$5k is Not Enough

$5K is not enough budget to test into a new media channel. It might be enough to test a single tactic within an existing channel. The effectiveness of this is doubtful unless you have an incredibly high conversion rate from a low AOV, a free offering, or a top-of-funnel vanity metric (which is another topic altogether).

For the rest of the brands with revenue-based measures of success, a $5K budget is like using a drop of paint on a wall to determine its dried shade.

New media channels are a gamble. To balance risk and upside, structuring a test with an outcome in mind and spending as little as possible to understand the viability of a campaign, via both performance and scale is responsible.

Early in my customer acquisition career, I was so excited to test everything emerging under the sun. Back then I had to pass on most deals larger than five figures because my more experienced management did not see the upside of what I thought was a nominal risk. So, I had to stay under that figure or make a compelling case for anything greater.

Why? Because I chose not to focus on pushing what is working in favor of the shiny or grass is greener for further growth.

The greater budget freedom was not available to me because I struggled to put together a strategic rationale that explained why X was a better use of resources than Y.

I was ahead of the curve in quantifying funnels (or customer journey) and measuring performance, but could not explain why the gamble was worth a five-figure bet in a manner that demonstrated upside.

As a result, I spent too much time testing networks and platforms that did not have minimums.  Hoping the immediate performance was close enough to our average performance to increase our investment. When it did, I would graduate the channel from my bench into my core mix. When it didn’t and was more often the case, I’d still consider coming back to the channel when there was a material difference between their product and ours.

Like most MLB batters, tests converted in the typical 25% range, so I would reference the difference between an all-star (.300 batting average) and a failure (the “Mendoza line” of .200).

Today, a round minimum figure to test a media channel is too often used to justify required FTEs in order to make sure the brand is taken seriously.

In a rational world, a minimum test budget is a byproduct of bespoke brand KPIs calculated from a bottoms-up approach. I understand a media channel or agency’s cost of doing business, but it shouldn’t come at the expense of their future growth from the brand.

A publicly traded ad platform prompted this rant. They said $5K was enough to test. And in Q4! The brand’s media agency agreed. I requested their forecasted results and what went into the figure. None were used. Just that $5K is enough to test. I couldn’t resist asking what AOV they used in their forecast. When they shared it was 20% of ours, they assured me that their recommendation remained valid.

A month after the test concluded, a campaign recap was not put together to tell its story and how less than the minimum amount was actually spent. The test was a waste of everyone’s time involved because we have inconclusive results of whether or not this channel could be viable.

Still, it stands to reason that a minimum ought to be brand-specific because if your measurement of success is a purchase with a high AOV and lower conversion rates, your minimum will be more than that of a brand with a greater conversion rate (because of a lower AOV or other reasons).

$5K is not enough, in fact, after years of experience, $50K is really not enough to test something like audio. In fact, audio may be one of the less expensive alternative mediums to test into due to creative production costs.

If I could manage my younger self, I would model forecasted results from the bottom up with comparable, actual conversion metrics. Then, incorporate the media channel’s average CPMs, CTRs, and other metrics, creating a red flag when the outcome likelihood of success is out of whack.