Internet Advertising: How to Improve Return on Investment.

Too many companies spend too money on Internet advertising without knowing their return on investment (ROI). If you do not know your ROI, you simply cannot improve it. A company's goal should be to invest its advertising money where those people who buy the most with the highest frequency at a premium price can be reached.

Set Goals

The first step is to set goals for your Internet advertising campaign. It is very important to set goals, because goals allow you to measure the success or failure of your on-line ad campaign and to make necessary changes. When you set your goals, keep in mind that they have to be measurable and achievable. An example for a measurable goal is a 50% increase in online sales over the next quarter. Achievable means that your goal can be met. The goal has to be realistic and in line with growth potential, market size, and scale flexibility of your business.

How to improve your ROI

In order to measure the success of your ad campaign, you need to know which type of online ad campaign works best for you. In other words, which campaign attracts the best possible customers. One method of accomplishing this is to assign unique URLs to each ad and its publishing website. If you use the same ad on the same website, but on a different webpage, assign it a different URL. By assigning unique URLs, it is possible to track the success or failure of each ad. Unique URLs enable you to identify each click-through from any ad. Therefore, you can calculate the cost per click-through for each ad. Furthermore, you can calculate the ratio of click-through to sales, or click-through to action. Based on the unique URL, you know from what location the potential customers come from. You can track them on your site using a cookie and learn how they behave on your website. For example, you can find out how much time people that come from a specific ad spend on your site compared to visitors that originated from a different ad. You can discover how many pages they view on your web-site, or how many clicks it takes for them to buy your product. This information can be found on your log file. Analyzing your log file enables you to create an ad-specific behavior profile. Each ad specific profile describes all of its visitors' behavior based on their activities on your website. This profile lets you determine which ad has given you the best return on your investment.

Fine-Tune Your Internet Ad Campaign

Once you have determined which ad campaign has been the most successful, use it as the control campaign. A control campaign is used as the standard to which all other campaigns are compared. If a new campaign performs better than the control campaign, the new one becomes the next control campaign. The control campaign gives you a means to gauge your success and it establishes clear expectations for your future on-line ad campaign. Terminate campaigns that do not contribute to reaching your goals and measure up to your control campaign. Replace terminated campaigns with new ones. If you have not yet established a control campaign, inform your online ad agency how you plan to measure your ad campaign and what you expect to achieve.

A Word of Caution

As you might know, studies have shown that click-through rates have dropped below 1%. As a result, online ad campaigns are frequently referred to as "branding" campaigns. But the purpose of advertising is to get your target audience to take action. You want them to click on your banner and make purchases over and over again. Naturally, you are only making money when they purchase your products! Your company's survival depends on it.

In "The End Of Marketing As We Know It," Sergio Zyman writes that "marketing is not about creating award wining advertising. It is about selling the most stuff and making the most money." Advertising assists you in branding your product or service, which is a welcome side effect of advertising. An ad campaign ought to communicate the benefits of your product to your target audience through a unique selling proposition. Successful ad campaigns sell your products and in turn build your brand if your customers are satisfied with your products, the user friendliness of your web-site, your customer support and service. In other words, everything your company does impacts your brand.

Internet Advertising Shortcomings 

A possible explanation for the low click-through rate is content restriction. The publisher of the website where you advertise limits your banner ads to a certain size. Size refers to how many Kbytes your ad can be. The publisher also restricts the shape of your banners. These limiting factors do not allow you to advertise your product in the most potentially effective manner. Banner ads are not a compelling medium to arouse interest that leads to click-throughs by your potential consumers.

Demographic Segmentation: A Costly Routine

Another problem for online advertising is the use of demographics. The problem with demographics is that you buy your ad-space from the website publisher, based on a demographic segmentation. Unfortunately, your target audience does not fall exclusively into that segment. Some are younger, older, have more money, less education, etc. Demographic segmentation limits your reach. It is also an expensive routine, because you are paying for each ad served, regardless of whether or not the person is a potential customer. The ad is served as long as the demographic profile is met by the person who visits the website where you are advertising. The problem is that a many people outside your target audience see your ads, simply because they fit the demographic profile-- and you have to pay for each ad served. Many people who do not fit the demographic profile, but are in your target audience, do not see your ads, even though they are interested in your product. The cost of omitting these potential customers is very high, because they either buy from your competitor or they do not buy at all. If they do not become your customers they cannot evangelize your products or services and your word of mouth. campaign is not as successful as it should be.

Use psychographics To Maximize The Effectiveness Of Your Ad Campaign

The best way to overcome the demographic limitation is to use psychographics. The bottom line is that you have to know who your customers are. What are their lifestyles? What are their hobbies? What are their consumer behaviors? Knowing this information allows you to advertise on websites that cater to your customers needs. The psychographics approach makes your ads more relevant to your target audience, since their consumer behavior is a reflection of their lifestyle and their psychology. Pursuing this approach for targeting your potential customers improves your ROI dramatically.

Is it Magic?

When you combine all of the above mentioned methods to improve the return on your investment, you will realize that advertising and marketing can do magic for your sales and profit. Be assured, however, that advertising and marketing have nothing to do with magic. They are skills that require a tremendous amount of discipline, hard work, and dedication. Harnessing those skills or hiring professionals who have mastered the art of internet advertising means that you can have control over a successful online ad campaign. Make it your business to understand how your investment into your ad campaign will generate more revenue for your company.

Hermann Eichholzer is Director of Marketing with Los Angeles based Netraction. For more information, contact Hermann at [e-mail]. Or check out Netraction's web site at (www.Netraction.com).