Most of us know the term portfolio management, maybe as it is applied to investment portfolios—by diversifying your investments among stocks, bonds, bank accounts, and other investments you reduce your risk dramatically but have about the same upside potential. And some of you know how to balance a product portfolio, by making investments in product development based on which ones have the highest potential for profit. But how many of you practice portfolio management for your marketing budget?
Multichannel marketing is no longer a novelty—it is part of most of our day-to-day existences. But as we move to more feedback-based marketing approaches, such as Web search and e-mail, we find that what we should invest in those tactics depends on what they return. The whole Marketing Performance Measurement (MPM) movement is based on that principle.
And it’s a principle that I wholeheartedly subscribe to. One of the criticisms that a couple of folks made about our book, Search Engine Marketing, Inc. is that it has too much about measurement and was not purely about search technology. But I think that’s wrong. I believe that search marketing is more about marketing than search. That’s why measurements are so important.
Much has been written, by me and by people smarter than me, about how you can make changes and use the feedback to improve your approach for the next time. I like to call that Do It Wrong Quickly, but you can call it whatever you want as long as you do it.
But multichannel marketers have a larger problem, one that goes beyond optimizing within a single channel by tweaking your Web design or changing your ad copy. Shouldn’t we use this feedback to allocate resources among competing channels? Why must we agree at the beginning of the year that Paid search gets 15% of the budget when we see as the year goes on that it is driving far more business than magazine ads? If you use a portfolio approach—constantly balancing your resources across channels—you’ll optimize your total budget rather than sub-optimizing each channel individually.
If you use a multichannel marketing approach, you must constantly decide how to allocate the budget among competing marketing tactics. Imran Khan, Chief Marketing Officer for Internet lender E-LOAN, uses a portfolio approach to determine which tactics get “credit” for each new customer.
E-LOAN spends 70% of its marketing budget between TV and search marketing, and uses rules to determine which gets the credit for a new customer. Imran explains: “When people are searching for our brand name when they have never been to the site before, we credit an awareness channel like TV. When people search for home equity loan, we credit search.”
The tactics that get more credit become larger parts of the marketing mix over time. “To do a good job of budget allocation, we need to do a good job of credit allocation,” Imran says.
Do you measure which channels get credit for your sales? If you do, then you already have the tool you need to optimize your marketing channel portfolio. If you don’t, it seems like a good place to start working on before your competitors get there.