Setting Goals

One of the first things my clients ask me when we start planning an advertising initiative is “what will this cost me?”. This is understandable, as the costs for the ad engines tend to be the most expensive outlay in digital marketing. But I think it’s putting the cart before the horse in most instances. Instead, I think the more pertinent question is, what are we trying to accomplish?

I believe it’s best to start with the end in mind, and work backwards from that to figure out what has to be spent. Let’s say your client is looking to sell 10 widgets, and wants to know how much they have to spend on digital advertising to get there. I think the best course of action is to look at their historical metrics to get a baseline of actual past results, not the wishful thinking that we all tend to engage in.  

With some exceptions, paid media traffic tends to convert at lower rates than non-paid traffic. I think it’s safer to do this forecasting with those lower conversion rates. Another way of thinking about this is that it’s unwise to assume that a website will convert paid traffic better than it has been converting non-paid traffic for the past few months. 

This is how I see the situation for many websites:

If paid traffic converts at lower rates than non-paid traffic

AND

the website hasn’t consistently converted the non-paid traffic going to it

THEN 

is the website truly ready for paid traffic?  

So, look at the analytics and establish a baseline conversion rate for non-paid traffic. It’s probably wise to assume that paid traffic’s conversion rate will be significantly lower than that, but estimating a few scenarios in between is a useful exercise. Try to estimate likely low, medium and high conversion rate scenarios, and ‘run the numbers’ to see which of those scenarios is a money-maker. If things are largely looking grim, then perhaps this is not the time to pay for clicks.  

But maybe the scenarios are looking good and you’re ready to move forward! This is the thought process I’ve used to reverse-engineer how much paid traffic a website probably needs to convert enough of it to achieve the goal.  

How many clicks/users/sessions does it normally take to get one conversion? Let’s say that your website typically needs 80 people to come to it for 1 of them to convert. If you’re looking for 50 conversions, then you’ll probably need 80x50 people to go to it to get 50 conversions if nothing happens to your conversion rate. And seeing as paid traffic typically converts at lower rates, that number might go from 80 to...100? 150? Or more?!  

What is the cost of getting those users to your site through paid traffic? To me, this is the better question to ask to determine a potential advertising budget.  

What can be done to get that cost down? I think this problem can and should be attacked from several fronts: the media mix, the quality of the traffic, the website, and the product or offer itself.