Imagine the most common business with the most usual competition, an average check of $ 2000, a conversion rate on the site of 1%, and a margin of 20%. That is, 1 out of 100 people who came to the site will make an order on average $ 2000. And you will receive $ 400 of net income. Now imagine the most ordinary specialist in contextual advertising, which drives traffic to the site at the most usual price of $ 3. / click, and estimates its work at the most usual amount of $ 300 / month.
How much should I invest in the advertising budget in order to return the money invested in advertising?
Let’s use the simple formula: (Budget / PPC * Conversion * AverageClock) * Margin — (Works + Budget)
Конверсия на сайте
Стоимость рекламных работ
Средняя цена клика
ПРИБЫЛЬ ЗА МЕСЯЦ
ПРИБЫЛЬ ЗА ГОД
It turns out that in the most usual situation, you will receive a useless turnover of almost 300 thousand US dollars, having worked for a year free of charge. Fortunately, as you can see, increasing the percentage of conversion in the calculator, the situation is easy to fix. Even it makes sense to throw a specialist up to 10 thousand US dollars. For the work, if he can reduce the cost of the click and lead more targeted traffic to the site, which will increase the conversion and pay off tenfold. But according to plan everything can not be. The funeral company of the best friends of the expert is influenced by the planned profit of the client: competitors’ activity, seasonality, unpredictable behavior of the target audience, limited possibilities of advertising systems for automation, shortage of the advertising budget for full coverage of demand, a long period of statistics collection, client’s wishes and news about Donald Trump. Almost always, forecasts, especially before the beginning of work, are far from reality.
Regardless, whether the client is advertising a freelancer or an agency, the following points should be considered:
- «Expensive» and «Cheap» are measured not by investment, but by profit. To invest 20 000 USD … and get 30 000 USD … it’s cheap. To invest 5 000 U.E. .. and get -3 000 U.E .. — it’s expensive.
- The higher the investment — the higher the probability of payback of advertising. With a free amount in stock, a specialist can flexibly distribute it, and conduct experiments.
- The higher the skill level of a specialist — the more effectively he will spend the advertising budget, the more likely he will step over the payback threshold and the faster the sales volume, no matter how much his services cost. But you need to consider that demand is not rubber. If the specialist offered a plan with the cost of works in 20 000 U.E./ month and a budget of 100 000 U.E./ month for advertising baseball gloves in Ukraine, then something is wrong here.
- More experienced professionals are more expensive. There are, of course, real talents at a very low cost, but losing a customer risks much more than you can save. A professional must first of all be able to evaluate himself.
- A specialist should be able to analyze the payback of an advertising campaign (if the client provides him with data on marginality), and make adjustments to at least roughly follow the plan. Without a payback analysis, a customer can bet on red at a nearby casino with the same chance of a return on investment.
- The result in marketing is achieved only by testing hypotheses, so at the start of the advertising campaign the customer should have a cash reserve. Advertising on the textbook does not work. If the customer restricts the contractor, demanding immediate results, and builds a business in anticipation of a full payback for a month, then most likely in a month his business can be closed, despite the wild desire of the contractor to help.
With a technically simple project, but requiring a lot of creativity, the freelancer will do better, because it is more flexible in time, and the cost of services named by them probably will pay off. A complicated project is worthwhile to entrust to the agency, since the basis of the developments in automation will be better than manual work — there is such an opinion … And if the freelancer in stock and paid KeyKollector and Alytics and Serpstat, then why pay more to the agency? In the rest, the differences between the freelancer and the agency are insignificant, the key to the payback of advertising is the mutual understanding between the client and the contractor.