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Media and Communications

Looking for online advertising & marketing costs?

Looking for online advertising & marketing costs?

Hi! My name is Alex, and I’d like to take
a few minutes to demonstrate how smart digital marketing when implemented correctly, ends up
paying for itself. Before I explain further, let’s play a
short game. Which of these three is the cheaper product, and which is the
most expensive? a) Pay one hundred dollars, b) Pay five hundred dollars, c) Pay three
hundred dollars No brainer, right? Obviously, a) is the
cheaper option while b) is the most expensive one, right?
Well… …yes, as long as we’re talking about flat
costs this is exactly the case. However, when we
discuss marketing, we need to analyze it as an investment that is expected to bring in a return, not
just a flat expenditure. Let’s look at the scenario with
some returns: a) Invest $100 dollars and make 0 b) Invest five hundred dollars and make 10 or c) Invest three hundred dollars and
make five hundred dollars. Now the numbers tell a completely
different story, right? Option c), which in the previous scenario wasn’t even
competing for our attention now looks like a much better option. This
is the death trap into which most businesses fall when all they look at
is a flat cost comparison, instead of analyzing what they’re
getting back from each of the scenarios. So what do we mean by smart digital
marketing? Allow me to illustrate with a breakdown of one possible strategy so we can
understand how a 66% ROI and beyond is completely realistic. Let’s say that your
goal was to sell a $40 product through a strategically-planned and creatively-developed website… …and our goal was to drive traffic to the
site via pay-per-click ads. Our gross profit margin on the $40 product is, let’s say, 60% or $24. Let’s assume now that the cost of the web site comes out to $3,500, with a pay-per-click budget of $3,000, which amounts to $6,500 in total campaign expenses. Is that expensive? Well, not so fast… Remember our little game at the beginning.
We simply cannot afford to judge the scenario just by the expenditure. Let’s go on… In this example the cost per
click we’ll be bidding towards will be forty cents. $3,000
divided by 0.40 results in 7,500 visitors to our website.
Out of the total visitors, let’s say only 10% make a purchase. This is what we call our “conversion rate.”
In other words, out of every 100 visitors, 10 make a purchase. This means that we end up making 750
sales which amounts to $30,000
in total revenue. Now, how much of that was profit? Well, at
the beginning we said our profit per sale was 60%, so naturally, 40% will be cost. 40% of $30,000 comes out to $12,000 in total product costs. Let’s now add the
campaign expenses to that: $6,500 in campaign expenses plus $12,000 in total
product costs gives us $18,500 dollars in total costs. If we now subtract that
amount from the $30,000 in gross revenue we end up with $11,500 in profit. To recap: We invested $6,500 on a PPC campaign and a website made all our money back, plus made $11,500 in fresh profit.
This is a return on investment of about 77%… And this is just upon
launching our site. Now that the website is built, the next
time we implement the same exact campaign, our ROI shoots up to about 283%. Pretty cool, right? Now some of you would
say, “Gee… I can just get the same but for a lot
cheaper, right?” Well… let’s see how that works out. Let’s begin with the same product priced at $40. once again our gross profit margin is
60% or $24. In this case, you
decide to go with a cheap, jumbled up website that costs you $500, and invest a
pay-per-click budget of only $300, which comes out to $800 in total campaign
expenses. Seems like you’re saving a ton of money,
right? Well… not really. Hold on a few minutes, and I’ll explain. First, here’s the key: Optimizing PPC campaigns is a highly specialized art and science, and without the proper knowledge, your
cost-per-click could end up costing you much more than necessary. Therefore, the cost-per-click
shoots up to 75 cents. $300 divided by 0.75 400 visitors to our website. But because your cheap website really
wasn’t designed with conversion as a clear goal, your conversion rate plummets to a very
sad 1%. Out of every 100 visitors, only one makes
a purchase, which for 400 visitors comes out to 24
sales. The total revenue for those four sales
is $160. We can already see the problem… but sorry, it gets worse. If you remember, our profit margin was
60%… so again, our product costs will be
40%. This means that our total cost of goods comes out to $64. But we
also had campaign expenses, remember? $800 in campaign
expenses plus $64 in product expenses gives us $864 in total costs. If we subtract that amount from the $160 in gross revenue we end up with $704 in losses! So in the supposedly cheap scenario, we
skimped around with 800 bucks on our website and a PPC campaign didn’t even make 1 cent in profit, but
ended up losing $704 a return on investment of -12%. Would you rather pay $6,500 to make $11,500 in pure profit, or pay $800, ship four products, and still end up $704 poorer? Exactly… I thought so! And this is how smart digital marketing
pays for itself, while cheap efforts end up sinking your
dollars. Now the best part is that in the
scenario of smart digital marketing, things only get better from there. From
that point, we can strategically alter the ingredients to improve that
ROI even further. Imagine what can happen to your business
if you had an experienced partner by your side that had the knowledge to systematically
alter all four ingredients at the very same time.
Now this is precisely what we do every day at YMMY Marketing. We give our clients
the peace of mind that their marketing investment is
moving their business forward and paying for itself. Contact us today… let’s get cooking!

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