Many companies, when they make their first entry into the world of online marketing, are unsure how much they should spend on their marketing efforts.  Instead of asking how much they “should” spend, a better question would be “How much can I afford to spend on my advertising campaigns”.

Online marketing is just one form of advertising.  Many businesses still do well from print ads, billboards, and even TV and radio.  Each marketing platform has its own benefits and downsides.  Before you put a price on your marketing campaigns, you should think about how much you can afford to spend to make a sale – and how likely sales are to come from each platform.

When you place your first advertisement in a new publication, or experiment with a new medium, you can’t be certain how well that advertisement will convert.  There are, however, a few things that will help you to make an educated guess:

The most important things to consider are:

1. The effective reach of the publication or platform (how many people will see the advertisement).

2. The typical conversion rate of that platform (the quality of your ad will matter here).

3. The demographics that the platform can reach.

4. The value of a new customer to your business.

Once you have some figures to go with the above points, you can determine whether or not it is going to be worth advertising on that platform.

Advertising online usually allows you to reach a bigger number of people than most other advertising platforms, but the value of those ad views will vary depending on how well defined your marketing campaign is.

You may want to invest in the assistance of a PPC agency to help you set up a well targeted campaign.  It is possible to run your own advertisements, but hiring a UK based PPC agency will save you a lot of time, and could reduce your outgoings in the long term.

Deciding if A Campaign is Worthwhile

To determine whether or not a campaign is worthwhile, consider how much you’re likely to make as a result of the campaign.  Don’t just factor in the amount of profit per purchase – consider how many of those customers are likely to come back (either to buy refills of consumable items, or to purchase other products in your store).  Some companies rely on consumables, upgrades, or add-ons for most of their business model.

If it costs you £80 to gain a new customer worth £100 via a certain advertising method, then that’s probably not a sensible use of your money – yes, you’re making a small profit, but there are probably other advertising methods that could generate customers without eating into your profit margins so much.

It’s best to run several short term campaigns, testing each one to see how well it performs.  Don’t commit yourself to a long, expensive advertising campaign unless you’re confident that it will work.  Even if you are confident, spend a little time figuring out what you’ll do if the campaign doesn’t perform as well as you expect.  You should always have a backup plan – whether that’s an affiliate programme that only pays out for genuine sales, bringing in a PPC agency, or doing a good old-fashioned leaflet drop.

Spending money on advertising is always a risk, but if you plan your campaigns properly it’s a calculated one.

---

Article written by Amy Fowler of Boom Online Marketing, a UK based PPC agency also specialising in SEO, social media, and conversion rate optimisation. For more articles and inside knowledge from the Boom team, follow them on Twitter.