Blog

The rise of profit-driven marketing

Profit-driven marketing is catching on in the United States and Europe. But before we can address it in this region, mindsets needs to change – not only on the client side, but also within agencies. In order to raise awareness on this new form of marketing, agencies, who are responsible for strategic thinking on behalf of their clients, should become even more involved and spread the word on the market.

What is profit- driven marketing?

Profit-driven marketing is a big shift from traditional marketing, with most companies in the region still thinking traditionally. Companies have fixed marketing budgets, and they prefer these budgets to be spent on the old, tried and tested ways. CMOs and CEOs are happy to spend most of their budgets on channels they understand and are proud of, like television and newspapers.

But what if online marketing budgets were no longer fixed? What if they were no longer considered as costs but rather treated as profit centers? This is the approach of profit-driven marketing: to have open budgets as long as it’s profitable for the business. Investments will be open as long as the profitability threshold is guaranteed and the right balance between volumes and cost per acquisition is maintained.

How to set it up?

Digital channels (search especially) and analytics products not only allow us to measure and attribute conversions across channels, but also across devices, as well as import offline data.

Once set-up technically, the work that needs to be done relates more to KPIs and targets that have been set and shared with your team/agency. When setting KPIs, make sure that you don’t look at fixed last-click targets per channel – attributing the value of the conversion to the user’s last click. Instead, focus on impression share, share of voice and monitoring revenues.

Obstacles you might face

This new approach might be easy to understand for your digital team, especially if they are focused on performance. But you’ll have more stakeholders to convince than that. Offline Marketing teams need to accept the fact that online marketing might have bigger budgets at some point. Digital teams need to have access to figures from their Offline teams, such as sales and other metrics, so that they’ll be able to capture the entire value and impact of the budgets they manage. Also, Finance needs to be convinced that digital budgets can be open, and that they’re no longer fixed over time.

It might take some time, but I highly recommend you have this discussion with your partners starting yesterday. The sooner you do, the sooner you will be able to transform the way you do marketing and start reaping the rewards of it.

For a more in-depth look at profit-driven marketing, check out this link.