Why Weighted Average Cost Of Marketing Is An Important KPI

April 27, 2021
cost of marketing

KPIs (Key Performance Indicators) are essential in any business. They help you define the goals you want to achieve. And one KPI that can help your business is the weighted average cost of marketing. This is simply the amount of money you spend on your marketing campaigns.

According to Marketing360, many people assume the cost of marketing is transactional, meaning you just have to spend X money to get X returns. 

Well, that’s not the case. Please keep reading to find out how you can use the Weighted Cost of Marketing to make better decisions and improve your business.

But before we analyze how it helps, let’s first quickly review how exactly you can calculate a weighted average cost of marketing.

How to calculate the average cost of marketing

A lot goes into calculating the annual budget for marketing. And below is a simple step-by-step process.

  1. Consider what you want to achieve.

This could be more sign-ups to your website, more sales, or a general increase in revenue by upselling your income. Don’t make the mistake of saying, “This is the X amount of money we want to spend on marketing this year.” 

Your campaigns will be set to fail since you only considered how much you want to spend and not what you will get in return. Instead, ask, “How much will it cost to get 100 more sign-ups this year?”

2. How much does it cost to get a lead?

This is the amount of money you have to spend to get at least one lead. You can get this information from the previous year by dividing the amount you spent on marketing and the number of leads you got. If you’re not sure about your cost per lead, you can analyze what other companies in the same industry are doing.

3. Conversion Rate

The conversion rate is simply the number of leads that turned into customers. Just divide the number of conversions by the number of leads. And if you’re not sure or don’t have enough data to go by, you can consult companies in your niche.

The Calculation Process

Start by calculating the number of leads you need. For instance, let’s say you need 100 new sign-ups in the coming year, and your conversion rate is 10%. You’ll calculate the leads using the following equation;

1000/0.1 = 10,000 leads

Now that you know how many leads calculate how much it will cost. Assuming it costs $200 per lead, multiply that by the number of leads;

$200*10,000 + $200,000

You will need $200,000 to get 1000 new sign-ups

NOTE: This is a rough estimate. Some businesses may have more complex pricing systems.  A good marketing strategy should work on improving conversion rates and minimizing the cost per lead.

Why The Weighted Average Cost Of Marketing Is An Important KPI

  1. It Helps Determine How Much To Spend On Each Marketing  Channel

When coming up with a marketing budget, you define how much you want to spend based on your average order value, lifetime value, acquisition cost, and the return you expect from your campaigns. 

Now, there are different channels that you can use to market your products,  they cost differently, and they often have different results.

But once you come up with the average cost of marketing you’re willing to spend based on the size of your company, it becomes easier to narrow down on the channels of penetration you can use. 

You’ll also be able to track the performance of each. And know how much to spend on each channel for the best returns.

Case Studies

According to nickmetrics.com, social media marketing such as Facebook ads and Google ads are some of the best ways sports betting companies can increase brand awareness, increase traffic to their websites, and even increase their conversions. 

According to Bettingexpert.com, companies like bet365, skybet, and PADDYPOWER have leveraged social media to get and maintain clients. 

But this doesn’t mean they only rely on social media marketing. They also set aside finances for affiliate marketing, traditional advertising, loyalty programs, and email marketing.

  1. It Helps Determine How Much You Can Spend on Marketing

As mentioned earlier, you calculate the average cost of marketing from the amount of money your company earns annually. 

So, you may be thinking, how will this help me increase my revenue? 

Well, spending money blindly on a marketing campaign isn’t going to help that much.

There’s a popular statement that Dan Kennedy made. He said, “Whoever is willing to spend the most on customer acquisition, wins.”

We not saying the statement is wrong. 

All I’m saying is there’s more to a marketing strategy than just the finances. 

You need to adequately plan, measure the performance along the way, determine your target audience, determine where your business is and where it needs to go, and eliminate what doesn’t work. 

Do that, and you’ll most probably win without spending millions of dollars.

Case Studies

According to europeangaming.eu, gambling companies spent £1.2 billion on online marketing alone. 67% of that was spent on direct online marketing, affiliate marketing, and social media marketing. Only 15% was spent on TV. 

And in 2019, the gambling industry was worth US$85.047 billion. This shows that betting companies leveraged on knowing how much to spend. And where to spend it, to see that amount of growth. This industry is also expected to grow tremendously in the future.

  1. Customer Engagement and Retention

Once you know where to spend the money and how much to spend, you will most probably start seeing some increase in your returns. 

Now it’s time to retain your customers. We all know that sports betting is highly influenced by seasons.

Well, if you spend money blindly on marketing during the active season, you may exhaust your finances for operational costs.

 For instance, let’s say you’re a bookmaker specializing in football. Football is played during spring, and the sport is not actively played during other seasons.

If you spend too much of your resources marketing during the fall, you may deplete the resources necessary to run your company when the season is over. 

But when you set a limit to the cost you’re willing to pay for marketing, you can bank on the active seasons and still be operational during the other seasons. 

Another way to leverage this in increasing revenue is by diversifying into baseball, basketball, and other sports that are played during the other seasons.

So, how does the cost of marketing come into play? Different sports have different marketing strategies, costs, and methods of penetration into the market.

Case Studies

According to optimove.com, you can engage your customers during the off-season by encouraging them to bet on other sports that they might be interested in. Bet365, a leading sports betting company, has sports such as soccer, football, rugby, basketball, snooker, and golf. All of this is meant to keep the players engaged throughout the year.

Wrapping Up

Calculating the average cost of marketing goes a long way in helping you determine how much to spend on each marketing channel for better results.

 Remember to always look for channels that have lower costs per lead and higher conversion rates.

Partner With Us

Scoresandstats is a leading sports betting company backed by AI offering live odds for a wide range of sports. 

They also offer live scores, previews, and accurate statistics to help you make better betting decisions. 

They also double up as an SEO marketing agency with several followers across social media platforms, and they have lots of experience in leveraging both organic traffic and paid traffic for sports businesses.