(FREE) Distribute a Marketing Budget Across Various Paid Media Efforts - Part 1
Budgets. Efforts. Prioritizing
Summary of the video (regular type)
My commentary (italics)
Intro
You want to spend money on the marketing and advertising that is going to bring in the most revenue. Keep in mind that not only is the AMOUNT of revenue generated important, but also how QUICK it is generated.
The right amount to spend on different channels is different for every industry/business. What works for another business might not be optimal for you.
Determining top-line budget
How much can you spend on pay-per-click (PPC) advertising?
Many businesses can’t answer this question. That’s fine, there are ways to determine this…
Business financial data
What do you have to spend? Do other expenses need to be cut to invest in growth? What percentage of revenue should be spent on marketing and advertising (ALL marketing, not just PPC)?
Here are some suggestions:
So… 9.5% is a good starting point.
IF the money you spend on marketing and advertising brings in MUCH more revenue - then you should throw as much money at it as you can. (Big) IF you have the capacity to handle that much in sales.
Profitability per sale
How much do you want to increase your revenue? From there, the answer can be reverse-engineered. Use the linked (free) spreadsheet to estimate this amount.
Distribute a Marketing Budget Across Various Paid Media Efforts
What’s a good conversion rate for PPC?
1.5% is a good average.
What’s a reasonable cost-per-click?
$.67 - $2.32 (Google) Source
$1.50 is a reasonable starting point.
Remember - REVENUE IS NOT PROFIT! There are costs associated with delivering your product/service to your customers. Compare the PPC spend to achieve rev goal to your expected gross profit, NOT just revenue! Costing is beyond the scope of this newsletter. More on that at a later date.
How many efforts can you afford?
The word “efforts” is a catch-all term for channels (Facebook, Google), targeting types (search, display), campaigns (brand, non-brand), and/or geographies (US, Europe). Each combination of efforts will get money allocated to it. For example:
Top-line budget = $2,000
$1,000 - Facebook, Core-audience, Europe
$500 - Facebook, Custom-audience, US
$500 - Google, Search, Brand, US
What is your top-line budget?
This will determine how many efforts you can afford. A bigger budget means more efforts. Or, of course, more money on the efforts you choose. See above for more on top-line budgets.
Conversion or goal KPIs
For example, if each lead (from a particular effort) cost $500, allocating only $250 to that effort doesn’t make sense. Based on the cost per lead (or conversion) can you allocate enough to each effort to make it worthwhile?
Coverage goals
The narrower your focus on one component of the effort (channel, targeting type, campaign, geography, etc.) the broader you can be on others. There can be trade-offs. For example:
Advertising in one state vs the entire U.S. might allow you to advertise on Facebook AND Google
Alternatively, advertising JUST on Google might allow you to advertise to the U.S. as a whole rather than just regionally.
Competition
A niche product or service might allow for an advertising budget to be spread over more efforts (less competition). A more competitive industry will likely be more expensive, so fewer efforts might be within budget. Generally speaking the less competition, the less expensive any given effort will be.
If you can’t afford all you want
Start with the tactic most likely to perform well
Think about your target market. What channels (Facebook, Google, Twitter, etc.) will they be on? Use the (free) Distribute a Marketing Budget Across Various Paid Media Efforts spreadsheet and estimate the Expected PPC conversion rate and Expected cost-per-click.
For example, search:
“LinkedIn conversion rates”
“Pinterest cost-per-click”
And so on…
The numbers you find could vary wildly, so find several opinions, if you can.
Give it a reasonable timeline to perform
Not every lead is going to become aware of your product or service and become a repeat customer who refers others - on the same day! Time consists of cycles (a series of events that are regularly repeated in the same order). A day has a cycle. As does a week, month, year, etc. Let a couple of cycles come and go BEFORE you jump to conclusions.
Analyze the performance of the ad
Draw conclusions and act on them. Assume that your first few efforts will perform poorly. Hopefully, with most adjustments you make, results will improve. THAT’S THE GOAL. If you start out perfect, there’s nowhere to go but down! How long to let an effort run before you act on it?:
On average, you probably shouldn’t touch the effort until at least 9 days have passed.
With your insights
Do one of the following:
Optimize your effort. Tweak the variables to (hopefully) get better results.
Shift budget. Throw more money at well-performing ads, less at poor-performing ones.
Extend into a new effort. Start from scratch with a new channel, targeting type, campaign, or geography.
Again, only start new efforts IF YOU CAN AFFORD THEM! Don’t invest too little money into an effort, give it too little time, and then move on to another effort and do the same thing!
Read more about marketing budgets in Part 2.
Comment below
What percentage of revenue do YOU think is appropriate to spend on growth?
How long should a business let an effort run before they act on it?