To build a realistic marketing plan, you need to make estimates about how much it will cost you to achieve your objectives. The most common objective is acquiring customers. In the previous post (Tip #9), we estimated a cost of $45 to acquire a customer using digital marketing. To calculate this, it’s critical to know the benchmarks performance metrics for each step in the customer journey. A benchmark is an industry average, and while it’s possible to do better, starting with benchmarks provides realistic expectations of performance. It may also help to determine that the initial plan is not likely to be cost effective and thus needs to be re-worked. Let’s look at an example for a services business.
We plan to use digital ads on Meta to generate leads for a services business. We’ve identified 3 steps in the customer journey. For each step a prospect must take an action; and at each action, we will face a fall-off in the number of people who complete that action. Marketing benchmarks can be found online, but often the best source is your advertising agency. They do this for a living and likely with similar customers.
Here’s the math:
Step 1: Generate a Click: We estimate our cost per 1,000 impressions, or CPM, will be $20, and a click-thru-rate, or CTR, of 1%. Each impression then will cost us $0.02 ($20/1,000). And with a 1% CTR, then each click will cost $2.00 (or $0.02 / .01). We have a good email/phone database of existing customers and will upload that to Meta to exclude targeting current customers.
Step 2: Download a Coupon: Our landing page features a $10 off coupon that prospects can download and redeem at our locations. We benchmark that 15% of site visitors will take that step. We can calculate the cost per coupon download to be $13.33 ($2.00 / .15). It may seem to some like 15% is a low number, but our benchmark research has ranges of 10% to 20%, and we’ve chosen to use the mid-point.
Step 3: Redeem the Coupon: The final step is for the prospect to come into the location, redeem their coupon, and make a purchase. Again, using benchmarks, we estimate that 30% of those that downloaded the coupon will take the final step to make a purchase. The final cost to acquire a customer with this campaign is estimated to be $45 ($13.33 / .30).
Extra Campaign Benefits
The campaign will achieve additional benefits that will be difficult to measure but are certainly there. For example, it will build awareness among users who see the ads but do not download the coupon. This has real value and will help to increase revenue. So we are being a bit conservative in our calculations and this is by design. If you require your campaigns to payout using only the direct measurable results and letting additional benefits accrue, you will be setting your business up for success.
