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What is profitability?
Profitability is an indicator of the company's return on investment. It shows how much return each financial instrument provides. It can be money, movable or immovable property, time invested, and so on.
In English, profitability is referred to as ROI - Return On Investment.
In this case, we will talk about the return on investment (money) in marketing.
Profitability can be calculated for each investment channel over a period of time. It can then be compared to determine which of the marketing channels is more profitable and then invest a larger marketing budget in it.
Why Calculate Profitability?
The phrase is definitely heard: "I know that half of my marketing investment is not profitable, I just don't know which side." To avoid such an expression, you need to monitor the profitability of each marketing channel yourself.
Profitability and Internet Marketing.
In internet marketing, it is important to understand the profitability of each marketing tool. One of the benefits of the Internet is that almost anything can be tracked. Therefore, it is possible to calculate the profitability of each advertising channel.
Where to start?
Ask yourself - how much does one visitor to my website cost me? Are they 10, 20, 30 cents? If you use Pay Per Click ads, the cost per visitor is known, but have you calculated how much each visitor paid for a banner or ad? It's so easy to calculate, for example - banner costs per month / number of visitors per month.
When advertising on Google, the average cost per click is 10 to 30 cents, depending on the competition. And one of the highest quality visitors comes from the Google search engine (because it is advertised on specific keywords). Does your banner cost cheaper?
I know someone will say - a banner also gives brand promotion, but it is difficult to measure and most professionals do not take this factor into account when calculating only the costs of a particular visitor.
The cost per click is a small measure of profitability, but if your website doesn't have a registration or online billing system that you can track, then the cost per click is the minimum you need to know.
Purchase / Registration
If it is possible to order a product online (online store) or register for a service (training, etc.) on your website, you must calculate how much the cost of one registration is for each advertising channel.
If you are offering a registration for a seminar, it is easy to find out how much each registration has cost with the help of analysis tools. This will be a great number to compare different marketing channels. This figure will provide much more complete information on the funds spent.
Next, you need to calculate how much money you earn on average for each product. One has to know how much registration costs, but quite another to set the maximum marketing cost for that one registration.
Continuing the previous example of seminar registration - calculate how much money you earn on average for each registration. For example, participation in the seminar costs 300 Ls, your profit, minus all costs, is 50 Ls. This means that you may not invest more than LVL 50 per marketing participant in marketing. Let's say we advertise on Google search and on average one registration costs 22 Ls. Next, we will calculate the profitability of this investment.
Profitability Formula = (Profit - Investment) / Investment.
In our example, Profitability is 1.27 or 127%. It remains to compare this figure with other marketing channels and it will be seen where to invest more in the future and where less or less marketing money.
The moment you start calculating profitability, you will be able to try the profitability of the available marketing tools to the fullest. How beneficial is maintaining Twitter and other social marketing tools, email marketing, optimization, etc.
Internet Marketing consulting is necessary for any company that is interested in the benefits of the Internet. Of course, you can also find enough information in this area yourself, but I recommend choosing the advice of an experienced specialist, who will tell you about the benefits, both from a theoretical and practical point of view. Internet Marketing Consulting will provide answers to many questions, as well as provide additional information and advice on opportunities to earn online!
Where to use advice:
- It is recommended to choose a consultation if your website is under development. It is much easier to apply the wisdom of Internet Marketing at the very stage of creating a website than to make changes afterwards.
- Entrepreneurs often come up with great ideas, but there are problems with the implementation of these ideas, so the consultant will help to evaluate them from the point of view of Internet Marketing and give their assessment "from the sidelines".
- Consulting is also a great way to educate employees whose job it is to plan Internet Marketing activities in a company.
Customer's main benefits:
- Time saved compared to self-education;
- Combining the knowledge of an Internet Marketing specialist with a customer's idea can result in much greater benefits (for both);
- Consultants and specialists provide excellent business support. It will be difficult to do all the work yourself.