3 Things Every CMO Should Know About Geo Testing
1. Geo-Testing Gives You Causal Results
Geo-testing is the only way to get truly reliable results in the current measurement world. It's the only way to understand the causal connection between your media spend and sales. There are two types of geo tests:
Holdout tests are when you turn media off, which means they do not cost additional dollars. These are typically used to validate the lift to sales and the incrementality of a given media tactic (or tactics) at their current level of spend. Essentially, a holdout test answers the question: What is my current level of media spend doing for me now?
A scale test is when you do add more dollars to see the impact they have. This additional spend is slightly offset by the fact that you're also getting additional orders, i.e. you're getting some returns on that investment.
A scale test lets you answer questions like: What happens if I double my spend in non-brand search? Is there a return on that investment? If so, what does the return look like?
2. Test Frequently
Marketers must test frequently because dynamics in the marketplace are constantly changing. That is to say that incrementality and tactics’ contribution to your orders are not static over time - they're dynamic. Some of the main factors that influence your results include:
- The level of your investment
- The level of investment on a certain channel relative to other marketing channels
- Your portfolio mix
- Your competitor's level of investment in similar or other marketing tactics
- Seasonality (the effectiveness of your media around the end of the year, for instance, is different for most D2C brands than it is in February. So logically, your level of investment should be different, too)
The unfortunate truth is that many marketers are just guessing when they invest in a certain channel. Investing large amounts of money into the market to see what works is the least effective way to understand your media spend - honestly, it’s a bit of a dumpster fire.
Testing, and testing often, is the only way to realize the smartest way to invest your ad spend and achieve optimal allocation of your media dollars across different tactics and channels to get the best return on investment.
3. Testing is an Investment (That Pays Returns)
Testing is an investment that pays returns. It’s more accurate than to say that it pays for itself because if you do it right, you may get back more than you put in.
For example, let's say that I do a holdout test and lose $50,000 in sales. Well, guess what? The information I get from that test and the marketing optimization I can perform based on it are worth far more than $50,000. It’s crucial to keep this in mind and to take a big-picture approach to testing, even if the idea of losing that $50,000 is (understandably) daunting.
And that’s why testing, at its core, is an investment. The returns are often bigger than the cost of the test, not just in terms of dollars but also in giving you back the gift of time. The best way I can put it is that testing is an investment in your business. It's not just about marketing - it's about the health of your business.
I have personally seen some brands who hesitate to make the decision to invest in geo testing. It may take them twelve months to slowly, slowly increase their, say, Facebook spend. Think of it as finding the door out of a room with the lights turned off - eventually, you will figure it out, but you’re going to run into a lot of painful furniture and hit yourself in the shin a few times.
Why not turn the light on and go right to it?
Say you run a Facebook scale test, and you find your optimal spend level - if it took you six months to get there, you just gained six months of efficient spend that you would have otherwise not had.
There’s really no reason every marketer out there isn’t running geo tests to understand and optimize their media budget today. For more information, check out our detailed guide on geo-testing like a pro, or reach out to set up a demo with Measured today.