In this blog post I’ll show you why the phrase “The best costs less” applies to online advertising.
Hello and thanks for reading!
As promised, I’m going to detail why the phrase “The best costs less” applies to online advertising and how being results focused can save your company a lot of money.
This article is intended for companies that are using an agency to run their online advertising, or are considering one. This primarily means either Google Adwords® or Facebook Advertising but could include many other platforms such as Instagram, Pinterest, etc.
This is a competitive industry and chances are you have been solicited by a wide range of companies from a wide range of countries and with a wide range of pricing.
Of all the offers, how do you determine which is the best value?
- Is it the low ball offer?
- Is it the upgrade offer from your local newspaper publisher selling their online ad space?
- Or is it the high-priced agency that is dedicated only to digital marketing?
Let’s walk through an example campaign together.
Say you have a $10,000 budget for a PPC (pay per click) ad campaign to promote a new product line. This includes all creative, ad management fees, etc.
You have three offers on your desk.
- Agency A charges $5000 in creative and management fees
- Agency B charges $1500 in creative and management fees
- Local Publisher offers free setup and management.
Which one will cost your company more?
A) Agency A
B) Agency B
D) Need more info
It’s a trick question. The Cost Per Click and actual results are essential info in determining which offer will provide the best value.
If you have a couple minutes I’ll break down an example ad campaign for you.
Step One – Cost Per Click
As an agency, one of the first metrics we pay attention to is the Cost Per Click. It is a fine balance between keeping the quality of traffic high and the cost per click low.
There are a lot of factors in this but a key part of this is in the targeting.
Accurate targeting = great results!
So, first metric. CPC (cost per click)
Agency A invests the time to carefully target your ads and achieve a low cost per click.
Agency B goes with the quick default settings and achieves an average cost per click.
The Paper Publisher uses a high CPC to cover their hidden costs.
How does this affect the number of visits you get from your budget?
Despite working with a much smaller budget, Agency A wins with over double the amount of visits.
Step 2 – Bounce Rate
Another metric we pay a lot of attention to is Bounce Rate. It’s a good indicator of how well an ad is targeted, and how well the landing page is performing. Obviously a visitor that bounces from your site without further engaging isn’t a well-targeted customer.
If we factor the bounce rate into the comparison then Agency A’s better performance becomes even more obvious.
At this point you can already see that despite first appearances, Agency A is providing over double the value over the other two providers.
Let’s follow this further.
Step 3 – Conversion Ratio
How is this going to affect your sales?
Conversion ratio is the percentage of visitors that convert to paying customers. The rates vary wildly but a standard axiom is that higher quality traffic converts to more sales.
As the visitors from Agency A’s campaign are better targeted they are more likely to make a purchase.
43 sales vs 17 and 16. Over double the number of sales. Neither Agency B or the local Publisher look like such a good deal now do they?
Step 4 – Sales
Higher quality visitors make larger purchases. In 15 years of tracking this it has always been true.
Let’s assume that the customers targeted by Agency A’s campaign make purchases worth only 12% more. How does this look in the final numbers?
- Agency A took $10,000 and turned it into over $24,000 in sales.
- Agency B took $10,000 and turned it into $8500 in sales.
- The Newspaper Digital Campaign took $10,000 and got less than $8000 in sales.
Back to the original question.
You have a $10,000 budget for a PPC ad campaign. This includes all creative, ad management fees, etc.
- Agency A charges $5000 in creative and fees
- Agency B charges $1500 in creative and fees
- Media Company charged nothing for creative or fees.
Which one provides the best value?
Answer: Agency A.
For all practical purposes. The $5,000 paid to Agency A was completely absorbed by the campaign and cost your company nothing.
So back to my original claim: The best cost less.
An agency that understands your business and how to target your customers is an investment not a cost.
How accurate are my numbers?
If anything they are a bit conservative.
In a recent audit for a client I found that a campaign run by a large national level publisher had a final cost per click of $9.44 However their bounce rates, visit times and sales generated were far less.
A campaign that my agency ran for the same client, for the same time period had a final cost per click of $.98 Yes, that’s correct. 98 cents.
Before you accuse me of buying junk traffic take a look at the final results:
Want to learn how we can improve your online ad campaigns? Drop us a note to get the conversation started.
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PS The great retro images are from a 1962 ad campaign called “Turners Saved My Marriage”. Images courtesy Tyne & Wear Archives & Museums.