This comes from my own experience, having worked on advertising accounts with circa £25m media budget. The pressure was high, the CPA was tight, and sales expectation was rising YoY.
This experience needs to be tailored to the needs of SMEs as not many of us have a high level of advertising budget. But the underlying principles are the same, and we can gain a great deal from examining the activities of those big budget brands who can afford to pay for the training and apply this insight to our smaller ad accounts.
There are broadly two types of clients that we deal with:
1) Those with experience of paid media advertising, and who are interested in utilising our expertise to support their paid media advertising journey.
2) Those that are new to paid media and have limited or no experience of working with a media agency.
Forecasting paid media performance for the latter group can only involve the use of media planning tools to get the level of monthly search or audience size. We are always up front with these clients to avoid giving them false hope with unrealistic sales and traffic projections.
The first group, however, have plenty of data that can be usefully shared with us, and we can then use these data to project what can happen in future paid media campaigns and outline what the performance might look like. The forecast can be done around the specific KPIs that are most important to the clients’ business.
When projecting for yearly performance, broken down by month, it’s important to take into account seasonality for your vertical. I always incorporate annual inflation in the cost, too. Believe it or not, even when the economy is stable we can see a YoY increase in Cost per Click (CPC). I expect that the CPC to be even higher with the inflation rate we are currently facing at global and local levels.
The above focussed on ‘harder’ performance metrics such as Cost, Cost per Acquisition (CPA) and Sales. There are also softer performance KPIs such as Click Through Rate (CTR). This is one area I would always give a little more room to in my projection as CTR can go up and down depending on what visual or ad copy text is shown to the audience. As a result, until we run the ads campaign, the accurate percentage number will not be known. The same logic applies to forecasting Conversion Rate (CVR). If my client is about to launch a new website, for example, it will be hard to rely on the forecast based on previous CVR data as a new website design means a change to the user journey. As a result, the CVR can go north but it can certainly go south too. So, promising to deliver the exact same CVR can be unrealistic.
If there is something that I’ve missed in outlining the process above, let me know either via the comment section or via email and I will get back to you.