How to Budget for Paid Advertising in 2015
Paid advertising has taken a backseat to inbound marketing over the course of the past decade, as marketers realized the power and cost efficiency of content marketing and related strategies. However, paid advertising can still be a viable strategy, as long as it is implemented effectively. The scope and cost of paid advertising is set to evolve into 2015, and it can serve as a powerful complement to a more qualitative, brand-based content strategy.
Still, it can be difficult to properly budget for advertising. There are several digital advertising channels available, all with different costs and benefits, and if your strategy isn’t properly aligned with your brand, you could compromise your ROI. In this guide, I’ll summarize the most significant paid advertising channels available in 2015, and how to set a course for your budget.
Setting a Cap
Before you start divvying up your paid advertising budget, you have to know exactly what you’re willing to spend for the year. You can look at this figure annually or monthly, but before you make an estimate, you’ll need to consider several factors.
Starting from scratch or extending a plan
Are you carrying over a budget from last year? If so, make a determination about the effectiveness of the campaign. Was it successful with the budget you allotted? Consider matching or increasing that budget. Was it unsuccessful? Take a good look at the factors that can be improved upon. If you can make improvements, start over with a similar budget. If not, consider reducing or eliminating the budget altogether. If you’ve already done all you can to make a paid advertising campaign work and the numbers aren’t justifying your spend, paid advertising may not be the best campaign for your company.
Are you starting from scratch? Take a look at your current marketing spend, and look for areas where you can make small cuts in order to free up spending for a paid advertising channel. You don’t need a massive budget to start out; consider taking a few hundred dollars a month to experiment, and scale up the campaigns from there (assuming you find success).
Calculating the value of a conversion
Take a look at your current sales data. Assuming you have a reliable lead generation strategy in the works already, calculate the following metrics:
- Close ratio. This is the number of closed sales divided by the number of total leads, and represents the percentage of incoming leads that become closed sales. If your conversion always results in a sale, such as with a product-specific landing page, this is always 100 percent.
- Average sale. This is the average transaction value of a successful close—also keep in mind that your customers will likely make multiple purchases from you over the course of a lifetime. You can use “average sale” as a conservative measure, or estimate the estimated lifetime sales per customer for a more long-term estimate.
- Average value of a conversion. Finally, multiply the close ratio by your average sale (or average lifetime value) figure. This will result in the average value of a conversion.
Now that you know the average value of a conversion, you’ll have a much easier time determining the value of your paid advertising campaign. For example, if you have a total monthly budget of $5,000 and your average conversion value is $500, you’ll need more than 10 conversions in order to justify the value of the campaign.
Run some user testing to verify that your landing page or ad designs are appealing enough to maximize your conversion ratio. Once you know your conversion appeal is solid, the remainder of your campaign adjustments will be choosing the right platforms for advertising and distributing your budget accordingly.
raditional PPC Plans
Pay-per-click advertising campaigns are some of the most popular. Through these campaigns, you’ll get visibility on major search engines, and you’ll pay a fixed amount for each person who clicks on your ad. They’re excellent ways to tightly control your budget and get metrics on who is clicking your ads.
The main advantage with Google PPC campaigns is visibility. Google is the search engine of choice for more than two-thirds of the online population, and as a result, its ads get the greatest amount of visibility. However, since you’re only paying for people who click your ads anyway, that advantage is limited.
Google Adwords is also very easy to use and gain insights from. If you’re interested in doing in-depth keyword research and organizing complicated variations to your strategy like audience segmentation, Google is probably your platform of choice. The biggest downfall of Google is its popularity; there are millions of people using Google Adwords, and as a result, the cost of advertising has become incredibly competitive. You’ll have all the information you could ever want about your incoming traffic, but you’ll need to make the absolute most of it if you want to recoup your budget for this channel.
Bing advertising is similar to Google, and is an up-and-comer in the world of online advertising. Its platform is ridiculously simple to use, and the costs per click are very low compared to Google. The downside of Bing is its primary demographic; it’s a minority search engine, and most of the people using it are older populations or those unfamiliar with technology. This is mostly due to the fact that it’s the default search engine on Internet Explorer and Microsoft products.
If your primary demographic falls into one of these categories, ratchet up your spending with Bing ads in 2015. Otherwise, try giving it a shot—you might find the lower ad costs will result in a higher ROI than Google.
Facebook and Social Advertising
Facebook’s advertising platform has become very advanced, and it’s quite reliable as a means of generating traffic to an external landing page. The tools available to social advertisers on Facebook allow you to pinpoint your target audience with spectacular specificity, filtering out possible targets by age, sex, geographic location, and interests. You can also specify a budget per day of spending. If you haven’t tried it yet, I highly recommend trying it.
On the other hand, other social media platforms like Twitter and LinkedIn are trying desperately to improve their advertising platforms to match Facebook’s capabilities. They’re worth experimenting with, but for the majority of businesses, Facebook will prove to be a superior social platform.
Affiliate links are an alternative paid advertising strategy worth considering. External users will post links to your products and services on their blogs and sites, and for each successful conversion, you’ll pay them a small percentage of the sale. Keep in mind that these links will not count toward your SEO efforts, and you’ll have a harder time tracking and filtering inbound traffic.
The ultimate direction of your paid advertising campaign is up to you, but 2015 is ripe with potential options. Start out slow, with a budget of only a few hundred dollars, to experiment and see which platforms work best for you. I highly recommend at least trying Bing advertising because of its relatively low ad costs, and trying Facebook ads for their versatility and advanced campaign management tools.
Beyond experimentation, Google Adwords is still the reigning king of paid advertising. You’ll have to do extensive research to find placement opportunities that will net you a positive ROI, but the analytics information and widely available demographics make it one of the most informative and reliable platforms available.
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