How to Calculate a Mobile Ad Budget for Your Business
Growing your business with effective digital marketing is not unlike firing on the burners on a powerful jet; it takes some calculating and precision to get right, but doing it right helps you skyrocket to new places. That’s why it’s just as important to know what kind of ad budget you’re working with, but defining “perfect” can be its own challenge.
How to Determine Your Ad Budget
Understanding certain key performance indicators (KPIs), how they’re calculated, and how they relate to the overall strategy will help you establish an ad budget that’s right for your business.
Cost Per Click
Cost per click (CPC) measures how much you’ll pay every time someone clicks on your ad. It’s a cost-effective pricing model since you’re not responsible for anyone who merely looks at the ad without engaging, but it still needs to be monitored since clicks may quickly add up.
That said, CPC is no guarantee of a conversion. You can improve your performance of this metric by considering things like keyword relevance, landing page quality, and click-through rate.
Cost Per Mille
In the cost per mille (CPM) model, you pay a certain amount for every 1,000 impressions of an ad, giving you an idea of how wide an audience it reached. It’s useful to give you this awareness, but it runs an even greater risk of racking up the bills since users don’t even need to click for it to count.
Cost Per Lead
With cost per lead (CPL), you measure the cost of generating a single lead. This person has not only clicked the ad but also demonstrated explicit interest by completing the intended action. For this model, you only pay once you have their contact information.
This metric will naturally run higher, but it directly results in leads that may lead to a sale.
Cost Per Action
With the cost per action (CPA) model, you pay once a user takes a specific action, such as signing up for a service or purchasing an item. This cost comes at a fixed rate and is largely determined by the advertiser, so it’s not common to see it measured by ad platforms; you can track this internally to assess how well the promotion is performing.
Cost Per Sale
Finally, you’ll want to think about the cost-per-sale (CPS) model, in which advertisers pay once a user completes a purchase. Of course, it’s an inherently low-risk way to measure performance since you’re only paying once the sale is generated. This is also more specific compared to the CPA metric since it only considers actions that result in generating profit.
Key Takeaways
Before you start a new marketing campaign, it’s crucial to plan for the expenses. Creating a budget is the only way to ensure your strategy pays off without wasting time and money on dead campaigns. Instead, you’ll be able to direct this otherwise excess spending toward development, testing, and other critical operations. By creating a mobile ad budget for your business campaign, you’ll be able to analyze your marketing investment and make necessary adjustments.
