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The Difference Between Cost and Value in Advertising
A lesson all marketing professionals must learn
The one piece of advice I’d give to any marketing professional is to understand the significant difference between cost and value — both inside and outside of work.
Value is when something has perceived importance, usefulness, or monetary worth. It’s also what we give out in our actions and behaviours, and in the choices we’re seen to make.
Practically, as a marketing consultant, I give value to everything. Whether it be clients, brand advocates, customers, or digital and experiential activity.
I crunch the numbers on web traffic, engagement, and shopping cart abandonment to predict how much we’d make with each penny we’d spend. Anything more is a bonus, but it should never be less.
A Lesson for You When Advertising
When starting a business or new venture, people often see the cost and value as aligned. “I’m paying £5,000 for this ad, so I’m absolutely going to make at least £5,000.”
This is false.
I am not a professional mathematician, but I do understand that conversion rates on past activity give people like you and me a scalable indicator for any repeated action.
Every brand advocate or advertiser should be paid on a prediction for ROI (Return on Investment). If it’s out of your budget and you don’t have money to risk, don’t use their service.
Remember: The price is what they want you to pay, not what it’s worth.
Think hard about that next time you buy a sponsored post, advert, or email blast. They want £5,000 to send it to their 5,000 email addresses. Sounds fair, but what’s their open rate?
Let’s say the average is 8%. Now that’s 400 customers who will see those emails, not 5,000. So where you were paying £1 per potential customer, now you’re paying £12.50 per potential customer. Yikes!
If they value their list at £1 per customer, the most I’d be willing to pay them for that email blast or ad is £400. Honestly, that’s its value.
