How To Figure Out The Value of a Digital Marketing Channel
Originally posted on https://enotto.com/blog/how-to-figure-out-value-digital-marketing-channel/
Digital Marketing Channels Value Estimator
Hey, there. Welcome to today’s edition of the Enotto Digital Marketing Vlog Series. Today, we’re going to discuss figuring out how much a digital marketing channel is worth to your business.
This is a fairly common issue to pop up for folks.
They’re trying to figure out what should I work on, what channel should I develop first, especially if you’re a small, solo entrepreneur or small business, and you just don’t quite know what you’re supposed to be doing when it comes to online marketing.
Now, this is where things can get a little hairy, trying to figure out which direction should you go.
Everything looks the same to you.
How to figure out your digital marketing priorities
What we find that helps clients is we break down, break down what’s the likely value.
How much revenue is this channel likely to bring to your company? And then, focusing on the channels that are going to bring you the most money the soonest, or at least the most money, and then working down from there.
This tool right here doesn’t really incorporate … Actually, so, we built a tool. We built a digital marketing channel calculator. So, essentially, the idea here is to break down different digital marketing channels and say, “What’s the likely value to a company?”
What this doesn’t incorporate is time. So, things like SEO, it takes time, and it depends on how competitive the marketplace is. With this tool, we actually provide a free link. A free copy of it is down below here, down in the article. You’re welcome to use it, take it, put your own numbers in it, get to work for your business to help you identify what channel makes the most sense for your business.
Key metrics to understand marketing channel value
Average Annual Customer Value
So, with that, key metrics you want to have in mind when using a calculator like this, know what your average annual customer value is. Some people focus on what’s your lifetime value of a customer. Really, it’s best to look at an annual side, just a little easier, and tends to be a little more financially viable for folks. So, you can find that out, easiest way to do it, annual revenue divided by total number of customers or clients you’ve served that year. Simple.
Monthly Search Volume in Target Area
Find your monthly search volume and your target area. I say target area. If you only serve, say, in Knoxville, Tennessee and only 25 miles around Knoxville, Tennessee, use a keyword planner, use Google Ads Keyword Planner, use Keyword Finder from Mangools, and only target within a 25-mile radius around Knoxville or at least in that general area where you’re going to serve.
You’ll just get much better data from the search volume side. If you say “nationally we’re going to have this much search volume.” “SEO’s worth this much to us,” or “SEM’s worth this much to us,” that’s a bit of a lie because you don’t really want to target somebody in Washington if you can’t serve them. You might pick up search volume to them, but you’re still not going to be able to serve them. So, I don’t recommend focusing on that.
If you don’t know what you’re supposed to look for from a keyword side, like, “I don’t know what keywords to look for,” one thing I recommend that’s kind of a quick and dirty way to do it, google the primary thing your business does, say, it’s video production services, and figure out who ranks the best currently for that keyword, and then grab your competitor’s URL and dump it in Keyword Planner, Google Ad Keyword Planner, in the keyword ideas side of it, and see what keywords pop up there. It’ll give you a general idea of the volume there. You can also pop it into SEM Rush, pop your competitor in SEM Rush, and see how much organic traffic they’re getting according to SEM Rush.
If they’re ranking really well for your head term there, they more than likely are going to be a pretty good … They’re going to rank pretty well across the board, and you have at least a pretty good idea of how much search volume there is for that keyword or at least keywords surround what your business does.
Average Cost Per Click (CPC)
You also want to know your average cost per click. So, if you don’t have any history again, use SEM Rush. It’s a handy way to say, “What’s this keyword really worth?” Google Ads Keywords Planner, will only give you a range, and that’s the range at the top end. So, that can range from anything like, “Oh, it’s four dollars to $50, sometimes.”
If you don’t want to run an ad on there, I recommend SEM Rush, they just give you the average of what the keywords have cost. So, pretty handy there.
Average Cost Per Impression
And then, you want to look at your average cost per impression. This comes into play mostly for display advertising, so Facebook, LinkedIn, Instagram. Those are done in cost per impression, that’s usually done per 1000 impressions, is that cost based you want to look at. That’s just going to be a handy tool to understand, okay, what is the display channel worth for your business.
Channel Conversion Rates
Optional metrics, if you’ve got them, have your conversion rates for your different digital channels.
Visitor to Lead Conversion Rates
The conversion rates you’re looking for here is your visitor to lead conversion rate. So, say somebody hits your website, then, from one of your digital channels, and how many of them turn into a lead, i.e., they give you their email address, or they call you, or they say, “Hey, call me,” or they request a quote. They do something that they can engage with you after the fact, after they leave your website. If you can talk to them again, and they’ve raised their hand and said, “I’m interested in your business,” that’s a lead.
Lead to Customer Conversion Rates
So, what’s that percentage of visitors turn into leads for you, and then, what percentage of your leads turn into customers? So, how good are you at converting? If you get a lead, what percentage of those folks do you turn into a customer? Is it 5%, 10%, miraculously 50%, 100%? If you’re doing 100%, give me a holler. I’m curious.
Visitor to Customer Conversion Rates
And then, also, what are your visitor to customer conversion rates? Some folks will jump right from the visitor website, and say, if you sell eCommerce products, they’ll jump right into being a customer, right? They never become a lead. They just say, “Yes, I want to buy from you.”
Or if you give them a way to say, “Hey, you can sign up right away,” and somebody gives you a dollar that day. If you have a service-based business, like a plumber. They can go from visitor to customer, they don’t need to turn them into a lead per se. They can just say, “Hey.” They can order a service online maybe, or they just pick up the phone and say, “I’d like your service today,” period. That would, I would say, has more visitor to a customer conversion rate.
Click Through Rates
Also, what is your average Google Ad (search wise) Click Through Rate? What’s your average display advertising Click Through Rate? So, just to understand Click Through Rate, that’s how many people see your ad and then click on it. Display is typically much lower. It’s usually less than a percent, typically around 0.5%.
Whereas, Google Ad search Click Through Rates, it depends. I think the average is 2.4, but if you’re hitting it and hitting it well, you’re seeing up to 10, 15, 20 percent Click Through Rates.
A lot of people (searchers) don’t click on ads, at least historically, but that’s shifting now. Now, as Google Ad, they’re getting better. People are getting better about creating their Googles Ads and understanding what the user intent is behind the keywords they’re targeting.
You’re getting higher Click Through Rate because if you’re answering customers’ problem, but then, you’re also able to serve them and sell them, they’re going to click. They’re going to click more.
With that display advertising, also, know what your average cost per impression is. We talked about that a slide ago, but just kind of understand what that is.
Putting it all together
So, let’s put it all together. I’ll give you one example here, and you can play with the tool and see what other channels are worth to you, but for today, quick and dirty, what’s a Google Ads channel? So, search, SEM, search engine marketing, what’s that going to be worth to this example client?
So, let’s say their average annual customer value is $2500. So, a customer to them is worth 2500 bucks a year. They might buy from them multiple times. Maybe they buy from them 10 times, and each time, it’s $250, or maybe it’s just a one time project, but the average project is $2500.
Also, let’s say they have an average search volume in their target area, 1500 searches a month, and their average Click Through Rate on their search engine marketing ad is three percent, so not great, but technically above average, and their average cost per click is four dollars.
So, that would mean that they’re getting about 75 monthly visitors. If they’re getting three percent, say if they’re targeting the entire search volume there, they’re getting three percent of that 1500. They’re getting about 75 folks, and that’s going to cost them $300. So, let’s keep that in mind.
Now, the other side of that coin, let’s say they expect to turn 15% of those visitors into a lead. So, if you’re pushing to a squeeze page, “Hey, sign up for a free quote, or hey, here’s a lead magnet,” sort of thing, “Get an ebook from us. Give us your email address, and we can get started talking to you outside of just the website or hoping you come back through the social media or come back through search.” Say they get 15% of visitors there. So, you’re looking at 11.3 leads in a month. So, 75 monthly visitors times .15, so 15%. That means they’re getting about 11-and-a-half leads a month.
Now, let’s say they have an average customer conversion rate of two percent. So, let’s say that two percent of all traffic that comes through that search engine marketing channel actually converts into a customer. They don’t become a lead. They become a customer. They say, “Yep. I want to buy from you.”
So, they’re getting 75 folks hitting them, and two percent of those folks turn directly into a customer. You’re getting about one-half customers per month.
But we need to remember, okay, how often are those leads turning into customers? So, what’s the lead customer conversion rate?
Let’s assume it’s a five percent conversion rate. So, they had 11.3 leads that month, and then, five percent of them turn into customers. So, you’re really looking at half a customer, in other words, about six customers a year they’re going to get from that channel from people who turn into leads that then turn into customers. So, on average, they’re going to get about 2.06 customers per month, or two customers a month, they’re going to get from search engine marketing. So, if you figure on average, then it’s about 150, 145 dollars per customer they’re going to get from that channel. That’s a pretty good ROI, in my opinion.
So, this seems like if this shapes up for your business, I would advise this person, if there’s more search volume they’re not tapping into, or there are more keywords available they’re not tapping into through search engine marketing, that’s a good place to say, “Hey, this seems like it’s worth it. Some of the numbers aren’t great. It’s a low Click Through Rate. It’s a pretty good conversion rate. It could be better, but hey, it seems like this is taking really well. Your customers are worth $2500, and you’re only having to pay $145 for one or $150 for one. I would keep going at that.”
But see if you can break this all down with our calculator.
We’re breaking it down here. Here’s this channel here, the search engine marketing. We’re getting 75 people a month touching our company. It’s costing us $300, their client’s company. 15% conversion rate to leads, getting 11.25 leads, 11.3 leads.
The express track conversion rate, that’s seeing how many people are turning from a visitor to a customer, not going to a lead. So, again, here on average, so, we can see. We break that down into what’s the average channel value per year.
That little calculation then actually takes into account how much does each customer cost you and then deducts that from the expected revenue you’re going to get. So, here, you’re looking at 24-ish customers a year, so times $2500 minus the $145 to acquire that customer. You’re looking at about $60,000 that search engine marketing can have for this example client or this example company.
Now, they know, right? They can clearly see, “Okay, this is worth $60,000 to us. We’re going to push on this. We want to develop this channel.”
If they’re not doing any search engine marketing, now they have proof of it, “Hey, this should bring us another $60,000 a year.”
So, if you have any questions, if you’re trying to figure out, “Hey, what’s this channel worth to us, or hey, we know how much this channel’s worth, but we don’t know how to get started, or we don’t have time to get started, or we want to have an expert do this,” in other words, give us a holler here at Enotto.
This is what we do.
We focus on SEO, but we run great search engine marketing campaigns.
We run display advertising for folks, basically all the things you can touch into digital marketing.
We can help either shepherd you there as a consultant or take it over for you and do it for you, give you a fully done for you digital marketing.
My name’s Frank. I’m a founder of Enotto. You can email me directly anytime, [email protected]. Give us a call, 865-999-1010, and looking forward to helping you out, and stay tuned for the next in our vlog series. Have a good one. Thanks.