Magazine article Marketing

Andrew Walmsley on Digital: Spend Less, Invest Better Online

Magazine article Marketing

Andrew Walmsley on Digital: Spend Less, Invest Better Online

Article excerpt

This week I recommend you spend less on advertising online.

Last year's IAB report showed a 41% increase in online adspend. This year's figures are due to be released this month, and the only discussion is how much the increase will be, not whether there will be one. This is very good news for companies that are in the business of buying digital media, so why would I suggest you spend less?

First, take a look at where you are spending your digital marketing budget. If you are like most companies, all of it will be spent on display advertising, search and affiliates. Driving traffic to your web properties is, of course, important, but what too many companies still fail to recognise is that getting the customer to the front door is only one part of the sales process, and arguably the easiest; converting the visitor into a customer is much more challenging.

I'm a numbers guy, so let's get back to budgets. If you spend pounds 1m on online marketing to generate 2m unique visitors and manage to subsequently convert 3% of your visitors, you might be pretty happy That's 60,000 new customers at a cost per acquisition (CPA) of pounds 16.66.

Think about the key figure in this equation - the conversion percentage. What if we could raise that by just 0.25%, by taking pounds 50,000 of budget and using that to focus on site conversion rather than driving traffic to the site?

The new numbers are revealing. Using the same ratio as above, a spend of pounds 950,000 (that's pounds 1m less the pounds 50,000 earmarked for increasing site conversion) would generate 1.9m visitors. If you convert at 3.25%, you will get 61,750 new customers at a CPA of pounds 16.19 - 3% more customers for a CPA that is 3% lower.

This is a no-brainer. Who wouldn't opt to spend pounds 50,000 to increase conversion by 0.25%? Well, surprisingly, a lot of companies don't - and it is not as difficult as you might think. Many companies say they have this under control: they regularly perform usability testing and adjust their site accordingly. This is a good start, but it puts the emphasis on the site rather than the customer. That's why customer experience testing is an increasingly popular approach as the online channel grows in value.

To understand the difference, think about how a typical usability study works. Typically eight to 12 participants are asked to complete a series of tasks that follow a relatively logical pattern - find information about product X, register, buy the product, contact the company. …

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