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Efficiency and growth: The new focus of risk and reward

If you’re struggling to plot a path towards sustainable growth for your company, an efficient frontier might be the tool for your business needs. Jason Juma-Ross, Director of Tech Industry Strategy at Meta, outlines how this concept can help marketing leaders prepare for a competitive future.

Jason Juma-Ross, Director of Tech Industry Strategy at Meta
Jason Juma-Ross, Director of Tech Industry Strategy at Meta

Have you ever poured time and effort into a complex recipe, only to be disappointed at the end? I’m sure we can all relate to that.

A marketing plan is surprisingly similar to cooking - both are dependent on “ingredients” working in tandem. For businesses, those ingredients might be the quality of the data, the risk and reward of certain strategies, the ad platforms, and so on.

The critical thing in each situation is to achieve the right balance, and for a business, to have a mechanism to adjust course - like adjusting the seasoning.

Risk and reward in particular is something that I’m sure all leaders have become well acquainted with, particularly when braced against complex headwinds such as global macroeconomics and softening consumer demand. 

The best leaders will be managing current investments while remaining focused on customers and competition. Some companies may be prioritising return on ad spend over lifetime value, while others stack incremental sales over consideration.

Leaders will need to evaluate the risk of whichever strategy they land on to determine what’s best suited for their business.

That is why the most forward-thinking leaders should be considering an efficient frontier. This is a way of conceptualising a portfolio of investments by return and risk. It’s a method to determine the highest expected return for a defined level of risk and can reveal how competitive your business is.

The following are three strategies, outlined in Meta’s recently published whitepaper Turning Headwinds into Tailwinds: Levers for Growth, that your business can develop on the efficient frontier. These strategies have been handpicked in order to drive growth whilst minimising risk.

First party data is the foundation of better decision-making

Good first party data can transform your company’s approach to decision making and minimise risk across the board. In 2023, first party data will be one of the most effective routes to personalisation.

But before embarking on a new first party data strategy, marketers need to ensure the data has robust performance signals that can deliver incrementality. Both of these features are needed to measure return effectively.

To go without these will mean your business will fail to achieve the returns needed in order to build efficient implementation.

At a bare minimum, modern first party data strategies will need a direct API, such as Meta’s Conversions API, to represent real business outcomes in the highest quality possible.

A tool like this is well suited for an efficient frontier model as it allows marketers to accurately attribute incremental sales to specific activities. It can eliminate double-counting or over-attributing success where it is not merited. 

Implementing a performance marketing framework

Performance is no longer just one stream of marketing strategy - it can be applied as an overarching framework for all your activities.

During a downturn most marketers will divert budget to efforts that will provide return on investment in a shorter time frame. But this may not be the most efficient strategy for the long term.

A downturn is a chance to embed brand marketing into a structured performance framework, allowing a business to drive visibility, results, and accountability across all marketing tactics.

Heavily relying on only one set of tactics to the exclusion of others may result in inefficiencies. When you remove any primary objective - awareness, consideration or conversion - from a campaign, you risk decreasing incremental return on advertising spend1.

Like first party data, setting up this performance framework can help businesses gain clarity on how brand tactics can contribute to incremental sales or retention.

This strategy will help your business stay competitive, aligning multiple marketing efforts towards maximum return and setting the business up for long-term growth.

The art of testing and learning

Setting up an efficient frontier takes time and patience. A robust efficient frontier takes work and a commitment to continuous test and learn.

Meta recently hosted roundtables with senior members of the industry, all geared towards discussing how companies can continue to achieve growth.

For Mandy Eales, Regional Vice President (Partnerships) at Tealium, testing and learning has a significant role to play.

“A test and learn mentality can achieve innovation, which in turn is the enabler of market competition,” she said. “By adopting this methodology, marketers can improve efficiency and performance by eliminating unproductive investments.” 

What is foundational to this approach is understanding that what may work for one business may not work for another. That’s why it is crucial to test, evaluate, and adjust in building an efficient frontier. As leaders, this mentality is something that can be promoted from the top down, and should be implemented business-wide.

Building an efficient frontier is no mean feat, but that’s why these strategies spelt out above are so crucial. Making the most from first party data, setting a strong performance marketing framework, and implementing a test and learn culture are all tools that can build your efficient frontier. Done well, and this will allow you to minimise risk while powering your brands through to growth.

To learn more about how businesses can build for success, download the full whitepaper “Turning Headwinds into Tailwinds: Levers for Growth.”

Source: ‘The Synergistic Impact of Multi-Objective Buying; Examining the Effect of Simultaneous Ad Strategies on Facebook’, Meta, September 2022

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