Now that a recession is looming in America and most of the world, firms large and small are bracing for some lean years after a couple of fat years following the pandemic lockdowns.
People are especially price-sensitive during a recession, so raising prices seems out of the question. Firms will likely resort to cost-cutting, and much of those cuts will affect marketing budgets, which had been dwindling in many companies even before the pandemic arrived.
Though the marketing budget as a percentage of total revenue has increased substantially since it hit a low in 2021, by 2022 it had yet to catch up to pre-pandemic levels, data from Gartner found.
Source: Gartner
As firms consider squeezing their marketing budgets, it's crucial to understand the most effective methods relative to the total amount spent so that marketers can make informed and rational decisions that will maximize their return on investment.
There's a noticeable tendency among business owners and marketers to just throw all and sundry at advertising walls (i.e. platforms) and hope that something sticks. That is a wasteful and inefficient strategy, and luck decides the outcome. Your company should not toss a coin and hope it gets heads; it should choose heads for itself.
Advantages of Digital Advertising
Digital advertising has been growing by 15% annually since 2010, and it is projected to keep growing for years to come. It's no surprise that digital has become the main method of advertising and the number one go-to choice for small firms with a low marketing budget.
Source: IAB / PWC Internet Advertising Report
Digital advertising is affordable, measurable, and effective. Such advantages are crucial particularly for small businesses and firms that do not have large advertising budgets. Metrics such as clickthrough rate (CTR) allow tracking of the active response to the advertising and indicate cost per conversion (CPC), therefore enabling a much better comparison of campaign efficiency compared with traditional advertising.
Let's dive deeper into the various advantages of digital advertising.
1. The Ability to Solve (And Pay) for Different Goals
Digital advertising gives firms and marketers the ability to tailor their advertising according to the objective they want to achieve. If the goal is to grow brand awareness, they can cast the net wider for maximum impact. If, on the other hand, the goal is to increase sales, the ad can be served only to potential paying customers—i.e., people who have shown an interest and can afford to buy.
2. Smaller Budget Requirements
Companies don't need a large marketing budget to run a digital advertising campaign. It can be done with a small budget and scaled up or down. And because the digital world isn't limited by space, the reach of an advertisement with a small budget has the potential to rival that of one with a huge budget.
3. A/B Testing of Creative
Digital advertising makes it easy to understand customers' preferences. Marketers can A/B-test different campaigns and figure out which one works best for a specific audience and which clicks with potential customers. Campaigns that work can then be reinforced, whereas those that don't work as well can be trimmed or discontinued.
4. Sharper Segmentation and Personalized Targeting
A digital ad is less likely to go to waste or reach a nontarget audience. Digital advertising allows the ad to be customized and personalized to a specific demographic, narrowing the target range and increasing the chances of conversion.
5. Pay per Performance
Using the pay-for-performance model, marketers don't even need to understand the ins and outs of digital advertising. They can just pay the advertising platform based on the performance of the ad as defined and agreed upon before beginning the campaign. That way they can assure that every penny spent is being effectively used.
Disadvantages of Digital Advertising
However attractive digital advertising is, you must not ignore its downsides. Here are some that you'd do well to consider as you evaluate your advertising options.
1. Poor-Quality or Manipulated Traffic
It is difficult to effectively track the quality of the traffic generated by a digital advertising campaign. Clickthrough rate is a poor indicator of the success of an advertisement. It doesn't, for example, give any information about reach and coverage. Moreover, the metric may not even help track conversions, as people may simply be clicking the ad without any intention of buying or seeking further information.
Furthermore, clicks can be manipulated using bots, giving firms distorted information regarding reach and recognition.
2. Questions of Efficacy
Even targeted advertising, which carries a premium over other advertising methods, may be only marginally more effective, if at all. Laser-focused advertising may not bring additional benefits and may even harm the advertisers, as those seeing the ad might convert even in the absence of advertising. Furthermore, repeatedly targeting people with ads may annoy them, leading them to develop ill feelings toward and distaste for the brand.
3. Limited Ad Placement Control
There are also reputational risks and ethical issues with digital advertising. Your ads may appear on controversial, illegal, and even potentially harmful sites, such as those that spread misinformation and disinformation, thus tarnishing your brand's reputation by association and lowering the trustworthiness of your site or product.
Digital Advertising: The Bottom Line
Advertisers need to demand more information from ad agencies and ad companies. To really judge the efficacy of digital advertising, advertisers need to know how their ads are distributed and to whom, where the clicks come from, and other related information.
Ultimately, the primary object of advertising is to increase sales; advertisers want the ads to be served to potential customers. Without that information, it is impossible to tell whether investments are paying off. Your online presence may be growing, but does it actually translate into sales and real growth?
