This is part 3 of a 4 part series on using your marketing budget effectively. You can read the original post to get a better understanding of Tim’s money-saving advice.
We’ve begun to looking at ways to stop wasting money on marketing. Step one taught us to “Establish a measurable indicator for every marketing effort.”
Step 2: Run a small marketing effort to determine your cost per conversion.
Before you launch into a full-blown campaign, test run your effort to see if it is effective. With your indicator, or goal, clearly established and your tracking measures in place (see step one), you can now determine your cost per conversion.
A conversion, in the marketing sense, is not someone coming to faith in Christ. Rather, it is simply one completion of your goal (remember step one when I told you this wouldn’t seem very spiritual?). Your cost per conversion is the amount of money you spend divided by the number of conversions you achieve.
Let’s look at an example. Suppose you send out a direct mail postcard and on the postcard, you ask people to visit a special page on your web site where they will fill out an online form. Your “goal” is getting people to fill out the form. You spend $500 to run a small test campaign and you track the number of form submissions you receive. Let’s say 40 people fill out the online form. In this example, your cost per conversion would be $500 divided by 40, or $12.50/conversion.
How about another example? Let’s say that you place an online banner ad on a web site that targets your audience. Clicking the ad directs people to your web site. Let’s say that your goal is still to have the person fill out an online form. Using an analytics program, you can track how many people complete your online form after having clicked on your ad. You spend $100 to run your ad for one month and 2 people fill out your form. Your cost per conversion would be $100 divided by 2 or $50/conversion.
Armed with this information, you can now make a few important observations.
- First, you can tell that the postcard generated a better (cheaper) cost per conversion than the online ad, even though the total cost of the direct mail was more. Cost per conversion is to marketing what price per pound is to meat. It helps you determine value instead of just looking at price.
- Second, you can now evaluate your cost per conversion to determine if your marketing effort is worth the money or if it is a waste. What is a good cost per conversion? Only you can answer that question. Is it worth it to your church to spend $12.50 to get one person to fill out an online form? Some might say “yes” and some might say “no”. It all depends on your context. The important thing is that cost per conversion gives you the ability to make that determination. If you are only evaluating total cost, you are most likely wasting money. By looking at cost per conversion, you can determine if your efforts are effective or wasteful.
- Third, over time, your cost per conversion gives you a frame of reference by which you can determine if a particular marketing effort is fairly priced. For example, if you run a lot of online ads, you will start to establish a “comfort zone” of cost per conversion. When you run a test campaign on a new site, you can quickly determine if that site’s performance is in your comfort zone. Not only does this help you select the best ad values around, but it can also give you grounds to negotiate better ad rates with providers based on real conversion data.