You may be familiar with having a diversified portfolio in your investments, customer base, and other aspects of your personal and professional life. The age-old wisdom speaks to the benefits of a portfolio model for future-proofing, reducing damage from fluctuations, minimizing the impact of realized risks, enabling steadily growing profitability, and more. With medium to long-term time spans, it works.
It also works when we look at the digital sales and marketing efforts by your company, whether entering a new market, maintaining a steady course, or increasing your foothold.
Next, I’ll explore the what, why, and how of this sort of model.
How does the portfolio-model compare to traditional models in use?
In the past, it has been advisable to test and identify the sales and marketing method and channel that works best, then focus all efforts on it.
However, the portfolio model considers and prepares your company for the ever-increasing fluctuations in buyer preferences, tech platform whims, and regulatory changes. Instead of seeking a single best method, the portfolio model emphasizes a selection of channels and methods that create positive ROI and support each other.
With the aid of technology and modern processes, this diversified approach can be effectively implemented.
Why should you use a portfolio-model rather than over-optimize?
Using a portfolio model for your digital sales and marketing efforts is advisable for several reasons. Much like the adage of not putting all your eggs in one basket, this model ensures that you
- Are less vulnerable to changes in any single channel.
- Have better influence over your target personas and Ideal Customer Profiles (ICPs) in an omnichannel manner.
- Have a safeguard; if your primary customer acquisition channel is disrupted by platform changes, regulatory shifts, or evolving consumer preferences, you can still rely on other parts of your diversified strategy.
Over-optimizing one channel often leads from misinterpreting attribution and ignoring the influence of other channels, which can be detrimental when relying solely on short-term metrics like last-click attribution. A diversified approach ensures a more stable and sustainable digital strategy.
How to make your resources last and ROI increases?
I’m not expecting you to allocate additional resources beyond what you use now. However, you will need to reallocate a portion of your budget to other parts of the portfolio. Depending on your situation, 30-60% should be diverted to areas outside of what is currently working best. The overall portfolio should aim for a positive ROI.
It’s important to note that not all parts of the portfolio will have the same cost structure. You will need to mix CAPEX and OPEX channels.
- Advertising will require a consistent media budget with minimal starting costs
- Automated email sequences for lead generation might only need a subscription fee rather than volume-based pricing
- Highly-CAPEX channels such as SEO or purchased platforms will have different financial requirements
This example illustrates how to consider resource requirements effectively. Again, the key point is that all parts of the portfolio should contribute to a positive ROI. By diversifying your resources and leveraging different pricing structures, you can ensure a more robust and resilient digital marketing strategy.
What does the portfolio-model look like in different phases of maturity in the market?
When entering a new market, the resource distribution and portfolio width should be broad. In this phase, you are searching for signals to identify what methods work best while eliminating the underperformers. This approach allows for a comprehensive understanding of the new market dynamics and helps in establishing a foothold by leveraging the most effective strategies.
In the phase of keeping your business steady, the focus shifts to maintaining the best performing parts of your portfolio while ensuring enough breadth to adapt to any changes. This involves holding onto the strategies that yield the highest returns and continuously testing new additions to the portfolio. This balance helps in sustaining steady growth and mitigating risks from market fluctuations.
When expanding your footprint, the strategy involves deepening investments in the existing successful parts of the portfolio while allocating a smaller input to explore new opportunities. This dual approach ensures that you capitalize on proven methods while still innovating and discovering additional avenues for growth. By doing so, you can enhance your market presence and achieve a more extensive reach.