Measure Everything: Digital Advertising

Today I’d like to talk about what I see as one of the biggest advantages of digital advertising: it’s efficiency as a form of advertising.

By digital advertising, I mean advertising that is delivered by a computer or other such electronic device, such as Google Adwords or Facebook. By efficiency, I am talking about getting the most increase in revenue for the least cost of advertising.

While digital advertising isn’t for every business, it’s probably the most efficient type of advertising you can buy for businesses selling online. Not because it’s the best way to advertise or has the highest sales conversion rate, but because it’s the most measurable. Here’s why:

When you use digital advertising, you can drive customers directly to a page on your website, which means you can store a cookie on their machine to record that they arrived at your website from a specific advertising campaign. Coupled with the information from the advertising broker (Google, Facebook, etc.) you can work out how much profit your advertising campaign generated per click that you paid for. For example, you pay for 100 clicks (adverts that people click on, priced per click), which generates 5 sales, giving you $100 profit ($20 per sale). You can then work out in a very exact way, the value of an advert. In this example, you know that if you pay less than $1 per advert / click, your advertising is worthwhile. If you pay more, it’s not worthwhile.


Common Mistakes Startups Make

I Am Starting A Business So I Need A Website

This is something that I used to hear all the time from people starting businesses, back when I used to run an IT company. They would come up with an idea, or have the beginnings of a business but didn’t feel that they had a proper business without a website. I believe that this is a logic fallacy stemming from the line of thinking that because successful businesses have a website, you need a website before you can be a successful business.

Now I’m not saying that you shouldn’t have a website. To be clear, I absolutely think you should have a website for your business. However (unless your business is focused around web business), you should be aware that it’s probably one of the least important aspects of a business.

The second thing about websites that I’d like to dispel is the idea that a website will get you lots of free business. It won’t. For a website to get traffic, you need to advertise the website. You also have to build a method to convert sales. This is beyond the scope of this article, but the takeaway is that a website is not what makes a business.

Religion, Babies, Politics And Pets

What do religion, babies, politics and pets have to do with business? Absolutely nothing, and it should stay that way! A big mistake that people make when producing public facing materials for their business is to include these things. I can tell you that there is no faster way to half your customer database than by pressing a political or religious allegiance. It’s just not necessary and will cause you to lose customers.

Another common mistake people make is to pick the thing they love the most in this world and expect that others will have the same positive feelings when they see baby pictures all over their website or their cute dog on their marketing material. Don’t do it! Resist! It’s a great way to instantly lose credibility and make you look like an amateur.

Not Measuring Effectiveness

Not measuring internal success of a business is a very common mistake. People often let the jubilation of all the sales coming from that big trade show hide the fact that it just wasn’t efficient – the event cost $3,000 to attend and you made $5,000 profit, but you forgot to add in the $3,000 of staff time to prepare and attend the event, support costs of the new sales, amortization of the event equipment, etc. When you consider all the costs associated with those new sales, the venture was not profitable.

Another common mistake is not measuring the cost of advertising. How do you know that the radio advert you paid for returned a profit? Did those new sales come from the radio advert or a Google search? People often pass off the cost of advertising as soft benefits and say that you can’t measure the value of having the brand out there. Another argument is that sales often come from multi touch points so you can’t measure the value of any particular media. For example a customer heard a radio ad and decided to buy when they saw a flyer from the company they felt they knew because of the radio ad.

There’s certainly some truth in this, but you should be doing your best to measure it. Ask customers where they’ve heard of you; give them discount codes that relate to particular adverts; if you’re big enough, create a new phone number, website or URL to monitor the success of that new TV ad. Organize your advert campaigns so different media over lap and measure the success of a campaign that includes multiple media types rather than a particular advert.

Measuring the effectiveness of your adverts is important because this will make your business more efficient. If your business is more efficient, your products can be cheaper, and if your products are cheaper you can be more competitive, put more money into efficient growth and be more resilient in a downturn (imagine your competitors indiscriminately cancelling TV, radio and web ads because they’re trying to save costs, while you know exactly what’s earnings accreditive and shouldn’t be cancelled).

No Financial Modelling

You see an opportunity to grow the business at the cost of raising capital from an external source. You could get an investor. You could get a bank loan. You could do nothing for a year and grow organically.

This decision is often made with feeling rather than with maths. For example, people don’t want to get more debt so they get an investor and lose a percentage of their business. Some people don’t want to lose a share in their business, so they do miss out on the growth.

Financial modelling is the best way to work out what course of action would result in the largest gain in the value of your share in the business. Financial modelling should be used throughout the business, including working out how a change (voluntary or otherwise) might effect the business.

As time goes by, I’ll add more articles about these subjects with more detail on each subject. Stay tuned.