When we kick off with new clients, we always ask what tactics and channels they’ve tried in the past and how effective they were.
Often, we’ll hear something like, “We tried Google Ads/email/Facebook Ads/fill-in-the-blank channel once and we didn’t really see much from it.”
When we dig into where these channels may have fallen short, in many cases we learn that the business pulled the plug on the test well before it had a real chance to become profitable.
This is a common pitfall, especially for small businesses. Naturally, when budgets are tighter, the need to see quick ROI is greater. We hear this quite a bit: owners are comfortable making the investment – if it leads to new business.
Small business leaders aren’t wrong to want or expect ROI, of course, but the fact is that effectively testing new marketing channels requires time, optimization and patience before ROI is realistic.
In this post, we’ll provide guidance for how to plan for tests that allow for enough runway to succeed.
Start With the Right Budget
First things first: before committing to test a new marketing channel, ensure that you have enough budget to make the test worthwhile.
As a naturally risk-averse person, I appreciate the urge to limit the downside involved in a new channel by testing it with a small budget. If the test doesn’t work, you’re only out a little bit of money – no harm no foul.
The problem is that if the budget doesn’t give you a real shot at driving results from the channel, you’re essentially just throwing it away. Not only will it not drive revenue, but you also won’t learn anything from the test because you won’t have conclusive data.
So how much budget is enough? The answer depends on the channel, your customer lifetime value and your close rate. Start by defining how much revenue a new customer is worth over the course of their business with you. Then, you can use your average close rate to determine how much you can spend on a new lead to break even. This method will help you take a more outcome-based approach to testing new channels.
For more help nailing down the right budget for testing, check out our free resource on calculating customer lifetime value. Based on what you’re currently spending on customer acquisition, our formula will help you determine an optimal budget for your marketing efforts.
Find Your Baseline
Whether you’re looking to test Google Ads, paid social ads, email marketing or another channel, if you’re testing in earnest for the first time, it’s likely going to take at least a couple weeks to find your baseline.
Now, clearly this is a generic rule of thumb. There are a lot of factors that determine how quickly you’ll find your baseline. For example, with more volume, you have more data to optimize faster.
(If you’re a numbers person, you can have fun digging into data projections, statistical significance and minimum sample size calculations. If not, you can find a data-driven partner to do it for you.)
Unless your budget or list size is prohibitively small, you can often get a reasonable sense of your channel performance about two to three weeks into your campaign.
If at that point you’re achieving your campaign goals, great! You’re off to a promising start. But if your performance is falling short of expectations, don’t get discouraged. Remember: this is just your baseline. Now it’s time to optimize.
If your campaign’s activity is drastically different from the goals you set, there may be something fundamentally wrong with either your goals, or with the execution of the channel. In this case, we recommend diagnosing this problem first before moving forward.
Plan To Optimize
Channel optimization is one of those things that most people agree is important in theory. But in practice, it’s often de-prioritized, done in half-measures or dropped altogether.
My hunch for why: the actual work of ongoing optimization can be a grind. Testing different ad copy, landing page images or email subject lines that can result in nominal gains, no change or even drops in performance can feel small and frustrating – especially when you have a hundred other tasks that warrant your attention.
However, by following this process and consistently applying what you’ve learned to future tests, performance should steadily improve over time.
For help structuring and following through on optimization, read our post on the conversion rate optimization testing calendar, or download the calendar to get started.
Time To Pull the Plug?
Not every channel or campaign is going to be a winner. While you want to give your new campaign enough time to be optimized for success, you should also be able to recognize when to end it.
As with budgeting, determining when to end a test should be routed in your numbers. If you understand and live by your metrics, you’ll know when reaching your goals is feasible over time and when it’s not.
In general, there are a couple of signals that it’s time to call it quits:
- ROI isn’t feasible: Not every campaign should be judged based on ROI (e.g. brand awareness campaigns). But in our experience, ROI tends to be the metric that counts above all else for most small businesses. If ROI is your objective, but the limitations of your budget doesn’t allow you to get the leads (or other positive returns) you’re looking for, it’s time to pick a more cost-efficient channel to test.
- Ongoing optimization isn’t moving you closer to your goals: If your marketing team is spending weeks following best practices and your metrics aren’t improving, the campaign may not be set up for success. Rather than scrapping the channel completely, however, go back and consider: did this campaign put the right message in front of the right people at the right time? Try to pinpoint where the disconnect happened and apply this learning to the next test.
- You don’t have the resources to properly manage the campaign: Managing and optimizing marketing channels takes dedicated time and resourcing. If you’re finding that you simply don’t have the bandwidth for the required analysis, testing and iterating, pause and come back to it when you do.
Win Some, Learn Some
By putting these practices to work, you’ll avoid the situation where you’ve spent money on a campaign that didn’t work and you’re not sure why. With proper goal setting, testing and evaluation, you’re continually expanding your understanding of what works and what doesn’t.
Effective channel testing isn’t brain surgery – but it does take time, patience and hard work. If you could use a hand planning and running your next test, we’d be happy to help.
