Online Advertising – A Profit Driven Exercise or Costing You Money?

Raphael Sebbag

Having worked at online marketing agencies since 2008, I have seen how many clients are managed, and what communication looks like between the two.

An area that seemed too often overlooked, was that of ‘return on investment’, profit, the bottom line. This could have been due to time constraints, client overload, or simply they just didn’t have technical or financial experience to bring their discussions back to this area.

Return on investment should be of concern for any business owner who has engaged the services of and entrusted an agency or consultant to manage their advertising spend.

A basic example of this, has your ‘pay per click’ agency or digital marketing consultant told you one of the following?

  • “We reduced your cost per click”
  • “We increased your click through rate”
  • “We reduced your cost per lead”

If you answered “YES”, then it’s quite possible they could be ignoring a major element – your bottom line. As the saying goes, you are ‘missing the forest for the trees’. These stats can be great, but they can also be quite irrelevant if what you are spending on your advertising is failing to make you a profit.

You should be asking yourself, or rather they should be asking you, has the advertising dollars spent helped to increase revenue, has it helped to increase profit? If it hasn’t then your advertising charges could be seen as an expense rather than an income generating exercise.

Let’s take a look at a more specific, yet basic example. For you to reduce your cost per lead, while focusing on that metric primarily, this may have no impact on sales or could have a moderate downward impact on sales. If your sole goal is to reduce cost per lead that would be great. But, what if you could maintain, decrease or even increase your cost per lead AND increase the revenue or profit you get then wouldn’t you want to explore that route?

The advent of detailed analytics data (e.g. through Google Analytics, Adwords etc) has complimented digital marketing revealing live stats such as how much you pay per click; what keywords generated sales; what geographic or what time of day is most profitable for you, what devices get you the best return, and on and on. Whilst this is a boon for the analytic, results driven marketer, it also has the potential to condition many marketers (maybe un-intentionally) to focus on key performance indicators that help the agency look good, but ignore the information that actually makes a bottom line difference to client ‘s business.

The next time you have a discussion with your marketing agency, manager or consultant – be wary if they do not discuss fundamental metrics with you, such as sales and profit – it could be a symptom of a much greater problem.

I hope to share more about this topic and how it relates to advertising online in more detail in future postings.

Do you find that your advertising is an expense or an investment for your business?

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