Smart Money: Financial Considerations For Online Advertising

Imagine you’re planning a vacation. You’re trying to set a budget for the trip, and hotel costs are high. Wouldn’t it be nice not to have to pay for a room? Could having an RV save you some money?

Unfortunately, there are a lot of extra costs associated with owning an RV – the costs in excess gas, parking at a campground, providing your own food, and of course, buying a massive vehicle that you’ll only use a few times a year. Hidden costs abound, and you’re sure to discover more. You might save money over time, but the budget is more complicated than you may initially believe.

As a business owner looking to expand your online advertising base, it’s important to think about the hidden costs that come with your advertising decisions as well. Some forms of advertising are cheap to produce, but their conversion rates are low, while others are more expensive to launch, but will serve you better in the long run.

So, how do you choose?

Social Schemes

Social media marketing is likely the easiest and most cost-effective advertising method as you can find. And what’s more, executing a campaign on Twitter or building your Facebook connections are the kinds of tasks you may be able to pawn off on interns and other entry level marketing employees.

Crafting a short blurb, posting links, and recommending your page are all low-cost ways to advertise online.

However, don’t expect to derive great riches from social advertising. This form of advertising can help push some inbound links, but the conversion rate may be low.

An exception exists for companies who hold events as social media is perfect for engaging a local community. By posting events on their calendars and companies are able to talk it up, which can build interest. It can also create a sense of personal investment that builds loyalty to your brand.

Data Driven Decisions

Big data is a more highly-developed sector of online advertising. It taps into the particular interests and motivations of current or potential clients. In this sense, big data-driven advertising is where the money is. Gathering, managing, and creating a plan from big data can be costly, but the returns are high, especially with creative ad concepts.

Assessing Your Audience

Finally, when deciding how much money to invest in an advertising idea, consider what audience it’s meant to reach.

Audiences can be grouped as follows:

  1. repeat customers
  2. occasional but established customers
  3. a broader group of potential customers who receive email
  4. a more distant group with some aligned interests
  5. the broadest social audience

Your investment should depend on where on this list your potential audience falls.

Investing in audiences #1 & #2 can be the most effective way to grow your customer base when advertising.  Established customers already have a sense of loyalty, while audiences #3, #4 and #5 are not as likely to convert.

You should consider concentrating your advertising efforts on audiences #2 & #3 to shift them into audience #1. Expanding your repeat customer audience is where the money is in online advertising.

Advertising isn’t an exact science, but by considering the long-term impact of your investments, you can make the most of your money. Spending in the wrong place isn’t just a poor investment; it’s also money that could have been spent otherwise on customers with greater loyalty or a stronger conversion rate.

You have a target audience – learn who they are and invest in advertising accordingly.

About Larry Alton

Larry Alton is an independent business consultant specializing in social media trends, business, and entrepreneurship. Follow him on Twitter and LinkedIn.

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