How The Recession Makes You Royalty

by , Dec 4, 2008, 3:30 PM
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The classic recession saying is "Cash is king." So if you're an advertiser willing to buy on a CPM basis, you should be getting used to being treated royally by now. And if you're a media firm, well -- life as a vassal is better than no life at all.

In these rough economic times, everything is suddenly on sale. And business models have been forced to change. Players in the performance advertising arena are welcoming new colleagues to the world of ROI: media that previously enjoyed high CPMs with limited accountability.

Why performance? And why cost per lead in particular? Not only is partnering with media more cost-effective for marketers, it recognizes a fundamental change in online media usage. For example, research now shows that while page views of business sites have accelerated since the stock market meltdown, the proportion of those visitors clicking on ads has plummeted.

Simple economics says that less advertiser demand will make media more negotiable. If you're a marketer with a cash budget, you or your agencies have no doubt seen some pretty sweet deals. Bonus circulation is now standard and extra names should be expected from list owners.

For marketers who are new to performance, there are excellent opportunities to build margin by finding ideal target customers at reduced acquisition cost. Here's a way to approach performance and get going:

  • Establish your current acquisition cost per new customer. This should include not only your media cost, but any continuity marketing cost, salesforce time, etc. This acquisition cost should be your control.

  • Calculate the average media CPM that yields the acquisition cost, and then look to beat this CPM by at least 20%. If CPM-based media can offer this rate, make your buy... and move your target CPM lower.

  • In moving to cost per lead (CPL): start by calculating the cost per lead you currently pay via CPM media. For example, if you average one qualified lead per 2,000 impressions and pay a $6 CPM, your CPL is $12. This gives you a target.

  • Many lead gen firms will get close to your CPL target, but you'll need to test across a range to ensure quality. And often, you'll find comparable or better quality at a lower Effective CPM.

  • It can't hurt to ask; today's media market will give you the chance to stretch dollars if you're creative. Media that were exclusively CPM in the past will now frequently welcome hybrid deals that include performance elements. You can offer a low CPM guarantee and ask the media to share in an upside based upon results -- such as the number of qualified leads generated. If the media performs well, you might want to adjust your guarantee to lock in more volume.

    The media recession is a unique opportunity to make high performing online media your ally. Never a bad idea to have allies as you compete against the other nobility.

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