Scalability vs. Efficiency: The Marketing Paradox

Whether they know it or not, marketing teams are caught in a paradox. On the one hand, greater personalization helps you craft high-impact messaging with better conversion rates. On the other hand, drilling down means that you inadvertently exclude a broad audience. 

In general, the same tactics that work for a specialist audience won’t scale well when you try to grow your brand and increase your customer base. Striking the right balance is a battle between scalability and efficiency. 

The scalability-efficiency spectrum

There is an old saying in the software development space that goes, “Fast, cheap, good… pick two”. It’s a funny way to highlight the fact that there is always a compromise when delivering services. 

The principle holds true for marketing as well. Surgically targeting users with efficient marketing comes with a cost. A narrow approach to audience targeting means your message can be too specialist and too specific to engage a wide audience.

Let’s be clear, scalability and efficiency aren’t binary. It’s not one or the other. The two concepts exist at opposite ends of a spectrum. You can try to find a blend between the two, but just know that moving towards one involves moving away from the other.

By scaling your marketing, you are diluting your core message. By drilling down, you risk alienating potential buyers. It’s not an easy problem to solve.

Now let’s take a deep dive into this paradox and see how grappling with it can help you with your marketing.

Scalability vs. efficiency: Pros and cons

There is a popular belief in marketing circles that suggests you can get maximum ROI on your marketing if you target:

• The right people
• At the right time
• With the right message

However, scalability takes a different approach. It suggests that a unified message sent to a wide audience across lots of different channels will generate more revenue and outperform an efficient approach. 

Now, both of these ideas can be valid at the same time. It’s a paradox after all. But these statements holding true depends largely on the context, business, product, audience, and market conditions. 

Efficiency pros and cons

The pros of an efficient approach are that by targeting a well-defined niche, you can deliver messaging that really speaks to them. Because your marketing is tailor-made for this audience, they should:

• Understand your solution more fully
• Feel that your brand really “gets” their pain points.
• Convert at a higher rate

The downside, of course, is that your reach and total addressable market (TAM) are smaller.

Scalability pros and cons

A scalable marketing approach requires your solution to connect across geographical regions, broad demographics, professions, preferences, and a variety of socio-economic elements. Succeeding at this approach means that something about your product needs to transcend these factors.

The pros of this approach are:

• Improved brand awareness
• Improved brand equity

However, it’s not only good news. Some of the downsides of scalability are:

• Lower conversion rates
• A diluted marketing message
• Less effective lower-funnel messaging

The different types of mixes of efficient or scaling ads 

Digital marketing teams have been dealing with the paradox of efficiency vs. scale for many years. While they might not be conscious of it in these terms, they understand the difference between broad and narrow targeting.

While some exceptions exist, most businesses use a combination of each approach. As we said, it’s not one or the other; it’s a spectrum.

Let’s use a simple sales funnel to illustrate.

Awareness: at the awareness stage the broad net of scalability applies.

Interest: More targeted, but still accessible to a wider audience.

Decision: Some degree of personalization with more specific messaging

Action: Efficient, tightly targeted ads with a high degree of personalization.

How scalability and efficiency affect audience targeting

Scalability vs. efficiency is present in audience targeting too. Some of the most critical work you can do before you start a business is to determine your ideal customer persona. Understanding who your perfect target is defines:

• Your messaging
• Where you advertise
• Pricing structure
• Features
• And more.

However, as you add different characteristics, like age, gender, educational status, location, interests, salary, and so on, you shrink down your potential audience.

While this can be a smart idea for niche products, you might find that you are:

• Competing hard with other companies for a narrow audience, which can get expensive
• Soon run out of people to target, which limits your revenue
• Your business becomes impossible to scale because there is no audience to move into
  

When to use efficiency and when to use scale

For small businesses with low advertising budgets, efficiency is best. You need to make every dollar count, and one of the best ways to do that is to carve out a niche. Similarly, you can take time to really hone your message so that it engages your audience. Finally, you can add a high degree of personalization to your pitches and messaging.

Scale is best when you’re a large business with an ample ad budget. Aggressive growth or scaling of the business is about brand awareness, visibility, and reach. If you want to achieve this kind of market growth, you need to lean toward the universal nature of your product.

What KPIs should you look for

Some of the KPIs that efficient marketing businesses should consider are:

• Return on ad spend (ROAS)
• Customer acquisition costs (CAC)
• Lifetime value (CLTV)

With companies trying to scale their offering, conversion metrics are less important. As we’ve seen with many startups like Uber and Amazon, aggressive expansion involves high burn rates with the hope of eventually gaining a foothold in the market.

The idea here is that you invest money to boost brand awareness and recognition, eventually leading to sales down the line. So while conversion rates might be lower than if you are running efficient campaigns, it’s not the main focus when tilting your marketing towards scalability.

That said, there are still some metrics that you should keep an eye on, like:

• Churn rate
• Net promoter score
• Sales revenue
  

Certain companies are built explicitly around efficiency

Some businesses are built around efficiently targeting narrow or niche audiences. Some good examples are:

Skateboard manufacturers: While your target market is narrowly defined around skateboarders, it is still a multi-billion dollar industry.

Environmentally conscious consumers: This cohort makes up a small amount of the market, yet it has been a huge growth industry in recent years.

Remote workers: This audience segment also emerged in recent years, alongside products geared towards them, like ergonomic furniture, flexible desks, and even health and fitness products.

These examples are all audiences that could be reached by efficient marketing that relies on hyper specific messaging that understands their pain points and offers them solutions.

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Scalability vs. efficiency: what does the research say?

In the Rex Briggs book, SIRFs Up – Catching the Next Wave in Marketing, Briggs introduces the concept of the Spend to Impact Response Function (SIRF). It’s a simple idea that graphs the total marketing spend and the revenue impact. Over 10 years old at this point, the book talks about how better data analysis would be the future of marketing.

One of the findings in the book showed that, after a certain point, the SIRF curve begins to flatten with each extra advertising dollar. It argues against target reach because the more you target each individual, the more diminished their response.

Secondly, Briggs argues that if you raise your ad budget, targets become less precise anyway. Much of the arguments rest on the assumption that surgically targeted campaigns cost more per impression or audience member.

Researchers have long understood that targeted ads were more efficient than their broader counterpoints. For example, a survey by the Network Advertising Initiative (NAI) showed that targeted ads were more than twice as effective as broad ads.

If anything, this effect has become more pronounced. Research from Nielsen shows that targeted ads that reached their intended audience provided a return of $2.60 per $1, with poorly targeted ads generating a mere $0.25 per $1.

Finally, a video marketing by MetrixLab, in conjunction with Meta, showed that ads that targeted a core audience can scale well. In a test of over 100 ads, 68% maintained or improved their performance when shown to a broad audience. In auction-based marketing, such as Meta Ads, it seems that excessively tight marketing scalability was not a hindrance to connecting with wider audiences.

These figures get at the crux of the issue. Targeted ads are more expensive, but more precise. Scalable ads produce bigger overall returns. For many companies, there are times when they need to grow and times where they need to extract maximum ROI from marketing efforts.

How strong data analytics helps you move between each end of the spectrum

One of the hallmarks of an efficient marketing strategy is high levels of personalization. Big Data and analytics are the cornerstone of understanding your products and customers so you can deliver better marketing and advertising. This wealth of information provides businesses with accurate data to power data-driven insights.

In our opinion, businesses need to consider scalability and efficiency when formulating their marketing strategies. With the right technology and tools, even scaled up marketing can use data to deliver more personalized and meaningful customer experiences. Our company (e-tailize) offers integration, marketing and data analysis software for marketplaces such as Bol.com and Amazon. Be sure to take a further look at the website if this interests you.

Need more information?

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Ricardo Rubino

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06 – 81 10 26 49

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