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How to Create a Budget for Paid Ads

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How to Create a Budget for Paid Ads

Creating a budget for paid ads can be challenging, especially if you are new to the field. With so many different platforms and types of ads available, it can be difficult to know where to start. The good news is that there are some tried-and-true methods that work well for most businesses. In this blog post, we will look at the best way to create an ad budget and maintain profitability.

Find Your Profit Margin & Lifetime Value

First, you need to find out what your profit margin is for your product. The reason is so we can determine how much we can spend to acquire a customer. To find your profit margin, take the price of your product and subtract all of the costs associated with acquiring a customer.

For example, if it takes $100 to acquire a new client (i.e., ad spend plus cost-per-click) but each customer brings in an average profit margin of $120, you would want to adjust your budget so that each new customer costs less than $100. In this case, you would want to set your budget at $99 or less in order to be profitable.

You can also calculate your lifetime value (LTV) to get an idea of how much you can spend on acquiring new customers. To do so, divide the average profit margin by the churn rate. For example, if you spend $100 to acquire a customer but make an average of $120 each year for the next three years (i.e., your churn rate is 25%), then your LTV would be about $40 ($120 / 0.25). This means that it’s best to set your budget at around 40% or less of your LTV.

From here, you now need to should determine how many new customers you would like and base the total budget around that. So if it costs you $100 for a new customer and you want 10 new customers within the next month you would need a budget of $1000 to achieve that goal.

Remember this does not guarantee you will get that number and you could very well surpass that depending on your offer and how much you can optimize your conversion rate.

Be Smart About Your Budgeting Process

Another way to determine a budget is by looking at the return on ad spend (ROAS) for any given campaign or platform. Calculating ROAS can be tricky, as it varies from business to business and depends on what you are selling, where you are selling it, and a variety of other factors. However, if you have historical data that you can use as a guide, then you can come up with a tentative budget for your next ad campaign.

For most businesses, a 3:1 ROAS is the first goal as that will cover the product and marketing expenses. This is also the mark where profitability is achieved.

Once you’ve determined your profit margin, LTV, and ROAS goals, it’s time to start allocating money to paid ads. In most cases, it’s best to start with a small budget and increase your investment as the campaign progresses. In some instances, you may want to spend more money on certain platforms or campaigns than others so that you can see which works better for your business.

In addition to setting budgets based on ROAS goals and LTV targets, there are other factors you can consider when allocating ad spend. For example, you may want to target certain platforms or demographics based on where your ideal customer is located or what they are interested in.

Creating a budget for paid ads can be challenging, but it’s important to remember that there is no one-size-fits-all approach. By taking the time to find your profit margins, LTVs, and ROAS goals you can create a budget that works best for your business.

1641227371 377 How to Create a Budget for Paid Ads

EJ Saunders

EJ has been in the digital marketing world since 2008 and founded his company Blaze Digital Solutions in March of 2020. Over the years he has worked with a variety of different businesses and is personally responsible for generating well over $10 million in sales with digital ads and SEO. 
EJ and his team at Blaze Digital act as a bolt on marketing team and help their clients businesses scale. His mission is to help at least 10 businesses generate $10 million annually in the next 10 years.  

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The Future of Content Success Is Social

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The Future of Content Success Is Social

Here’s a challenge: search “SEO RFP” on Google. Click on the results, and tell me how similar they are.

We did the same thing every other SEO does: We asked, “What words are thematically relevant?” Which themes have my competitors missed?” How can I put them in?” AND “How can I do everything just slightly better than they can?”

Then they do the same, and it becomes a cycle of beating mediocre content with slightly less mediocre content.

When I looked at our high-ranking content, I felt uncomfortable. Yes, it ranked, but it wasn’t overly helpful compared to everything else that ranked.

Ranking isn’t the job to be done; it is just a proxy.

Why would a high-ranking keyword make me feel uncomfortable? Isn’t that the whole freaking job to be done? Not for me. The job to be done is to help educate people, and ranking is a byproduct of doing that well.

I looked at our own content, and I put myself in the seat of a searcher, not an SEO; I looked at the top four rankings and decided that our content felt easy, almost ChatGPT-ish. It was predictable, it was repeatable, and it lacked hot takes and spicy punches.

So, I removed 80% of the content and replaced it with the 38 questions I would ask if I was hiring an SEO. I’m a 25-year SME, and I know what I would be looking for in these turbulent times. I wanted to write the questions that didn’t exist on anything ranking in the top ten. This was a risk, why? Because, semantically, I was going against what Google was likely expecting to see on this topic. This is when Mike King told me about information gain. Google will give you a boost in ranking signals if you bring it new info. Maybe breaking out of the sea of sameness + some social signals could be a key factor in improving rankings on top of doing the traditional SEO work.

What’s worth more?

Ten visits to my SEO RFP post from people to my content via a private procurement WhatsApp group or LinkedIn group?

One hundred people to the same content from search?

I had to make a call, and I was willing to lose rankings (that were getting low traffic but highly valued traffic) to write something that when people read it, they thought enough about it to share it in emails, groups, etc.

SME as the unlock to standout content?

I literally just asked myself, “Wil, what would you ask yourself if you were hiring an SEO company? Then I riffed for 6—8 hours and had tons of chats with ChatGPT. I was asking ChatGPT to get me thinking differently. Things like, “what would create the most value?” I never constrained myself to “what is the search volume,” I started with the riffs.

If I was going to lose my rankings, I had to socially promote it so people knew it existed. That was an unlock, too, if you go this route. It’s work, you are now going to rely on spikes from social, so having a reason to update it and put it back in social is very important.

Most of my “followers” aren’t looking for SEO services as they are digital marketers themselves. So I didn’t expect this post to take off HUGLEY, but given the content, I was shocked at how well it did and how much engagement it got from real actual people.

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7 Things Creators Should Know About Marketing Their Book

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7 Things Creators Should Know About Marketing Their Book

Writing a book is a gargantuan task, and reaching the finish line is a feat equal to summiting a mountain.

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Being position-less secures a marketer’s position for a lifetime

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Optimove Positionless Marketer Optimove

On March 20, 2024, the Position-less Marketer was introduced on MarTech.org and my keynote address at Optimove’s user conference.

Since that initial announcement, we have introduced the term “Position-less Marketer” to hundreds of leading marketing executives and learned that readers and the audience interpreted it in several ways. This article will document a few of those interpretations and clarify what “position-less” means regarding marketing prowess.

As a reminder, data analytics and AI, integrated marketing platforms, automation and more make the Position-less Marketer possible. Plus, new generative AI tools like ChatGPT, Canna-GPT, Github, Copilot and DALL-E offer human access to powerful new capabilities that generate computer code, images, songs and videos, respectively, with human guidance.

Position-less Marketer does not mean a marketer without a role; quite the opposite

Speaking with a senior-level marketer at a global retailer, their first interpretation may be a marketer without a role/position. This was a first-glance definition from more than 60% of the marketers who first heard the term. But on hearing the story and relating it to “be position-less” in other professions, including music and sports, most understood it as a multidimensional marketer — or, as we noted, realizing your multipotentiality. 

One executive said, phrasing position-less in a way that clarified it for me was “unlocking your multidimensionality.” She said, “I like this phrase immensely.” In reality, the word we used was “multipotentiality,” and the fact that she landed on multidimensionality is correct. As we noted, you can do more than one thing.

The other 40% of marketing executives did think of the “Position-less Marketer” as a marketing professional who is not confined or defined by traditional marketing roles or boundaries. In that sense, they are not focused only on branding or digital marketing; instead, they are versatile and agile enough to adjust to the new conditions created by the tools that new technology has to offer. As a result, the Position-less Marketer should be comfortable working across channels, platforms and strategies, integrating different approaches to achieve marketing goals effectively.

Navigating the spectrum: Balancing specialization and Position-less Marketing

Some of the most in-depth feedback came from data analytic experts from consulting firms and Chief Marketing Officers who took a more holistic view.

Most discussions of the “Position-less Marketer” concept began with a nuanced perspective on the dichotomy between entrepreneurial companies and large enterprises.

They noted that entrepreneurial companies are agile and innovative, but lack scalability and efficiency. Conversely, large enterprises excel at execution but struggle with innovation due to rigid processes.

Drawing parallels, many related this to marketing functionality, with specialists excelling in their domain, but needing a more holistic perspective and Position-less Marketers having a broader understanding but needing deep expertise.

Some argued that neither extreme is ideal and emphasized the importance of balancing specialization and generalization based on the company’s growth stage and competitive landscape.

They highlight the need for leaders to protect processes while fostering innovation, citing Steve Jobs’ approach of creating separate teams to drive innovation within Apple. They stress the significance of breaking down silos and encouraging collaboration across functions, even if it means challenging existing paradigms.

Ultimately, these experts recommended adopting a Position-less Marketing approach as a competitive advantage in today’s landscape, where tight specialization is common. They suggest that by connecting dots across different functions, companies can offer unique value to customers. However, they caution against viewing generalization as an absolute solution, emphasizing the importance of context and competitive positioning.

These marketing leaders advocate for a balanced marketing approach that leverages specialization and generalization to drive innovation and competitive advantage while acknowledging the need to adapt strategies based on industry dynamics and competitive positioning.

Be position-less, but not too position-less — realize your multipotentiality

This supports what was noted in the March 20th article: to be position-less, but not too position-less. When we realize our multipotentiality and multidimensionality, we excel as humans. AI becomes an augmentation.

But just because you can individually execute on all cylinders in marketing and perform data analytics, writing, graphics and more from your desktop does not mean you should.

Learn when being position-less is best for the organization and when it isn’t. Just because you can write copy with ChatGPT does not mean you will write with the same skill and finesse as a professional copywriter. So be position-less, but not too position-less.

Position-less vs. being pigeonholed

At the same time, if you are a manager, do not pigeonhole people. Let them spread their wings using today’s latest AI tools for human augmentation.

For managers, finding the right balance between guiding marketing pros to be position-less and, at other times, holding their position as specialists and bringing in specialists from different marketing disciplines will take a lot of work. We are at the beginning of this new era. However, working toward the right balance is a step forward in a new world where humans and AI work hand-in-hand to optimize marketing teams.

We are at a pivot point for the marketing profession. Those who can be position-less and managers who can optimize teams with flawless position-less execution will secure their position for a lifetime.

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