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Advertising Effectiveness: How to Identify Poor Performance?

At first glance, calculating the expenses and returns from advertising channels seems straightforward. However, numerous nuances need consideration during planning, measurement, and optimization of expenses. In this article, we’ll delve into advertising costs as direct marketing expenses, starting with the most apparent aspects.

Accounting for Total Channel Expenses

When organizing comprehensive analytics, it’s crucial to account for both variable and fixed expenses. For paid traffic, apart from the cost per click, include expenses for managing advertising campaigns: agency fees or employee salaries within the organization.

Similarly, for traffic from email campaigns: include the service cost along with the cost of creating and managing campaigns.

Social Media Marketing (SMM) usually involves fixed management costs or, in the case of in-house employees, monthly salary expenses. Analogously to other channels, consider the total expenses: cost per click, lead, and sale.

Search Engine Optimization (SEO) is a bit more complex since, besides site traffic, modern SEO includes overall website conversion work, reputation management, and crowd marketing. Thus, evaluate the cost per search click and assess indirect impacts (conversion rate growth, the volume of branded and direct queries).

Advertising Expenditure Accounting

  • Accounting for fixed and variable costs in customer acquisition.
  • Multichannel Analytics.

Multichannel Analytics in Marketing

Example of a multichannel sequence and customer interactions.

LTV (Lifetime Value)

Currently, there are numerous business models and industries where customer acquisition costs exceed potential transaction profits. However, companies expect to recoup costs and earn through repeat purchases, cross-selling, and upselling.

Thus, what initially appears to be an unprofitable marketing campaign or even an entire business might prove to be quite viable and effective.

Without CRM, tracking repeat deals, and comprehensive web analytics (preferably end-to-end), assessing the effectiveness of such business schemes would be extremely challenging. Of course, with few transactions, even when managing sales manually, you can estimate the number of deals per customer, the average check, and calculate the LTV. Additionally, in most cases, one can anticipate the potential and efficiency of repeat sales based on logic and experience.

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