Online marketing has become essential to do business in the internet age, but many businesses are paying over the odds for marketing. It’s notoriously difficult to calculate return on marketing spend, but I have created a mathematical formula that works well to benchmark spending.<\/p>\n
( ( [Number of impressions] \/ 100 \/ 100 ) * [Price of product] )<\/strong> The formula is quite similar when paying per click: The formula depends on two assumptions:<\/em><\/strong> Studies have shown that click-through rates vary from around 0.5% to around 3%, averaging at around 1%.\u00a0 Conversion rate studies show a greater variance (from less than 1% to 8%), but I have found 1% to be a reliable benchmark.<\/p>\n In this example, I am paying \u00a31,000 for 100,000 impressions and selling my products for \u00a330 each:<\/strong><\/em><\/p>\n 100,000 \/ 100 \/ 100 = 10 expected sales<\/strong> As you can see, this deal would result in a loss of \u00a3700 if I were to accept it. For this deal to be viable it would have to cost less than \u00a3300 (\u00a30.003 per impression).<\/p>\n [Max Price per impression] = [Price of product] \/ 100 \/ 100<\/strong> It’s often more useful to look at the amount paid per impression or per click.\u00a0 Using this formula you can calculate a break-even price based on the price of your product.<\/p>\n For a product that costs \u00a330: For a product that costs \u00a3100: If your product sells for \u00a3100 and you are spending more than \u00a31 per click or \u00a30.01 per impression, you are probably making a loss on your marketing spend!<\/p>\n","protected":false},"excerpt":{"rendered":" Online marketing has become essential to do business in the internet age, but many businesses are paying over the odds for marketing. It’s notoriously difficult to calculate return on marketing spend, but I have created a mathematical formula that works … Continue reading
\n– [Cost of campaign]<\/strong><\/p>\n
\n ( ( [Number of impressions] \/ 100 ) * [Price of product] )
\n– <\/strong>[Cost of campaign]<\/strong><\/p>\n
\nFirstly,\u00a0 that online ads will have an average click-through rate of 1%. This means that for every 100 people who see the ad, one will click through to the website.
\nSecondly, that 1% of visitors to the website will buy the product.<\/p>\n
\n 10 * 30 = \u00a3300 sales value<\/strong>
\n \u00a3300 – \u00a31000 = -\u00a3700<\/span><\/strong><\/p>\nFormula for maximum price per Impression<\/h3>\n
\n [Max Price per click] = [Price of product] \/ 100<\/strong><\/p>\n
\n[Max Price per impression] = \u00a30.003<\/strong>
\n [Max Price per click] = \u00a30.30<\/strong><\/p>\n
\n[Max Price per impression] = \u00a30.01<\/strong>
\n [Max Price per click] = \u00a31<\/strong><\/p>\n