Advertising budgets are important. But how much is too much when it comes to ad spend. And how much should you expect to make as revenue at the end of a campaign, or month. That's what we're about to hopefully discover.
1. Advertising Budget Calculator
Start with your Expected Advertising Budget (per Month) slide-control below.
2. The Basket Value
When it comes to important KPIs, the Basket Value is a crucial metric that tells us the average purchase value of a customer segment (per shopping session).
That means, let's say in general we have 100 customers buying goods. Each customer's "Basket Value" is the amount they spend on each visit/session of shopping.
Now when we segment that, the customers would be grouped by specific attributes. It could be based on their ages, or whether they're male or female, their locations, or their interests, and so on.
So why in the world is Basket Value so important?!
3. The Time Constraint
Let's put it like this, time is a limited constraint. That means, within a specific time, you have expenses, you have revenue and profits, and you have the number of customers you can serve.
If you focus on customers with a low Basket Value, you would need to be able to sell to several of those customers within a single month to meet your target, or sell to ONE single customer who's Basket Value meets that same target.
To give you more context, let's say you are selling headphones, and part of your cost of sale (expenses) is the marketing and advertising cost. Right?
Now, if it costs you 500 USD to advertise on a specific platform, and you get 100 customers from that campaign, your Customer Acquisition Cost is 5 USD per customer.
If the average customer's basket value was 15 USD, you only made 10 USD from that sale.
But if 1 customer purchased 2000 pieces of that 1 headphone, the benefits would ideally be far greater.
The cost of advertising can be very expensive. So strategic use of your advertising expenditure is required.
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4. Defining Business Goals - What do we want to achieve
Because the cost of advertising can be very expensive, important to define business goals in order to understand and have a clear picture of what we want to achieve.
This could be long term planning, with the focus on building the brand's marketshare and not looking towards short term profit, or this could be a direct cost vs profit marketing campaign where we would want to make every penny spent on advertising to translate directly to our profit center.
For small and medium sized business, the latter choice might be a better strategy, but at the same time, working on the branding as well along the way.
5. Customer Identification - Who do we want to sell to
So why, is this important..?
When you identify your ideal customer, or better referred to as your Buyer Persona, you're able to better target in your ad campaigns to that specific Buyer Persona.
This means, that instead of targeting 2000 people who wouldn't bat an eye at what you're offering, you're targeting a very specific Buyer Persona that would have a much higher probability of converting to a customer.
That would then typically translate to saving ad expenditure.
The example infographic here is for a company that would potentially be a furniture brand or supplier.
6. Platforms - Where to advertise
Once you've identified your ideal customer, the next part of the game is reaching out to them, or targeting them.
And there are a thousand and one ways/channels to do that. Some ways include Linkedin Business Pages, SupplierValley Q&As, SupplierValley Blogs, Alibaba Company Listings, SupplierValley Buzzword System, SupplierValley Targeted Publishing and so on.
While there's a lot of choice and room for growth, for small or medium businesses with smaller teams, it's always best to focus on a few channels, and really put maximum effort into those platforms. Or delegate the responsibility to others while you focus on other areas.
The cost of advertising, and how much you have to spend, can vary greatly.
And by targeting the right customer segments, in the right places, you can potentially save money by not throwing it all on a large segment of customers with low basket values, and unrefined buyer personae.
You can make a difference.