Why is internet marketing the only growing industry right now? Companies are tightening their marketing budgets, but increasingly shifting budgets to Internet marketing. Because?
A pioneer in marketing John Wanamaker once said, “I know half my advertising money is wasted; the problem is I don’t know which side.”
This is the reason why internet marketing is growing. The effectiveness of Internet advertising can be accurately calculated. No need to guess if AdWords advertising pays for itself.
An AdWords eCommerce campaign
For an online merchant, Google Analytics and eCommerce tracking provide an easy way to track the profitability of your advertising. The reports show you directly how much you’ve spent on AdWords advertising and how much you’ve earned. The effectiveness of traditional advertising is difficult to track in the same way.
Calculating the effectiveness of advertising can be more difficult when the website does not sell anything directly, but the deal is generated after contact, either face-to-face or over the phone.
A company whose website cannot be purchased directly
When it is not possible to transfer products/services to the shopping cart and pay directly from the website, you should start exploring certain key values instead. They can be used to calculate and evaluate the profitability of marketing.
Such websites are designed to gather the contacts that the company’s sales unit begins to approach in hopes of selling.
Campaign performance calculation
If your business website has a contact form that is tracked by Google Analytics or Google AdWords conversion tracking, you can accurately estimate how many contacts your AdWords campaign has generated.
Marketing effectiveness can be evaluated using the following factors:
- Number of contacts from conversion tracking.
- The close ratio of how many of these contacts end up in a deal.
- The average purchase worth a purchase on average.
- Kate, how much money does the company have left for the product/service for sale?
When we multiply the number of contacts by the conversion rate x and the average purchase size, we find the return for your AdWords campaign.
number of contacts
A well-constructed AdWords campaign attracts 1,000 unique visitors to your site each month, with ten of them completing your contact form. This is how you get 10 contacts from your website per month.
The contacts are transferred to sales and each quarter of these advances to the sale. In this case, the trade percentage is ¼, that is, 25%.
Many companies sell products at different prices and therefore need to calculate the size of the average purchase. Once your business has accurately measured sales, you can calculate the size of your average purchase. In the example, the average purchase size is €5,000.
The return on advertising is obtained using the formula: Number of contacts x percentage of sales x average purchase size. In this case, 10 x 0.25 x 5,000 = €12,500
Is it worth the publicity?
There are also other expenses in the business and therefore you need to calculate what kind of margin the products or services you sell have. Less often, the selling price of the entire product remains in the company’s cash register as profit.
For example, if your margin is 50%, your marketing will be a plus when you spend less than (12,500 x 0.5) €6,250 on it.
The above formula only reduced the productivity of the first trade for the company. However, a profitable business is based on the fact that the service or product is so good that the customer will return to buy more. If your customers buy many times a year, you may pay a little more than your first customer, even lose a first sale.
Following this model, large and successful online stores operate in the United States, for example. The “lifetime value” is calculated for the customer and therefore it is possible to compete more for the first purchase.
When it’s possible to measure the effectiveness of your marketing, it’s a good idea to invest in setting up a campaign and creating effective conversion tracking. Tracking allows you to convert your contacts directly into euros and thus accurately calculate the effectiveness of your marketing.