Budget liquidity is a concept that advertisers must embrace if they want to succeed in today's volatile markets, writes UM London’s Lawrence Dodds.
The world of advertising has never been an easy one to navigate, and it has become even more challenging in the face of events, from the rising cost of living and Brexit, to volatility in consumer confidence and inflation at 10.4%.
The current state of the markets has been described as a ‘permacrisis’, with volatility being the new normal. This means that advertisers must have the means to respond quickly, and it’s more important than ever for decision-making mechanisms between clients and agencies to be put in place. The cost of living and inflation have added to the complexity of the situation, and advertisers must be prepared to adapt their strategies to remain competitive and stay relevant.
What is ‘budget liquidity’ in advertising?
To me, it’s clear that advertisers need to let go of any habits or constraints, and focus on liquidity as a way of driving growth. Budget liquidity relies on a change to how advertisers approach in-flight campaign management, focusing on a campaign's flexibility and adaptability. In other words, a campaign is more ‘liquid’ when it has fewer constraints.
Limiting restrictions means the campaign can make use of the best opportunities, potentially turning up valuable opportunities that would otherwise be excluded. A more liquid campaign has the potential to be more effective and drive better results. Opportunities should span timing, media owner, flighting and creative. The difficulty here is ensuring advertisers are able to let go of the approval processes of the past.
A key driver of success around this method is ensuring that your focus is on spending money when category sales are likely to be at their highest, which will in turn drive sales. Advertisers must be able to identify the optimal time to invest in their campaigns to get the most out of their budgets. This means that they need to find new ways to exploit real-time insights – and have a model and set up with their agency that allows them to act at speed. A range of datasets can be utilised in real-time, including attribution models, sentiment, and rapidly updated econometrics.
Facebook and platform-based media owners have been talking about budget liquidity for a while but ultimately limited to their platforms and in a way that encourages full utilisation of their suite of opportunities. What if advertisers took some of these learnings and applied them at a total campaign level?
Taking steps to get ahead
To get ahead and implement change quickly, advertisers must take steps to become more agile. This means that they must be prepared to embrace new technologies and methodologies.
Ultimately, a new decision-making process needs to be established to ensure that insights can be quickly actioned on. Advertisers should discuss new processes and limitations with their agencies. Setting up the correct structure for decision making is going to be important to ensure that action can be taken quickly. Key guard rails need to be in place.
Advertisers can use real-time data analytics to track the performance of their advertising campaigns and adjust their budgets accordingly. By closely monitoring the metrics that matter they can identify any underperforming campaigns and optimise their budgets accordingly. Taking this a step further and producing dashboards that bring metrics into one place from across the business. Too often the flow of information is from agency to advertiser. A single dashboard bringing together both campaign data but also business insights is going to be fundamental if the correct decisions are to be made.
It is important that advertisers should continuously test and learn from their campaigns. By running small-scale tests and experimenting with different strategies, they can identify what works and what doesn't. This information can help them adjust their budgets to focus on the campaigns and channels that are most effective.
The challenge here is falling into a trap with test and learns that results in tactical tests that are either not further substantiated but also get forgotten about in the churn of marketing professionals. A combined learning plan and test and lean library needs to be shared between advertiser and agency.
In addition to exploiting real-time insights, advertisers must also leverage technology to stay ahead of the competition. Econometric analysis is a powerful tool but often sits in a desk drawer being pulled out once a year. Advertisers need to move to newer and more agile ways of using modelled relationships to make decisions with real time data.
Newer techniques and analysis allow for this along with live feeds from third parties and even sales teams. Such information can be leveraged through APIs into buying platforms. APIs allow advertisers to access real-time data and automate the buying process taking the human out of the loop. While this takes a lot, it has been done and will continue to drive dividends for advertisers who are prepared to let go.
Taking it a step further many media owners offer the ability to customise in platform algorithms to respond not just to live environmental data through APIs but also to the bid stream and elements available when an impression becomes available in the rapid bidding environment.
Budget liquidity is a concept that advertisers must embrace if they want to succeed in today's volatile markets. By adopting more flexible and adaptable strategies, leveraging technology, and taking steps to become more agile, advertisers can stay ahead of the competition and drive growth.
The permacrisis in the markets is not going away anytime soon, and advertisers must be prepared to adapt to the new normal if they want to succeed. It's time to embrace budget liquidity and take the first steps towards a more successful future.