math in advertising
This is not the article where we explain how to calculate ROAS, or talk about the importance of considering CLTV. If you are looking for the actual calculations of “Math in advertising”, you can look here, here, or here.
Math is the backbone of modern day marketing, and marketing is advertising. We are marketing our goods and services to people who know us and to those who don’t yet know us - sometimes simultaneously. The biggest shifts in marketing and advertising in recent decades are in targeting and attribution… and with both we get to leverage math.
When in business school learning the Net Present Value calculation, it can feel like learning something finally that had always been fuzzy but critically important… Does it pencil out?
When we are looking to build out a campaign for a new client we can almost instantly tell if their goals are too strict or budget prohibitively low for the objectives of the campaign. The way we can estimate budgets, performance, projections and all the while make optimizations is by using simple math to calculate the ins and outs of our campaigns and the rates at which small successes and failures add up to results. It isn’t easy, but it is simple.
Digital advertising campaigns are a string of variables. Below isn’t a uniform or perfect model, but illustrates the point:
Visibility > Click through rate > Cost per click > Conversion rate + List building > Lead quality or AOV > Funnel rates > Closed/Won > Lifetime value > Gross Margin > Remarketing, etc.
The quantification and valuation at each stage affords us a point for estimation - and revision - effectively building out a model where if our assumptions are correct we can say confidently for every $1 spent, you get X in pipeline, or Y new customers, or Z dollars back.
With this sort of model, you can then make an executive decision between two ends of a spectrum - On the one side we have higher return on investment but smaller volumes, and the other we have market share. As a partner we don’t vote on how you finance your growth, but we can certainly get you the inputs you need to make an informed and very exciting decision either way.
