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Profit-Driven Advertising: Can It Empower Your Marketing Team?

This article originally appeared on IBM’s THINK Marketing blog.

Does your marketing team track the true cost of digital advertising and the revenue driven by it? In today’s world of advanced analytics and cross-channel tracking, there’s no reason not to use profit, instead of cost, as a true north for your online advertising efforts.

Historically, CEOs have regarded advertising as an expense instead of a revenue generator. However, as marketing teams are beginning to place more of a focus on direct response campaign performance and measurable program outputs, they also have the opportunity to pivot towards profit-driven advertising, and away from the traditional cost-efficiency model.

What Is Profit-Driven Advertising?

Profit Driven 1Profit-driven advertising means investment in retaining rare repeat purchasers and acquiring users with high lifetime value (LTV), rather than acquiring new customers at the lowest price possible. This tactic provides greater long-term revenue for businesses and mitigates the risk of losing valuable prospects to competitors.

Why Should You Consider A Profit-Driven Advertising Strategy?

Treating marketing as a cost center versus viewing it as a profit driver produces two very different results. Here’s what ROI looks like when you optimize ad spend toward total profits rather than pre-determined cost-per-acquisition (CPA) bids.

Profit Driven Advertising comparison chart

 

As you can see, a traditional approach built around costs can result in a massive missed opportunity. A profit-driven strategy may mean higher upfront acquisition costs, but it also leads to much greater profit in the end.

Is Profit-Driven Advertising Right For You?

Profit Driven 2Transitioning to profit-driven advertising is a big step for marketing teams. If you’re on the fence about switching to this strategy, ask yourself the following questions:

  • Are current KPIs inhibiting my team’s ability to maximize profits?
  • Does my team have the technology to identify and optimize the total profits driven by digital advertising? If not, is there room in the budget to acquire the tools necessary?
  • Is executive leadership bought in to the value of data-driven decision-making?

Did you answer yes to any of these questions? Then odds are it’s worth investigating profit-driven advertising for your business.

How To Get Started With Profit-Driven Advertising

Profit Driven 3Embarking on a profit-driven plan of action involves several key steps:

  1. Setting total profits as the KPI to measure marketing team success
  2. Optimizing campaigns according to the outcomes most important to your business (such as increasing the average lifetime value of your customers)
  3. Empowering your marketing team with flexible budgets so they can maximize opportunities with all profitable customers and prospects
  4. Acquiring advertising automation software that allows you to easily track the true cost of marketing and the profit growth that bidding towards lifetime value can unlock
  5. Setting up a process for financial accountability so you can truly be certain that your profit-driven advertising efforts are paying off

Profit-Driven Advertising: From Marketing Cost To Revenue Driver

Get all the details about how the profit-driven advertising model can drive up your bottom line and fuel growth in your marketing budget.
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