The other day a client asked me how much to spend on advertising. The answer is not necessarily 'it depends'.
Lets say you want to sell 10 products or services per month. A rule of thumb is that a very successful campaign converts at 5%.
To sell 10 products, it would take at least 200 people to see the ad so that 5% of them eventually purchased. However, depending on the customer experience in the path to purchase, even though 200 people saw the ad, perhaps only 100 made it to the point of conversion.
Then, 5% of 100 are only 5 people. In order to get those numbers back up to a potential 10 conversions per month, 400 people have to see the offer so that 10 people convert down the line. If each of those people cost $5 to generate, then the total cost to generate 10 customers would end up being $2,000 ($5x400 people reached per month).
How good is that! You can now set your advertising budget. You can also watch the video covering how much to spend on advertising here:
If you want to know how to work out your marketing ROI is, click here.