Blog : Campaign Performance

What is the Law of Diminishing Returns in advertising? If your mobile app marketing, or ecommerce campaign is no longer hitting your KPI thresholds it maybe time……

What is the Law of Diminishing Returns in advertising? If your mobile app marketing, or ecommerce campaign is no longer hitting your KPI thresholds it maybe time……

You’ve probably heard of the 80/20 rule or the Pareto Principle: 20 percent of anything will yield 80 percent of your results. It’s a general rule of thumb for anything. 20 percent of your employees will do 80 percent of the work. 20 percent of your customers will make up 80 percent of your sales. And 20 percent of your advertising spend may make up 80 percent of your revenue brought in.

The Law of Diminishing Returns is similar.

Under the Law of Diminishing Returns, investments and returns don’t have a one-to-one relationship. Rather, your returns start to drop off at a certain point. Your returns plateau; once you’ve hit the peak, every subsequent dollar you spend may gain you nothing at all.

And that’s why you can sometimes throw money at a strategy over and over and just not get the results that you desire. 

Let’s take a further look at the Law of Diminishing Returns — and how to disrupt it.

Caring is a Finite Resource: The Law of Diminishing Returns

Consider this: You’re a florist. You sell bouquets. You have about 10,000 people in your town — and you’ve got about $100 in media buying budget. You decide to send out mailers.

So, you spend $100 to send out 10,000 mailers. 500 people respond and purchase $10 bouquets; you make $5,000. That’s a great ROI!

Why not try it again?

You send out another 10,000 mailers. This time, 250 people respond and purchase $10 bouquets; you make $2,500. That’s still great ROI, but it’s significantly less.

Next time, only 50 people respond. And the next time, only 25. Your strategy hasn’t changed. But the audience you’re marketing to has been saturated. You’re getting diminishing returns because there are fewer and fewer people who are interested.

Now, you’re a little smarter. You decide to send 10,000 mailers to the next town over. But you still don’t get 500 people — you get 300. Why? Because the first audience set was your ideal audience — they’re in the area. Now you’re moving to people farther away who are less likely to spend. So you’re still getting diminishing returns.

This doesn’t mean that you’re always going to be doing poorly. Eventually, that first batch of 500 people who responded are going to be in the market for flowers again. But it does mean that your initial strategies can often do better than follow-up attempts, for a variety of reasons.

(But let’s disrupt a little. Consider if this time you spent $50 of your media buying budget on mailers and $50 on digital advertising instead. You might be able to take advantage of both with less saturation.)

Let’s take a look at another example: You have a company that does mobile app development. You spend $25,000 on paid digital advertising and you make $125,000 in sales. Then you spend $100,000 on paid digital advertising. Do you make $500,000 in sales?

Probably not. Your audience is probably already saturated, so the same people are seeing your ads multiple times rather than new people being connected with each time.

And that’s the Law of Diminishing Returns: the first $25,000 you spend may have substantially greater results than the last $25,000 you spend.

You’ve Plateaued: Detecting the Law of Diminishing Returns in Your Advertising

How can you determine whether you’re hitting the Law of Diminishing Returns?

As our VP of New Product Clifton Pierce stated, “In terms of advertising, the Law of Diminishing Returns only applies if the advertiser isn’t truly paying attention.” It’s pretty easy as long as you’re reliably tracking your metrics. You should see that the more energy you’re putting into something, the weaker results you’re getting. If everything else remains equal about your strategies, then it should be easy to see that you’re pumping money into the Law of Diminishing Returns.

That isn’t always a bad thing. Think back to the florist. Even though the florist is getting diminishing returns, they’re still getting returns. As long as your ROI is positive, your advertising is still being effective. It’s more a question of whether your advertising is being as effective as it can be.

Rob Palumbo CEO at OutPoint, splits everything into the Most Productive Zone, Diminishing Returns Zone, and Negative Returns Zone. From there, he is able to better determine the right course of action for each marketing channel.

With mobile app marketing, you might see that your mobile app installs have slowed. But that doesn’t actually mean that it isn’t bringing you in revenue.

And, of course, understanding the Law of Diminishing Returns is critical when you’re doing your cash flow projections. You should never assume that you’re going to get identical results from the same expense outlay; that’s just too optimistic.

Can There Be a Law of Increasing Returns?

Of course, not everyone believes in the Law of Diminishing Returns. Jonathan Ivanco says, “There is no such thing as the law of diminishing returns, it’s lazy marketers that don’t understand what goes into real advertising and marketing.”But Richard Heinberg points out that the Law of Diminishing Returns applies to everything, including civilizations — generally in reference to the abundance of resources available.

In the examples given, returns started to diminish immediately because saturation had been met. But in real life, it usually takes some time to reach that saturation point. Usually you’ll see increasing returns, a plateau, and then diminishing returns. And diminishing returns really means you need to move on to other strategies; hence Ivanco’s statement that it relates to lazy marketing.

But is it possible to grow exponentially? Is it possible to continue to see better and better returns?

There are very few advertising campaigns that will never plateau or that will never start going downhill.  You will always need to steadily invest more if you want to continue getting the same results. And it’s not always money you’re investing. With social media advertising, for instance, you’re usually investing time.

But it is possible to have a very significant ramp up.

Look at influencer marketing, social media marketing, and other types of traditional marketing disruption. Companies are able to exponentially grow and continue to grow; they have such broad appeal they don’t meet saturation. With new realms like augmented reality and virtual reality coming, there are new opportunities for brand development and product development.

So, the Law of Diminishing Returns doesn’t always have to be a law; there can be exceptions. But they are rare ones.

Using the Law of Diminishing Returns to Your Advantage

Realistically, what does the Law of Diminishing Returns mean? It means that you’ve done the best you can at a certain technique. Mobile Marketing? Mailers? Email lists? Social media? You’ve peaked, baby. I mean, it’s all downhill from there. But you’ve done as good a job as you can — and now it’s time to move on.

If you’re struggling with the Law of Diminishing Returns right now, you’re throwing good money after bad. You’re probably spending $25,000 in paid advertising to generate 90 percent of your results and another $25,000 for that last 10 percent.

That’s great news.

Because that means that you can take that $25,000 that you’re using in digital advertising and generate even better results elsewhere.

Ultimately, the Law of Diminishing Returns just means that it’s time to try something different. It’s a way to show that you’ve capped out on what you can get (for now) from a certain advertising technique, strategy, or channel. And that’s an exceptionally valuable thing to know.

Advertising is a wild arena. It’s always changing. The strategies that work today have no guarantee of working tomorrow. You need to be able to identify your key metrics, track them reliably, and pivot when you can. By studying things like the Law of Diminishing Returns, you can become more astute at recognizing the signs — and more confident and competent at reacting to it. Here at Colure, we know that the success of our agency is built upon the success and growth of your business. Contact Colure’s Advertising Advisors today to make sure you have a balanced Go To Market Advertising Campaign for your next project or to be interviewed and featured in our next series of “Project Venus”. Let’s grow!

Project performance and KPI’s

Project performance and KPI’s

Business Basics

The success or failure of any project can be measured if you keep an open eye and know how to measure your company’s performance. You must have measurable data order to understand the significance of any market action. Goals must be set as benchmarks of success or failure. These goals should be realistic and attainable. These measurable benchmarks are referred to as “Key Performance Indicators” or KPIs. These are items that “help an organization assess progress toward declared goals.”-TechTarget.

What is a KPI?

These measurements “are used to evaluate factors that are crucial to the success of an organization,” – TechTarget. KPIs allow organizations to measure the results of their campaigns. These items help to tweak current goals to better sell their product or service. Well set KPIs can determine the success of an organization. Simply stated – if you can’t accurately measure your established performance, there is no way you will be able to modify precisely those behaviors for growth toward your goals.

Differing from group to group

Because organizations in every industry vary, the KPI’s need to reflect those organizations must differ . Each KPI is relevant to a specific purpose. While the basic premise is the same, the goals for each team will be dependent on what the result needs to be. KPIs for a mobile marketing campaign can measure the lead generation and the capture of a customer, but those KPIs will differ from a hospital’s patient ER wait time. The goal of a KPI is to find the best possible way to gain success without spending enormous amounts of time, effort, and money to get there.

Why use a KPI?

When an organization thinks up a new idea, product, service, or campaign, the result and their needs goal has to be assessed. Which means, “before you start assigning KPI’s to everything you can think of, there needs to (be) a clear understanding of your business objectives and strategic directions,” Intouch Marketing. Organizations must ask questions before, during, and after the launch of the campaign to determine the importance of their KPIs.

For KPIs to be successful, an organization must know how to translate the data. “If management cannot translate the importance and understanding of the businesses KPI’s to their employees effectively, they will most likely fail,” Intouch Marketing. Management must be able to quantify the statistics to their employees, so those individuals can execute the campaign to drive success.

Success is something that every organization wants and needs. Measuring KPIs is a key tool to reach those achievements. Organizations must always have an action plan for end results whenever initiating and executing something new into the mix. Otherwise, not setting goals will inevitably end in failure. Be wise and use those KPIs!

If you need guidance on measuring your corporation’s growth and performance, contact Colure’s Project Managers to help you define your next step for corporate growth.

Vital customer engagement (or how not to leave your customers at the door)

Vital customer engagement (or how not to leave your customers at the door)

Customer engagement (CE) is the living and breathing relationship that exists between a customer and a company. This critical relationship is a critical factor that helps to determine the success or failure of a company. The challenge to every business is that almost all buyers have different needs and wants. Consumers aren’t unanimous, even within similar demographics. There are different ages, lifestyles, ethnic backgrounds, etc. There’s an excellent chance that the motivating factors for one middle-aged customer may differ significantly from another. It’s incredibly important for a business to operate with their customer base as individuals.

So how do we go about the act of engaging a client? Here’s a few starting points to orient your mobile app marketing and digital advertising efforts:

  • An engagement marketing strategy is crucial. How will your company reach out to potential customers? How will you respond to their inquiries? Detailed analytics are necessary to help answer these questions. Actively learning about a customer’s lifestyles, rather than lumping people together based on a singular demographic. Remember, numbers are cold, your customers are real people. Think of them in that fashion. The more accurate and detailed your customer database is, the stronger foundation you will have for engagement.
  • Learn to predict consumer behavior. When looking at the unique lifestyle of your consumers, where can you see areas where they can benefit from your service or product? Big-box retailers like Walmart and Target do so by using data mining to notice trends in purchases. Walmart used data mining and discovered that Strawberry Pop-tart sales increased sevenfold before a hurricane in southern states. The reaction? Place Strawberry Pop-tarts at the cashier area of a store. More exposure to the pop-tarts increases sales even more. In the end, all parties benefit. Walmart and Kellogg’s experience increased sales, while customers have an emergency food source in case of natural disasters.
  • The benefits of customer engagement are limitless. Customer retention is critical. Customers can see the value in a company that puts the effort into satisfying their customer base. Satisfied clients can be the most powerful form of marketing. The family and friends of current customers are potential future customers. Nothing is more valuable than a recommendation from peer-to-peer. One survey even concluded that 92% of customers trust peer recommendations, compared to 47% trusting TV or magazine ads.

Customer engagement is beneficial, if not necessary, to a company’s success. Perhaps one of the most satisfying aspects of customer engagement is the company-client relationships built upon it. Increasing interaction cultivates and grows these relationships. Knowing that your company makes a positive difference in the life of your customers is a huge reward.

Micro-communities and Influencers

Micro-communities and Influencers

Marketing to micro communities – or niche marketing – is an effective method to place your company directly in front of a specific audience. Focusing your efforts to a limited segment of an audience can often create momentum from within a community.

Niche communities tend to be relatively small, tight-knit, and interconnected. Within these communities, there are certain individuals who are more pronounced than other members. These individuals are usually well-respected trendsetters with many followers. Their trendsetting ability earns these people the nickname of ‘influencers.’ Targeting these influencers is key to niche marketing. 81% of companies who use influencer marketing report positive results.

The jewelry company Benique saw a 300% increase on their return on investments (ROI) after starting their campaign. They provided free samples to influencers in return for reviews to their audience. They then collaborated further with the influencers who truly loved the product. Although finding influencers took time, the results paid off.

Context matters when seeking the right influencers. Don’t base your search on a given number of followers only. Katy Perry may have 62 million Twitter followers, but her approach to marketing her music may not be the best choice to promote a software company. Her mass following may actually be a disadvantage. Her overall engagement with followers is low and many of these followers are probably teenagers who are not interested in software. Search for influencers who can create action within your intended audience.

Working with influencers is a business relationship. Popular influencers may receive offers from your competitors. There should be some compensation from your company. The compensation doesn’t necessarily have to be monetary. The web hosting company Cloudways had trouble creating relationships with influencers when they began their marketing efforts. After several unsuccessful attempts, they tried a new approach. Cloudways offered to interview influencers and feature the interview on their website. This allowed the influencers to receive promotional exposure from Cloudways. The business-influencer relationship ended up being beneficial to both parties.

Traditional marketing techniques have moved from their role as a primary tool to augmenting the specific application of niche marketing techniques. The function of each marketing method becomes an additional tool in the ever evolving, media-based world. Creativity is essential to drive your brand’s success. Using influencers in a creative way will keep your business ahead of the competition and in front of those community members who lead the pack.

MAUs: Monthly Active Users vs Driving Downloads

MAUs: Monthly Active Users vs Driving Downloads

Business Basics

Online businesses need to identify their customer base to understand the relationship between themselves and their clients. How do companies measure success? Why do businesses keep track of their performance? How often should companies even keep track of certain information? These are questions critical to a business’ survival. Key Performance Indicators (KPIs) allow companies to measure almost every facet of their respective businesses interactions. With this data, they can understand their performance relative to the marketplace.

For some companies and mobile apps driving app downloads is the KPI but for those companies that operate solely digitally, a central KPI measurement is the Monthly Active Users (MAU). A standard definition of the MAU is defined as the number of “unique” users over the course of 30 days. This performance indicator is commonly used by social networking sites, digital gaming platforms, e-commerce businesses, and mobile apps. MAU measurement allows digital services to know who is using their product and how they use that product.

An active user is not just a person that may randomly access a site/service. An active user is determined as an individual who has created an account through email or username to access a site or service.

There are also two types of active users. There are first time users and recurring users:

  • A first time user is a new user who has accessed a site for the first time.
  • A recurring user is a user that frequents the site. It is important to clarify data to this extent when you are trying to track performance.

Ultimately it is up to the site or service to distinguish who they believe is an active user. Traditional social networking services like Facebook and Twitter have both have differing definitions:

  • Facebook defines a Monthly Active User as anyone that is a registered Facebook user, who has accessed the service through the website, messenger app, or mobile app at least one time in the last 30 days.
  • Twitter employs a slightly more complicated approach than its competitor. You must follow a minimum of 30 accounts and be followed by a third of the number of accounts you follow to be considered an active user. To put that in simpler terms, if you are a registered user who follows 30 accounts, with at least ten followers, and uses the site at least one time in 30 days, you are considered an active Twitter user.

It is crucial to measure user activity on digital platforms when examining performance, especially with mobile app marketing. Calculating the metrics of Monthly Active User data is a practical industry practice. The proper manipulation of this data will help companies find the information they need to succeed.

If you need help tracking your audience’s habits, contact Colure.

Click-through rates

Click-through rates

Click-Through Rates (CTR) are one of the most important pieces of data for measuring the success of your advertisements, but it can be confusing to interpret the numbers and apply them appropriately to your mobile app marketing and advertising campaign. Here’s a breakdown of what a CTR is and how you can maximize its use:

What is a click-through rate?

A CTR is the number of clicks that a pay-per-click (PPC) advertisement gets for every number of impressions (views). In essence, it tells you how many times your advertisement is viewed before someone clicks on it.

Why do click-through rates matter?

A higher CTR ultimately leads to lower costs for advertising. Google and other search engine platforms commonly offer lower prices for ads that offer a higher relevance to search engine users. Google, for example, determines the cost based on your Quality Score. The higher your quality score, the less you have to pay for a PPC advertisement.

How do click-through rates work?

What makes a CTR “good” really depends on your industry and the ad’s position, but overall, Google AdWords has an average CTR of 1.91% for search network and 0.35% for display network. With this in mind, your CTR should be as high as possible while still maintaining relevance.

How can I increase my click-through rate?

  • Use targeted keywords. If a keyword isn’t relevant to your business, it could end up costing more money than it’s worth because your ad is leading to click-throughs but not conversions.
  • Use visual content. Images and video boost engagement. In fact, research shows that using the word “video” in an email subject line boosts click-through rates by 65%.
  • Offer freebies. Consumers love free stuff, so promoting an offer like a significant discount off the price of a product is likely to increase CTR.

Click-through rates are used as a Key Performance Indicator (KPI), used to evaluate performance against the market competition. It allows for an apples-to-apples comparison. Numbers can be tricky sometimes. To understand those numbers, it’s important to see your company’s marketplace performance from another angle.

Create a dynamic marketing plan

Create a dynamic marketing plan

Every business needs a marketing plan. Businesses rely on sales and customers. These commodities cannot be generated without an effective marketing campaign that effectively communicates the company, product, and message. Though many businesses are well aware of the need for a strategic marketing plan, not all of them understand exactly how to implement one.

A marketing plan can include all of the following and much more: content development, emails and newsletters, market research and data analysis, SEO, social media management, sponsorships, website development, and mobile app marketing. While it is possible for a business owner to create, manage, and maintain a marketing plan alone, it takes a considerable amount of time and patience.

The ‘Do It Yourself’ approach

Owners thinking of a DIY approach should realistically calculate how much effort they can spare. For those undeterred by the tasks ahead, willing to tackle this challenge, below are three cheap and effective steps towards better results.

    • Do your homework: Research is key. Understand the market you are targeting and decide on your company’s message. Analyze competitors for blind spots and opportunities to shine. Don’t compete in areas they’re good—find your niche.

    • Email is big, cheap and often provides the highest ROI: It is also a preferred method of communication by customers.

    • Your website matters: Make sure it has a responive build that operates on different platforms. Streamline the online experience. 81% of consumers use online to explore their options beforehand and gather information about purchases. Don’t give them a reason to be disappointed.

Hiring an individual or an advertising agency

Perhaps the amount of work ahead is too daunting, or perhaps you might not have the time to invest in creating something polished that best represents your company. While the immediate idea you might have is to hire an employee in charge of marketing operations, you’ll be surprised to realize that, in the long run, hiring a person could be more expensive than hiring an agency. Employees have more costs than salary once you include training costs, taxes, insurance, and the software needed. Excluding price, advertising agencies have other benefits, most notably:

    • Expertise: both in the niche market you’re seeking and in the types of marketing you might require whether that be mobile marketing or marketing online.
    • Experience: with creating and executing plans and consulting businesses.
    • Efficiency: a marketing agency does not require training. They can start often times immediately and implement a plan of action urgently.

Working with a marketer requires trust and a willingness to try new things. Communication is crucial to keep both sides on the same page. Both parties must have an understanding of the other party. You should discuss the roles each party with play in the process. Advertising agencies make life easier by freeing you up to focus on what you do best – running our own company. Regardless, they still rely on you for information and the materials needed to create the campaign, so there is no easy shortcut when it comes to marketing your business. The tools for success are out there at your disposal, but the drive ultimately comes from you.

Reach out to Colure’s development team to discuss a plan to advance your next project.