and affiliate spends in this scenario?
Why this is important to understand is from 2 perspectives:
The marketing team and its resources in the form of agency partners are experts with consumer facing communication and the spends that happen through them impact the business bottom line
The sales/ trade marketing/ shopper marketing team is supposed to understand shopper behaviour and the spends that they do impact top line
In the case of performance marketing, advertising budgets are going towards driving sales through online channels, this is in the form of sheer advertising reach as well as commissions to channel partners and affiliates.
This begs two questions?
Who within the team is best placed to understand shopper behavior?
How should the sales related digital marketing spend be classified?
Our answer to this is that digital marketing spends should be split into 2:
1. Brand Awareness/ engagement spends – like traditional marketing
2. Conversion/ Sales Related Spends – like channel margins, discounts ToT
Also, the role of the Shopper marketing is very important here as they are the custodians of the shopper buying journey and business can benefit from their expertise in maximizing conversions from the bottom of the funnel.
Along with that, accurate spend classification, though impacts top line, but is a more realistic representation of spends.
This is an opinion and we are happy to have a conversation to understand this evolving space.
Aditya is passionate about building brands that consumers love and use e-commerce to scale business. Aditya can be reached at aditya@ensosbusinessconsulting.com