Amplify recently spent some time in San Diego attending the Traffic & Conversions Summit, which bills itself as the largest marketing event in North America. Thousands of digital marketers gather each year to take a look at the current snapshot of digital marketing trends and to help businesses plan accordingly.
We left the conference with some great practical takeaways. The most significant nugget of truth we left with, however, was a confirmation of our previous suspicions: business owners and digital marketers experience a very real communication gap.
In the back-and-forth conversation of ad spend and projections, business owners often don’t know their numbers as well as they think, and marketers usually take owners at their word. This disconnect can send well-intentioned businesses down the wrong path.
What Causes This Gap?
If you’re a small business owner, you understand the insane number of hats a single person is required to wear. In addition to being the heartbeat of a company, the owner must hire, manage inventory, firefight, market their product, budget, network, ensure quality control…the list goes on.
Somewhere in the deluge of demands, entrepreneurs can lose sight of their most important numbers. Entrepreneurs often don’t know how investing in ad spend will impact their bank accounts. So they often make their best guess at a target customer acquisition cost and monthly ad spend budget.
Digital marketers take these numbers and run. Now, everyone’s acting on a guess. We’ve seen a number of our clients in this position with their agencies, so we step in as the third point in the triangle. Amplify helps businesses find and use the most accurate and clear metrics from their businesses.
How Can I Bridge the Gap?
We recommend three specific steps:
Identify your average order value.
Subtract your customer acquisition cost.
Subtract the average variable costs per order
Using these variables, you can identify how many orders you need to have each month in order to break even, and incorporate an informed ad spend dollar amount required to generate more than enough sales to start putting extra cash in the bank.
Why is This Important?
Each new order creates a ripple effect through your business, hopefully dropping free cash to the bottom line. Without a clear picture of the above variables, it’s nearly impossible for you to be confident in a consistent and sustainable Cash Return On Ad Spend (CROAS).
With these tools, you are well on your way to understanding your business’ full financial picture and answering this vital question:
How does each dollar I invest in ad spend impact
my bank account at the end of the month?
We’d Love to Talk
If you’re a business owner who knows you have untapped growth potential and you just need clear, accurate numbers, we’d love to talk. It’s our favorite way to help businesses.