EP18: Your Marketing Budget

ProfitLayer with Timothy Dick - Business building explored layer by layer.

“You can't scale your winning ad campaign in a linear straight line. You have to be methodical about it.”Timothy Dick (9:51-10:00)

Managing your marketing budget is essential to getting the most out of your campaigns and remaining profitable along the way. The algorithms used by Google, Facebook, and other platforms give today’s businesses the power to reach their target audiences and convert them into paying customers.

But these algorithms are complex, and there’s a common mistake that businesses make when their ads are doing well. Thinking you can scale your marketing in a linear fashion can cause you to lose money and get worse results from the same campaign.

“Facebook, Google, and other platforms have complex algorithms behind them. There are many variables that go into how your ad is shown, the cost per click, and who sees it.” - Timothy Dick (0:53-1:21) There are many variables that determine how your ads are shown. A Facebook pixel can have more than 150,000 variables that have to be analyzed to determine who sees your ad and who doesn’t. Increasing your budget doesn't necessarily mean your returns will scale proportionately. These algorithms ensure that your best ads are shown to online users who are interested in your product or service. This makes your marketing messages relevant to users and maximizes the return you get on your ad spending.

The Biggest Mistake Businesses Are Making With Their Marketing Budget

But most business owners make the mistake of thinking they can scale their advertising in a linear way. If a business is getting $11 back on every $1 they spend, they assume that spending ten times that much will yield ten times the return. But it doesn’t work that way. Algorithms take time to learn how to present your ads in the most profitable ways. The results you get from an ad are specific to that campaign. Throwing more money into it won’t necessarily mean you get the same results. In fact, it can reset the algorithm in a way that forces it to re-learn how to achieve results with new parameters.

These algorithms typically search for the lowest hanging fruit based on your budget and target market. That’s why a successful campaign may slow down or stop producing the same results over time, even when you don’t change anything. It becomes more expensive and less effective. Making a drastic change to the budget gives the algorithm more money to work with. But it will look at more variables and different combinations, which can confuse the algorithm and hurt your results. More importantly, you may not be able to scale back and get the same results you once were when you started.

The Right Way to Scale Your Marketing

So rather than increase the size of a campaign’s budget, you can get better results by creating multiple campaigns and leaving the existing one alone. You can duplicate your campaign based on the results you’ve achieved and create a new budget. This process is repeatable and more likely to deliver consistent results. You leverage what the algorithm has already learned, and you can incrementally increase your budget to scale results. Increasing the size of your original campaign can force the algorithm to go from looking for something that’s one out of 500 to something that’s one out of 10,000. That’s going to be a lot harder to do compared to looking for a one in 500 across multiple campaigns.

“Advertising algorithms are really good for maximizing your return. But you have to know how to work with the algorithms and give them time to do what they need to do.” - Timothy Dick (1:47-2:20)Knowing how to scale your marketing campaigns helps you achieve consistent and predictable results. Trying to scale linearly is one of the biggest mistakes you can make. When you understand the variables involved in how algorithms work, you can see that it pays off to duplicate your campaigns and scale incrementally rather than just multiply the size of your original campaign. Taking a methodical approach like this will keep your campaigns profitable and grow your business faster.

How to get involvedIf you would like more information about Timothy Dick, and the success businesses have gained through work with him, please visit his website. If you liked this episode, be sure to subscribe and leave a quick review on iTunes. It would mean the world to hear your feedback and we’d love for you to help us spread the word!