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Why you should only advertise on the internet to people who have ‘Self-Qualified’

Internet Advertising is expensive. Not as expensive as traditional advertising but expensive nevertheless. And I am increasingly of the opinion that you only advertise to those who have ‘self-qualified’. Hnads upBy this I mean a wine drinker has put their virtual hand up and said, “I am interested in your brand”. Virtually done this in that they have visited your website or given you their email address.

This is a change from what I have been saying. My opinion before was to use internet advertising to drive awareness, the top of the marketing funnel, but given its cost, I now think it’s better to focus on the middle and bottom of the funnel. Those wine drinkers who have already expressed interest and may be a current customer.

There are number of ways to identify and track them called Retargeting and Custom Audiences. We’ll that we go through them shortly, but let’s first review how you measure the value and cost of internet advertising.

Advertising Measurement

Average Cost of Customer Acquisition and Lifetime Customer Value are two important concepts in marketing but especially in internet advertising. “Especially” because you can measure these two factors reasonably accurately; whereas, you struggle to do so in traditional advertising.

A simple example is, on average, spending $100 on a Google Adwords Display Network campaign, getting 20 clicks, only one of which converts – a conversion meaning a customer joins your wine club and buys wine. The cost to acquire that customer is $100. The customer then goes on to buy 2 cases ($300/case of which $150 is gross margin after wine and shipping cost) of wine over 2 years (28 months actually) before quitting your wine club. The Lifetime Customer Revenue is $600 and the Lifetime Customer Value is $600 less $300 (wine and shipping cost) less $100 (advertising) equals $200 of net profit.

So the aim is to increase the effectiveness of the ads so you get more clicks for the same budget (or reduce the cost with the same number of clicks). You can do this through better creative/copy, boosting your Quality Score (in the case of Adwords) or change the websites you place ads on (e.g. Google Search, Google Partner Search, Facebook ), or you can only advertise to people who have already expressed interested in your wine – the self qualified.

That’s what I’m suggesting, there are three ways to do it.

1. Facebook Custom Audiences

Facebook Custom Audiences

Facebook Custom Audience field using the Power Editor

This is where you upload your list of email addresses as a “Custom Audience” in Facebook’s Ad Manager. The list is probably from people who have signed up to receive newsletters and/or joined your wine club. You’ll need to use the Power Editor and go to Audience > Create Audience > Custom Audience. Facebook then compares the email list to Facebook users’ email addresses, puts the matches into a Custom Audience list, and dumps the rest. You can then advertise to those specific users in the Custom Audience list.

2. Google Remarketing

Remarketing, also known as retargeting, is where someone visits your site, a cookie is then downloaded onto their computer, and when they visit another website your ad is shown to that visitor based on the fact they have your cookie in their browser.

In the case of Google it gives you the cookie software to put on your website, provides a network of other websites to advertise on (the Display Network), takes your money through Adwords and places your ads if you bid high enough. It only shows ads to those people who have, of course, the retargeting cookie in their browser.

3. Facebook Remarketing

Facebook works with third party remarketing partners to do most of this. You get the cookie software from a remarketing company (I use PerfectAudience), you pay the company, and bid through this company to place ads on Facebook. The auction system is called FBX or Facebook Exchange.

Conversion tagging

Just a quick note to remember to ‘tag’ a conversion page. This is often called the Thank You page. On this page you put a pixel from Google and/or Facebook that tracks whether the advertising results in a sale.

Custom Audience and Remarketing Cost

Back to the simple example, and using Google Remarketing to illustrate the cost saving. You spend $100 on a Google Adwords Display Network campaign to the Remarketing Audience, get 40 clicks, only 4 of which converts i.e. 4 customers joins your wine club and buy wine. The cost to acquire each customer is ($100/4=) $25. The customers then go on to buy 2 cases each ($300/case of which $150 is gross margin after wine and shipping cost) of wine over 2 years before quitting your wine club. The Lifetime Customer Revenue is $600 and the Lifetime Customer Value is $600 less $300 (wine and shipping cost) less $25 (advertising) equals $275 of net profit.

You have reduced your Customer Acquisition Cost, and increased your Lifetime Customer Revenue, by $75. Which is 75% decrease and 37% increase respectively. All because you have only marketed to people who have expressed interest in your wine brands or wine store.

One qualification – Time

In the case of remarketing it takes time – you need to build up a list of internet browsers who have your cookie on their browser. Only once you have sufficient numbers is this sort of advertising worthwhile. So start now.

What’s your experience?

Images courtesy of mic wernej put your hands up

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