Interviews, insight & analysis on digital media & marketing

How to tackle marketing budget wastage

by Luke Boudour, Chief Experience Officer at GOA Marketing

The increased use of AI and automation by marketers may lead to increased levels of misspent budget. This budget wastage has also become harder to identify as a result of changes to how marketers are tracking and measuring success online, practitioners’ over-reliance on technology and a lack of understanding of what drives results. 

Research from Proxima indicates that up to 60% of marketing budgets are wasted – largely due to many businesses spending their ad budget blindly on Google, without having clarity on the quality, relevance or placement of their ad campaigns. 

Google has also undergone significant changes, where AI has increasingly assumed control of campaigns, resulting in reduced manual intervention for marketers. Marketers are encouraged to switch to “ad and match” functions that use automation to determine what is shown to searchers, rather than setting this up manually.

Many marketers are running campaigns either relying entirely on Google’s own tools, like Performance Max (or PMax), or using AI-enabled ad tech platforms to manage bidding, optimise budgets, target audiences or serve creative copy, or both.. Either way, this is arguably creating an opaque ‘black box’ of paid advertising, leaving marketers in the dark on how to run successful digital marketing campaigns themselves.

To really succeed, marketing professionals need to be both creative and data-focussed – being able to create compelling content and copy, as well as understand the data that drives success. This is becoming essential when Google is constantly shifting the goalposts on how its ad platforms, algorithms and reporting capabilities are all set up.

Many marketers are experiencing paid search results that have stagnated and in some cases even declined. Inflation of cost per click (CPC) rates, greater competition, hidden metrics, Google changes and new products have meant that results are not getting better as they should be. Rather, they are going backwards.

Poor digital ad strategies and execution, coupled with inadequate measurement and understanding of performance metrics, can waste budget. Without a clear strategy, actionable insights, policies, and cross-functional collaboration, digital spending inefficiencies persist – weakening a brands’ competitiveness, and leading to more wastage.

Where, exactly, is the wastage?

For many businesses, a lot of their marketing budget wastage happens without them even knowing. Wastage happens when marketers look to AI and automation to manage their marketing campaign at scale, and don’t understand at a granular level what is happening with their spend.

The marketing around Google’s Performance Max sounds compelling – just set your goal-based campaigns, and put your feet up as Google’s Smart Bidding uses AI for bidding, budget optimization, audience targeting, creatives, and attribution. The problem is, if you don’t grasp how it works and understand at a more granular level what’s happening – such as what keywords are being bid on, at what rate, with what creative copy, and with what quality score – you might end up with less-than-stellar results.

Introducing more AI and automation into ad tech platforms and tools that marketers use to manage campaigns will only lead to greater unknown wastage.There are also a number of technical factors contributing towards mass wastage of marketing budget – such as the use of broad keywords, irrelevant ad copy, or failing to track and respond to performance data. Understanding the right keywords for example, which drives clicks at a competitive cost per click, is vital for crafting a successful campaign that avoids wasted advertising spend. 

When in-house marketing teams turn towards outsourcing their performance marketing to agencies, they will not be seeing reporting on the more granular aspects of where a campaign is truly seeing success. This results in unidentified inefficiencies exhausting more budget from their overall ad spend.

How do you tackle wastage?

The main obstacle to overcome is utilising technology, without falling into the ‘data deluge’. All marketers aim to avoid wasting marketing funds, to enhance their campaign ROI. To achieve this, it’s essential to implement effective strategies, utilise suitable tools, and understand what’s really driving their success at a more granular level.

Businesses should think of automated tools as systems that need ongoing supervision and direction. If you don’t steer them away from incorrect outcomes, they’ll keep churning out subpar results – so keeping tabs on your automated tools regularly to assess their performance and make adjustments as needed is key in making sure you aren’t wasting budget. We saw this when we supported notonthehighstreet manage the automation of its paid search optimisation, and were able to increase ROI by 140% during the transition of its paid search management to be in-house.

Businesses should also explore various bidding strategies to determine which one aligns best with their campaign objectives – as selecting the wrong type for your marketing campaign can result in further wastage of ad spend. Considerations should include campaign goals, budget constraints, competition levels, and the specific ad types and channels being utilised for the campaign.

Being able to look beyond “headline” performance metrics like “Cost Per Acquisition” or “Return on Ad Spend” to understand what drives these metrics will enable marketing professionals to pinpoint marketing inefficiencies. The threat to the performance marketing space is that AI and greater automation will exacerbate, rather than reduce, wastage. 

Clearly, Google has a strong revenue incentive for increased, not decreased ad spend. It’s time to take the Ozempic to this “spend bloat”, and apply some rigorous fat reduction to ad campaigns, by directly understanding and managing the true drivers of performance.