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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.
Profit-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.
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.
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.
Transitioning 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:
Did you answer yes to any of these questions? Then odds are it’s worth investigating profit-driven advertising for your business.
Embarking on a profit-driven plan of action involves several key steps:
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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