Top 6 Mistakes Brands Make When Allocating Retail Media Budget

Matteo Bizon is a PPC Specialist at Bobsled, an Acadia company.

Last week, I introduced Bobsled’s new budget allocation model for retail media as part of a comprehensive preview of our recent research project launching on May 19: Retail Media Allocation. We want to bring important information to light about the best ways to navigate budgeting across a vast lineup of new retail media options and channels. 

One of the most common trends I’ve noticed among a significant percentage of brands is that a lot of their retail media budget is allocated to certain channels based on outdated or historical factors, resulting in the loss of opportunities for increased growth or profit. 

Today, I will highlight six of the biggest mistakes brands make when allocating retail media budgets using an older model. Our research has revealed more advanced techniques to help sellers understand the most efficient and profitable ways to spend money in retail advertising. Let’s jump in with the hopes that this information helps to clear up any major questions you may have about your array of retail media network options. I strongly encourage you to sign up for our May 19th Webinar, where you can go on a deep dive into our new retail budget allocation research.

1. Allocating Retail Media Spend Based on Historical Sales

A significant portion of Bobsled’s brands has divulged that they mostly allocate retail media budgets based on overall performance. This means that clients are mostly looking to the past, comparing historical channel sales to determine where money should continuously be funneled. 

This approach is very rigid and leaves little room for experimentation - something that is almost a necessity among brands competing in the midst of growing retail opportunities. It can be increasingly difficult for brands to start advertising on new platforms. Over time, investment into new platforms will be underdeveloped, convincing brands that they have no potential. 

Brands should instead focus on prioritizing awareness and consideration of new platforms, which are certainly less profitable parts of the funnel but are absolutely vital to their long-term success. 

2. Failing to Allocate a Test-and-Learn Budget

Again, experimentation is key. Brands must implement a sort of test-and-learn budget that will help them jump onto new opportunities as they arise. On average, sellers usually don’t allocate any of their overall marketing budgets to R&D or experimental efforts. 

We recommend starting with a small percentage of your budget, such as 10%, to dip your toes in the waters of these new platforms in order to learn what will work best. You may discover new ad types or platforms that will bring awareness and growth to your brand. Once your test-and-learn budget has proved successful, you can immediately reallocate that spend into your usual budget to continue testing new initiatives. That way you can prevent an old test-and-learn budget from continuing to experiment when those methods have already shown much success.

3. Focusing on One Specific Platform

A lot of brands place extreme focus on a single major platform instead of considering the bigger picture. In many cases, brands delegate different platforms to different teams within their company, creating a siloed workflow. This makes teams much less likely to share knowledge and information, which could contribute to vital growth and improved performance overall. 

This could even cause teams to compete internally over budget allocation. Instead of keeping allocations separate, coordinate team efforts to come up with the best model of success. Team members should all have the company’s best interests and ultimate direction in mind so the organization can start to function more smoothly. 

By working together toward the same goals, brands will have more freedom and financial flexibility to research new platforms and ad opportunities that can bring better growth in the future.

4. Making ROAS and ACOS the Default Targeting Metric 

A lot of brands tend to focus on ROAS (Return on Ad Spend) or ACOS (Advertising Cost of Sale) as the biggest targeting metric across all platforms and ad types. During my research, I have found that this typically happens for a few reasons. First, both of these metrics are fairly universal and very easy to measure across any and all platforms. A lot of UE focus is placed on these metrics due to their general legibility. A lot of brands want to focus on it since it is so widely available, but it’s actually not the best metric overall. 

The metrics you should be focusing on instead can depend on your main objectives as a brand. If you’re looking for increased growth in market shares or revenue, measuring ROAS won’t be helpful as this number does not directly reflect a brand’s potential for growth. It is impossible for a brand to branch out onto new platforms while being so limited by its ROAS measurements. 

If the goal is to grow a bigger market share, that is better achieved through a greater share of voice, meaning that you may have to bid higher and appear more often with your ads. You might need to focus on long-term gains, expanding your keyword searches to capture broader terms. It’s important to focus on the whole picture and implement strategies that would capture as many sales as possible. 

5. Getting Lost in the Many Metrics Available on Each Platform 

Similar to the previous mistake of looking at ROAS too often, it can be easy for brands to be consumed by all the different reporting metrics available on each of the different platforms. Since every retailer platform has many different levels of metrics targeting, brands often make the mistake of allocating their money and time to the wrong ones. 

As an example, take a look at everything you can do with Amazon DSP. You can get different insights into the number of Subscribe and Save offers that came from your paid ads. You cannot record the same insights with PPC campaigns. On the other side of the coin, Amazon PPCs can give you important data about search impressions, as well as your share of the targeted keyword campaigns. It’s important not to lose sight of the brand’s core digital advertising KPIs, which focus mainly on growth and profitability. Consider the cost for each action (impressions, considerations, or conversions).  

6. Not Knowing the Objective of the Brand

In March, we created a podcast episode dedicated to detailing the differences between growth and profitability as key objectives. These two major goals require very different and oftentimes opposing strategies in order for a brand to see its success. Additionally, brands will be measuring completely different KPIs to achieve growth than the KPIs they want to measure for profitability. Unfortunately, this is an uncompromising truth as brands must choose one or the other. They cannot ultimately complete two objectives at once. If your aim is market share growth, you should be increasing your overall ad spend. On the other hand, bidding for broad keywords may require even higher - and more frequent - bids across all channels. 

A good recommendation is to include impression-based ads that, while more expensive, foster awareness and growth. Those looking for profitability should naturally focus on top-performing ads. 

It is okay for a brand to focus on a mix of goals over the course of its lifetime, but it is important that the objectives are clear and singular at any given time. If anyone who is a part of the brand, from the channel partners to the third-party marketing agency, and they do not know what the ultimate objective is, there is no way to clearly communicate and effectively accomplish those goals. 

Make sure to sign up for Bobsled’s extensive retail media budget allocation research webinar and research being released on May 19th!