Many advertisers are including online tactics in their media programs these days. Whether using display, social or search, they know that most people nowadays spend at least some of their time online, and with the improved targeting and buying platforms, you have the opportunity to reach an engaged audience. What isn’t as quickly known is how much to allocate to this tactic. With CPMs starting at around $6.00 for a programmatic buy, it looks like an inexpensive way to advertise. It’s certainly less expensive than a television campaign, for example, and it’s arguably more targeted, but is it really as inexpensive as you think? How do you determine an effective budget?
To determine budget, you have to go back to Marketing 101 and answer the following:
What is your objective? Is it to generate awareness? Drive a response such as to increase sales or drive site traffic? Launch a new product? Each of those objectives would require a different level of frequency ranging from 10 – 20x. As with traditional advertising tactics, digital require multiple exposures to a message before the user may take action.
Who’s your target? How engaged are they with your product? The more targeted your audience, the more it may cost to reach them. Each targeting layer adds a bit to the overall pricing.
How active are your competitors? What are they doing online? You may need a higher frequency to offset their activity.
Once you’ve determined answers to these basic questions, you can more accurately develop a budget. For example, if your universe is 245,000 within a given geography and you want to get them to take action, you will need to reach the audience around 18 times, which is the target frequency for a direct response campaign. For that you may need to purchase 4.4 million advertising impressions a month. At an average CPM of $6 your monthly budget should be $26,400. Maybe not the $5,000 – $10,000 you may have envisioned. Most are surprised at that amount, but shouldn’t be. The basic principles of media buying apply across all tactics – digital is no exception.