Acadia’s Kiri Masters on a New Approach to Retail Media Budget Allocation

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For this episode of Expert Connect, I spoke with Kiri Masters, founder of Bobsled Marketing, which was acquired by Acadia earlier this year. Masters is now the head of retail marketplace strategy at Acadia, and recently produced a report, “Retail Media Allocation,” with her colleague, Matteo Bizon. Masters spoke with me about the downsides of focusing on Return on Advertising Spend (ROAS), the findings from the report, and more. Watch or read the conversation below.

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Alan Osetek: I’m really interested to learn about the idea and concept behind you starting Bobsled originally.

Kiri Masters: My career was previously in banking, and I worked as a commercial banker in New York for JPMorgan Chase, most recently. As I was working this banking job, I also had a little ecommerce business on the side selling craft supplies, and eventually uploaded those products to Amazon. And sort of played around in that sandbox for a little while, realizing that some of my clients at the bank who were legitimate manufacturers, I knew more about Amazon than they did, and they were really struggling. So I found myself giving them advice about Amazon while I was working with them on loan documents and things like that.

So I decided to hang out a shingle as an Amazon consultant in 2015. It was early days in some regards. It was the first year that Amazon ran Prime Day, and over the last seven years, have grown from a solo consultant to having a small agency, eventually grew that agency to 60 people. And in February of this year, sold that agency, Bobsled, to a digital marketing agency called Acadia, which is more of a full-service marketing agency. It’s PPC, SEO, organic social, analytics, and web development. And now I’m the head of retail marketplace strategy at Acadia.

AO: Congratulations on the sale. That’s an interesting scenario to have a full-service agency like that. What we’re seeing is obviously there’s 500-plus Amazon-approved agencies globally, and most of them are Amazon-specific. So I definitely see the future trending towards what you’ve done with your agency, which is a full-service capability. I know you recently published a retail media marketplaces allocation study, and I’d love to chat with you about that. Tell us a little bit about the study. What prompted you to do the study, and what are some of the insights that we can glean from it?

KM: We were starting to hear from a lot of our clients and brands that we speak to a real confusion around how do we allocate media spend across not just Amazon, but these other retail-media networks that are in play already, like Walmart and Instacart, and category-specific channels like Etsy or Wayfair. And we’re in a period where lots of retailers are launching retail-media networks. Ulta just launched one. Albertsons launched one recently. We’re hearing noises about Sephora launching a retail-media network. So the challenges that brands have had for a while now around figuring out how much to allocate to each channel are only going to get more complex as these retail-media networks get stood up.

We looked at—a colleague of mine, Matteo Bizon, who is a PPC manager at Acadia—we started to look at: How are brands currently doing this? How are brands currently allocating their spend? Is that working? And if not, and our thesis was that it wasn’t, what is a good model for doing that, something that is future-proof?

What we found was there’s two main methods that brands are using to allocate their spend right now. One is by retailer and sort of like a proportional percentage of spend going to each retailer based on their historical sales. So if Amazon represents 20% of your company’s annual revenue, then Amazon will get 20% of your total advertising budget. And if Target is 30%, then Target gets 30%. So that sort of historical looking, right, it doesn’t account for new channels or new retail-media networks that spring up. So if you’re a beauty brand, and you haven’t actually allocated out to Ulta or Sephora, you’re going to miss out on that opportunity.

It also doesn’t account for this sort of gray area, a non-retailer media network like Instacart, for example. Instacart launched its self-service advertising platform around two years ago now, and that’s turned out to be a really great media channel for a lot of CPG brands, but it’s not actually a retailer. You can’t see in your P&L as a CPG brand how much of your sales came from Instacart. It just shows how many sales came from Kroger and Sprouts, et cetera. So that model of allocating by retailer sales is flawed.

And then the second model that brands use is allocating by metrics and performance metrics, and the most common one there being ROAS. I’ve got a little bit of a vendetta against using ROAS as commonly as it is, and I’m sure, Alan, you’ve got a lot to add here as well. But ROAS really is more of a profitability metric, and it’s great at measuring the profitability of your ad campaigns. What it’s not suitable for is as a metric for growth or anything growth-oriented—so growing market share, growing new-to-brand orders, things like that.

But we just find that because ROAS—which is Return on Ad Spend, ROAS—is easy to calculate, it’s easy to compare, and it’s a metric that a lot of executives understand. And so it just ends up becoming this default metric and a lot of brands end up just sort of deploying their ad spend to the channels which have the highest ROAS. And that is unfortunately not going to help you achieve any kind of growth outcome if you’re just chasing the highest ROAS all the time.

So that’s how brands currently do it. They’re not super happy about it. I did do a poll of some brands—it was a fairly small sample, it was about 30 or so brands—but only 20-something, 21% of those brands are actually happy with how they’re actually allocating their media spend. So the model that we came up with was—it’s going to sound intuitive and logical to everyone listening to this probably—but it’s actually to look at the marketing funnel, and plotting out the universe of ad units and targeting options into that marketing funnel, and focusing in on the stage or stages that you’re focused on from a brand or a product level.

For example, if you are a brand that has a new product that’s launching, you’re probably going to be focused on the top-of-funnel awareness ad units and targeting options. If you are a CPG brand, your universe of options might include Amazon, Walmart, and Kroger. So you just look at those ad options that are in that awareness stage. You don’t bother with sponsored product ads. You don’t bother with those lower-funnel tactics. You’re just looking at “What is top-of-funnel across all of the ad networks that we’re currently using,” and strip away all of the complexity from those lower-funnel tactics.

That’s the broad concept, and it seems to have sort of really hit a note with a lot of brands. We presented this model to Colgate-Palmolive’s digital summit. It is simple. I think that’s the draw of it. It makes a lot of sense. It allows brands to think about things in a different way.

“The challenges that brands have had for a while now around figuring out how much to allocate to each channel are only going to get more complex as these retail-media networks get stood up.”

—Kiri Masters, Acadia

AO: How do you, as an agency, change your processes internally to move towards this model? And the second part of the same question, but on the brand side—how do you educate and evangelize within your clients to move towards this model or at least test out this model?

KM: Well, the first question is: How do you actually do this? What we do is we’ve set up some parameters around campaign naming and campaign tagging in our ad tech solution. There’s going to be some gray areas about what tag a certain campaign should get. Some campaigns might be suitable both for brand defense as well as growth, for example. So there’s going to be some interpretation involved. But essentially, tagging campaigns with the funnel stages, that’s one way to actually then pull that into a report for a client, especially looking across multiple channels, and then sort of show—this is what we’re spending at each stage of the funnel and the relevant metrics there as well.

And one thing to point out, which my colleague Matteo has really put a lot of thought into, is for each stage, what is the right metric? I just sort of got on my high horse about ROAS, but that can be a great metric for bottom-of-funnel campaigns. And then mid-funnel, you might be looking at metrics like clicks, click-through rate, and then top-of-funnel, impressions and things like that.

And then your second question was…

AO: Based on how your clients are organized internally, how do you evangelize and educate on this new model that you’re trying to implement across some of your clients?

KM: Right. So the biggest question, something that we need to press on a little bit, is what is your objective? And that can be different at the brand level, at the product subset level, and at the product level. So you could have an assortment where a lot of the assortment is fairly mature in its life cycle. But then you have some products that you’re launching, and those are going to have more of an awareness goal—you want to capture the market, build awareness. And your existing product lineup might be more focused on profitability and really sort of managing to a certain contribution margin.

So the first thing that we need to do is really clarify with clients what is the objective across your assortment and nailing that down. That can take a little while. Until we actually have that information and everyone is in agreement on that, we can’t really be successful. So that is certainly the first step, is understanding what the objectives are for each product. And then putting together the strategy and executing on that is what we do every day, but that first step—it really can’t be missed.

AO: So from a reporting or an output standpoint, which kind of attaches to the goals of the campaigns, are you trying to move towards reporting and communicating to your clients—across marketplaces at each funnel stage—metrics or results you see within your campaigns? Or is the client more interested in ASINs or SKU sets for campaigns? Are they looking at things at the ASIN level? How do they analyze results across their product sets?

Kiri Masters: Yeah, it’s going to depend on the brand. We’ve got some clients with fairly narrow assortments. It might be a beauty brand that has an assortment of 20 SKUs, and then they’re certainly going to want to look at the SKU level. And then for some brands with—particularly CPG—a lot of SKUs, they’re more interested in a product subset level. So it’s going to depend. Again, I would come back to what is the objective and which products have different objectives here. Of course, we can also build in target profit margins for each product if we need to, if that’s the focus. But again, if the focus is on growth and market share, then we’re really not looking at profitability metrics like ROAS or ACOS.

“If the focus is on growth and market share, then we’re really not looking at profitability metrics like ROAS or ACOS.”

—Kiri Masters, Acadia

AO: Before we switch topics, any other insights from the study you want to mention?

KM: We’ve started using this approach with our clients and with prospects as well, and it has been really, really eye-opening. I do a lot of this kind of work, writing and thinking about problems in the industry, and this is probably one of the biggest topics that we’ve covered in terms of interest and how it’s been received. So I knew that it was important, but I didn’t really appreciate how much of a pain point this was.

So it’s good to start getting feedback from people, and particularly the comment about ROAS being a blunt instrument. I think that really resonated with a lot of practitioners who find they’re trying to steer their organizations away from just focusing on ROAS, and they’re constantly looking for some external validation that that is the correct way of looking at it. And that has kind of blown me away how much—I think possibly mostly at the executive level—ROAS is holding a lot of brands back.

Alan Osetek: You have kind of two sets of agency types. You have one set which are the pure-play Amazon agencies, of which, I mentioned before, there’s at least 500-plus of them, according to Amazon, based on Amazon’s list of approved partners. And then there’s the traditional performance media agencies, the global ad holding companies that are all trying to build out their ecommerce and marketplaces practices as well. But I think we can agree that the real goal here is, in the longer-term, is to do what Acadia and you are doing—what brands really want to do is reach consumers in all channels and educate and inform, and eventually, in many cases, sell. So how’s it going, and what are some of the steps you’re taking to try to integrate the Amazon marketplaces channel with other channels as a part of an agency organization?

Kiri Masters: Well, I think that there’s two ways to look at it. And before we joined Acadia, being a specialist Amazon or marketplaces agency—and just to be clear, we’re Amazon, Walmart, Instacart, and Target. So we still do a lot with Amazon, but we do manage other marketplaces as well. Even so, being a specialist is very powerful. And I think there’s a long list of pros and cons about working with specialists versus working with a full-service agency. The trap that a lot of full-service agencies get into is offering a solution that they’re not fully proficient in and disappointing clients. And we have certainly seen our share of clients come to us because they worked with a generalist agency that didn’t really know what they were doing with Amazon and were really overwhelmed by the results.

In contrast, the benefit of being part of a generalist agency or end-to-end, really, is that a lot of clients are overwhelmed with how many vendors they have to work with. And they also want to consolidate just the number of agencies that they need to check in with and manage. So when you’ve got a relationship that you really trust, it’s really nice to be able to say, “Okay, let’s look at TikTok now.” And we’re seeing amazing results from brands—beauty is a big one, but outside of beauty as well—who stand up a TikTok strategy, whether that’s with influencers or the brand themselves. And so it’s really nice to now have that capability with Acadia, for example, where we have a really strong social team and other capabilities as well.

So if you’re a brand thinking about this, there are pros and cons, for sure, about working with specialists versus a one-stop solution. But ultimately, we found that for every client that we had who really wanted to work with a specialist, there were more who wanted to have more full-service features that we weren’t able to offer.

AO: Yep, absolutely. I understand that. In the last 10, 15 years in the digital media ecosystem, emerging platforms like Amazon and the other marketplaces typically do start with specialists. And eventually, there’s—as you nicely put it—an array of choices for brands who want to go the generalist versus specialist route. So it’s interesting to watch the marketplace evolve. So—oh, go ahead.

KM: Yeah, and maybe saying generalist is probably undermining it a little bit because within our team now at Acadia, we’re all marketplace specialists. We don’t personally manage TikTok for clients. So it’s like specialists within a larger context, just to clarify that. And I think that that’s the direction that we’re going to be going in, is, yeah, certainly specialists managing each stage for a client. But it’s one statement of work instead of working with five different agencies.

Alan Osetek: And I bet the next trick that always comes up is using a restaurant analogy. You need to have really strong waiters who can show the menu of all the great array of choices that you can bring together to have a great meal. So it’s hard to find those generalist account strategists who know enough about how to bring together the array of choices. So the research you’ve just conducted, it seems as though you’re taking that research and moving it forward in application within your agency. What are other topics you are wrestling with right now within the agency as this marketplace continues to evolve?

Kiri Masters: I’ll run you through the rest of what 2022 looks like. We’ve got Prime Day coming up; that’s always big. The backdrop this year is around the supply chain and inflation. What’s happened in the last couple of years is there’s been pretty interesting and dynamic market trends shaping what Prime Day looks like, or the Cyber Five.

So, and I have to give credit to Russ Dieringer from Stratably for this quote, but it was 2021 was about getting product onto the shelves; 2022 is about getting product off the shelves. And so that is a really interesting context that we’re looking at, and it seems to be quite category-specific as well. Who’s overstocked? Who is trying to desperately get a hold of someone at T.J. Maxx to buy their inventory? That’s the challenge that we’re dealing with around Prime Day this year.

Then the other topics that I’m going to be covering off this year from a research standpoint, we’re working with our analytics partner, Analytic Index, to do some research around promotions on Amazon and sort of like the shopper marketing promotion landscape—things like coupons, and Prime-exclusive discounts, and things like that—and looking at what is the effect of running those promotions on your performance metrics, like sales rank or share of voice, things like that. So we’ll be looking at where you get the most bang for your buck in terms of those shopper-marketing activities on Amazon.

This interview has been edited for clarity and length.