Recession Marketing Best Practices: Beginning to Look at Your Payback Period

In light of recent economic trends, we’re taking a closer look at the way brands and businesses spend their marketing and advertising dollars. Although these are important activities to continue no matter what the economic outlook looks like, different situations warrant unique responses and decisions.

Payback periods describe the amount of time that it takes to see a return on ad spend. In a slower economic climate, you may need to shift expectations around this metric accordingly.

In this blog series, we want to equip marketers with smart and efficient tactics for balancing costs and results in the midst of a potential economic downturn.

If you missed the first post in the series, Re-Establishing Optimal Budget Allocation + Why It’s Important in a Recession, you can read it here.

What is a Payback Period?

A payback period, or time to convert, is the amount of time it takes to see a viable return on your ad spend. Payback periods are important when you need to prioritize cash flow over strictly top-line growth—a particularly important task in the midst of a recession, or at any time that customers may not be converting as quickly.

Since brands can have two top-funnel channels with the same ROAS (which have drastically different times to convert), this means that for the channel with a longer time to convert, you can expect to see ROAS at a later point in time.

When to Leverage Payback Periods

Many brands choose to leverage payback periods when there is an opportunity to unlock significant cash flow. In other words, you can use them to regain or reclaim marketing dollars. This is often in an effort to save or trim costs or reallocate that money elsewhere.

To reap results, a general rule of thumb is to cut top and mid-funnel channels that have longer payback periods.

You can also leverage payback periods if you need or want to have a secondary metric to CPA (cost per acquisition) or ROAS.

Why Looking at Your Payback Period is Important in a Recession

Payback periods can be a critical metric for corporate and executive decisions, and marketers need to keep a pulse on them to have a response when making or advocating for major advertising decisions.

This metric is also important to the broader financial picture of an organization because it illustrates a break-even point. At this point, an investment pays for itself or recovers the costs associated with making it in the first place.

In a recession, decision-makers and leaders may be looking more closely at spending decisions and cash flow. On top of that, they may want to choose a more ideal scenario (if there are two viable options and a clear winner). When you can clearly illustrate the payback period that is shorter in length or scope, you can provide tangible benefits to the marketing budget and help the organization save money and resources.

How Rockerbox Helps Brands Evaluate Payback Period

In order to make informed decisions on how long (or short) your payback periods are, you need reliable and accessible data in an easy-to-use platform. Rockerbox helps users visualize spending results so that they can make sensible decisions, especially in light of economically challenging times.

When you apply big changes to your marketing or advertising strategy, you must be able to have full context for making those decisions, as well as justification for why they’re necessary. Rockerbox data can assist your team with knowing what to change and when.

Top Funnel Spending Tactics

The first step in changing your top funnel spending tactics is identifying where to cut top-funnel spend. To accomplish this within Rockerbox, you can follow the process below.

• First, identify two priority top-funnel channels that have similar CPA/ROAS and that are both within your target performance goals. 

For each priority channel you select, follow the below instructions within Rockerbox.

• Go to Customers -> Paths in the user interface.
• Use the filters on the left-hand column to select your priority channel or vendor (using the "First Touch is" option)
• Use the summary stats on the bottom left to identify the average time to convert (payback period). On average, how quickly can you expect to get return on investment in this channel?
• Compare the time to convert across both priority channels, and consider cutting the channel with the longer payback period to prioritize cash flow.

Mid-Funnel Spending Tactics

With mid-funnel spending tactics, you must first identify where to invest mid-funnel spend using payback periods as a secondary performance metric.

When you are on the fence about where to cut mid-funnel spend, leveraging the payback period can solidify your decision-making process.

• Identify two priority mid-funnel channels that have similar CPA/ROAS and that are both within your target performance goals. 

For each priority channel you select, follow the below instructions within Rockerbox.

• Go to Customers -> Paths in the user interface.
• Use the filters on the left-hand column to select your priority channel or vendor (using the "Where path contains" option).
• Use the summary stats on the bottom left to identify the average time to convert (payback period). On average, how quickly can you expect to get return on investment in this channel?
• Compare the time to convert across both priority channels, and consider cutting the channel with the longer payback period to prioritize cash flow.

To learn more about best practices regarding payback periods, visit Rockerbox help docs.

Make Informed Decisions with Rockerbox

When a recession is looming, brands need to prioritize cash flow. Sometimes, this means temporarily changing your spending in favor of activities that produce results faster. The payback period can be a tool you use to gather that data and turn it into action.

With Rockerbox, accessing and using such data is simple and straightforward. Take advantage of first-party measurement so that you can prepare for anything. If you’re already a Rockerbox customer, use the instructions above to optimize your own ad strategy. If you’re not a customer but curious about how you could apply these ideas at your own organization to cut unnecessary spend, we’re here to help.