How not to screw up at the start: set up a sales funnel and calculate advertising

Sales funnel, growth point, leads, conversion – the abundance of terminology makes your head spin. It is difficult for a novice entrepreneur to understand the peculiarities of modern business promotion on the Internet. How to optimize your sales? How to understand that an advertising campaign is set up effectively? How, in the end, is it not to “drain” the budget, but to achieve a result?

Let’s figure it out!

Attention! This article is for aspiring entrepreneurs. It contains the basics of Internet marketing, chewed up to an elementary state. But with the help of this knowledge, it is easy to navigate on your own or check if the involved marketer is working correctly.

Actor

Meet Igor, an entrepreneur.

Source: freepik.com

Three months ago, he opened a one-page website through which he sells iPhone 12 cases with a portrait of Valery Meladze. He buys covers in bulk and prints portraits himself. Monthly income is barely approaching zero, and Igor wants to bring the business to a stable profit. He needs more sales, but he has a limited budget to acquire customers. What to do?

Getting started with setting up a sales funnel

Igor should analyze the sales funnel. This is the path that each client takes: from the moment when he sees a link to Igor’s website in the search results, to the moment when he receives the purchased cover with Valerochka in the mail.

Source: vse-footbolki.ru

Why analyze a sales funnel? To find points that can be improved for the growth of orders. The fact is that at each stage of the funnel, the number of potential buyers decreases: customers are eliminated, leave the site, or abandon a purchase at the last moment.

The percentage of customers who made a purchase to the total number of people who are interested in Igor’s site is a conversion.

Igor’s funnel is three-level: users see the site in Yandex search results, go to the site, and place an order. The entrepreneur’s job is to get as many people as possible to get to the last stage.

Igor analyzed that an average of 8,000 people a day are interested in targeted search queries regarding the purchase of an iPhone 12 case. Of these, about 300 users go to his site. Every third leaves without an order: he does not like Meladze or he considers the price high. It turns out about 100 clients per day with an average check in the region of 300 rubles.

Potential target audience	8000 people
Number of visitors per day	300 people
Number of orders per day	100
Conversion from visitor to customer	(100/300) x100% = 33%
Average check	300
Daily earnings	300×100 = 30,000 rubles

Taxes, purchase costs, printing and site maintenance take away almost all the money Igor earns. He does not have the money to organize a large advertising campaign, so he will have to proceed from the available indicators of site traffic.

Where to begin? You can increase the average check. Let’s say Igor introduces popsockets (holders for the phone cover) into the assortment and sells cover + popsocket sets for 100 rubles more. Let’s see what happens:

Potential target audience	8000 people
Number of visitors per day	300 people
Number of orders per day	100
Conversion from visitor to customer	(100/300) x100% = 33%
Average check	400
Daily earnings	400×100 = 40,000 rubles

Igor can deviate from the principles and sell cases with portraits of other stars. This will cost you the expense of reworking the site, but can increase sales. Let’s say that now out of 300 visitors, not 100, but 120 people will make purchases:

Potential target audience	8000 people
Number of visitors per day	300 people
Number of orders per day	120
Conversion from visitor to customer	(120/300) x100% = 40%
Average check	400
Daily earnings	400×120 = 48,000 rubles

The indicators went up, which means that the entrepreneur has found points of growth. By increasing revenue and conversion, Igor can save money for an advertising campaign. And this is already a transition to a new level.

Preparing for an advertising campaign: what should a newbie consider?

Advertising is not a lottery game (although it is very similar). Igor has earned money with blood and sweat and cannot afford to experiment. If he is going to spend 15,000 rubles on the campaign, he expects that the revenue will grow by the same, or better – by a larger amount. Hence, he is not interested in advertising just to get people to know about his store. He needs sales.

And again, back to the sales funnel. The goal of advertising is to direct potential buyers to a specific stage in the funnel. For example, before advertising, the number of visitors per day was 300 people. Will the campaign be able to increase traffic?

Let’s say Igor has set himself a task: to increase the number of site visitors by 10% and keep the conversion around 40%. He is ready to spend 20,000 rubles on a contextual advertising campaign. What happens:

Potential target audience	8000 people
Number of visitors per day	300 + 10% = 330 people
Number of orders per day	120 + 12 = 132
Conversion from visitor to customer	(132/330) x100% = 40%
Average check	400
Daily earnings	400×132 = 52,800 rubles

What we see: the number of visitors has grown, as has the number of orders. The growth in revenue was (52,800-48,000) 4800 rubles per day. But as soon as advertising is stopped, the indicators will return to the old level. As a result, Igor can recoup the costs of the campaign and earn a little, but not significantly.

Igor wants to achieve consistently high sales without the need to constantly pour huge amounts of money into contextual advertising. He decides to experiment. He makes his way backstage to Meladze and takes pictures of him with a cover. The singer looks at this product as … In general, it is not so important. There is a snapshot!

For 2,000 rubles, Igor hires a copywriter, and he composes a touching post about the manufacturer of covers, which Meladze himself admires. Photos support the post. Another 20,000 rubles are spent on “crops” – paid publication of a post in entertaining public VK and Instagram. A few days later, the post is distributed by users, and large entertainment resources are also published for free.

Igor discovers that the number of visitors has grown to 1000 people a day – 12.5% of the potential target audience. Prior to that, his site attracted only 300 people – 3.75%. The number of successfully completed purchases increased to 450. What happened:

Potential target audience	8000 people
Number of visitors per day	1000 people
Number of orders per day	450
Conversion from visitor to customer	(450/1000) x100% = 45%
Average check	400
Daily earnings	400×450 = 180,000 rubles

Daily revenue growth: 180,000 – 48,000 = 132,000 rubles, and this is at an advertising cost of 22,000 rubles. The costs are paid off already on the first day of sales. During the period of “hype” (that is, increased attention) Igor will be able to make good money. After that, you will have to plan the next advertising campaign in order to maintain the level.

But there is one “but”

These calculations are inaccurate. There is no guarantee that advertising will increase performance. Let’s say a viral post may not arouse interest, but irritate the audience. Or buyers brought to the store using contextual advertising will not see enough assortment and leave disappointed.

There may be a different situation. An inspired customer will make recommendations and bring friends to the store. That is, advertising costs will be recouped additionally, although this was not foreseen in the calculations.

The conclusion is simple: pharmacy accuracy cannot be achieved with preliminary planning. Calculations are needed to see a rough picture and understand whether it is worth investing in a specific campaign.

Finally: calculating the return on investment

Prior to that, Igor evaluated the effectiveness of advertising by comparing the benefits and costs. If we are talking about one campaign, you can do so. What if Igor decides to launch contextual and viral advertising, and also attract a couple of bloggers? How to compare which method was more effective?

In such situations, you need to calculate the return on investment – ROI. It shows how much Igor will earn by spending on advertising.

ROI formula = (Revenue – Cost) / Cost x 100%

In this case, revenue is the revenue received additionally after the launch of the advertisement. Costs – all types of advertising costs.

For example, if Igor spends 20,000 rubles on advertising and his revenue grows by 25,000, ROI = (25,000-20000) / 20,000 x 100% = 25%. Simply put, Igor will earn an additional 25 kopecks from each ruble invested.

The principle is this:

ROI> 0 – advertising campaigns paid off, Igor earned more.
ROI <0 - the advertisement was a failure, the costs did not pay off.
ROI = 0 – what you spent is what you earned. There is no profit, as well as no losses.

How to calculate which advertising campaign is more profitable? Let’s say Igor launched contextual advertising and paid the head of the Meladze fan club for a recommendation in the fan public:

Advertising type	Expenses	Income	ROI
Contextual	5000 rubles / day	5500 rubles / day	10%
Native (via blogger)	50,000 rubles / one recommendation	67,000 rubles for two days	34%

It turned out that native advertising is more profitable. But the “hype” after the native publication quickly passed, and Igor does not receive new orders from fans. And contextual advertising is consistently profitable as long as it is active. If you tweak the settings, you can increase the ROI of your contextual ads and periodically contact bloggers for additional revenue growth. In this case, there is no “bad” advertising channel. Each has its own advantages, and they must be used.

For those who have finished reading

Demonstrated examples and calculations – the basis of the basics and rudimentary. Starting with it, it will be easier to delve into the intricacies of running a campaign. And terms such as CPL, CPO or SCAG will no longer seem like something incomprehensible. Igor was able, and you will succeed too. Go for it!