If you are considering using video for a marketing campaign you will undoubtedly come across the challenge of determining the total budget for the production itself as well as any advertising spend (media buy) that will be needed.
It’s no secret that video is one of the most effective ways to maximize and pre-qualify leads, increase conversions and sales and optimize the performance of any sales landing pages currently in use.
But video marketing is only a good investment if you are actually going to generate a return on your investment.
So in this article I’m going to show you how you can calculate the potential ROI of a marketing video campaign so that you will know:
How to interpret your existing data
How to determine the right timing for video marketing
How much to invest in video marketing
How to allocate budget to creative production versus the media buy
Contents:
You Have to Know Your Numbers
The first step in projecting the ROI of a video marketing campaign - or projecting the ROI of any campaign, really - is knowing your current numbers.
You will need to know:
Totals revenues and profits (yearly)
Total new visitors (monthly)
Total returning visitors (monthly)
Total number of new leads (monthly)
Total number of new customers (monthly)
Total number of returning customers (monthly)
If you are already very familiar with the above from your business, you can skip to the next section. If not, continue reading for some insight on how best to calculate.
Total of revenues and profits (yearly)
This calculation is likely already available via your profit and loss (p&l) statements - so it shouldn’t be hard to get.
It’s important that you have a clear picture of revenues and profits before you continue with any other calculations - otherwise it will be difficult to create accurate projections.
For the purposes of this article keep in mind the following definitions:
Gross Revenue: total of ALL sales receipts for the year
Net Revenue / Gross Profit: total of ALL sales receipts after cost of goods sold deducted
Net Profit: total of profits calculated after allowable business expenses deducted
As an example:
Let’s assume you sell one type of computer for $1,000 per computer, and it costs you $500 to make each computer, and at the end of the year you sell 2,000 computers.
Sale price per customer: $1,000
Cost of goods per computer: $600
Total computers sold for year: 2,000
Gross Revenue: $2,000,000 (Total of all sales)
Net Revenue / Gross Profit: $1,200,000 (Total of sales with cost of goods deducted.)
Gross Profit Margin of 40% (GPM)
Now assume your total business expenses (rent, payroll, insurance, facilities etc…) are a total of $750,000 per year.
Total Business Expenses: $1,000,000
Net Profit: $200,000 (Total profits after business expenses deducted.)
Net Profit Margin of 10% (NPM)
Keep in mind that if you are in a service business, it is not quite as cut and dry to calculate these figures, because there are likely variables project to project and varying “costs” of the services.
In those cases it’s even MORE important to know your numbers so that you can make your projections as accurate as possible.
The fastest and simplest way to calculate your cost of goods and allowable business expenses is to just subtract your net profit from your gross revenue.
As an example:
Let’s assume you’re a service based business that does luxury auto detailing.
Gross revenue: $500,000 (total of all sales)
Net Profit: $150,000 (total profits left over)
Simple subtraction makes it clear that the cost of goods (or in this case services) + the business expenses were $350,000 for the year.
Now just subtract your total business expenses (such as rent, regular payroll, insurance, facilities etc…) And that will give you the total cost of services sold.
Business Expenses: $225,000
Cost of Services Sold: $125,000
We now see that the cost of services (which could be in the form of expenditures on each job, 1099 subcontractors, other job-specific costs) totaled $125,000.
Total of new visitors (web or in-person)
The next number that it is vital to understand is the total number of new visitors monthly. If you are entirely an online business, this can be easily determined by jumping into your website analytics.
If you have an in-person business or storefront, you will want to install a way to measure this metric as soon as possible. (It can be as simple as a salesperson asking each visitor if it’s their first time in the store and then making a quick note for tallying at the end of each day.
However it is being tracked - it is absolutely imperative that you know how many NEW visitors your business is getting each month.
Total of returning visitors (web or in-person)
Similarly to new visitors - you want to also track the number of returning visitors that your website or storefront is receiving monthly. This can be easily measured the same way as new visitors.
Total number of new leads (monthly)
This is usually the first step of conversion for a visitor. After they demonstrate interest in your product and provide some form of connection (email address, phone number etc…) they are now a lead that can be nurtured.
It’s important that you are able to track the total number of leads created monthly/yearly, so if you don’t currently have some kind of CRM (customer relationship management) or other system of tracking this in place, it’s definitely time to do so.
Total number of new customers (monthly)
This should be fairly easy to determine - simply review your sales receipts to tally the total number of NEW customers for the year, and then divide that by 12 to get the average number of new customers per month. Take care to ONLY count new customers. Customers that made more than one purchase should only be counted once.
Total number of returning customers (monthly)
You also want to know your total number of returning customers per month. Simply review your sales receipts and look for anyone that made more than one purchase. Do not count the FIRST purchase made in this tally. You want a clear picture of how many purchases per month are coming from existing customers - so you do not confuse them with new customers.
Break Down Values By Visitor, Lead & Customer
Once you have all your relevant numbers together (revenues and profits, new and returning visitors, leads, and customers) it's time to do some simple math and break down relevant values by customer.
The idea is that you want to understand how each individual prospect, visitor, lead and customer translates to cost or profit for your business. This will give you the power to project, implement and measure changes that can dramatically impact your bottom line.
For the purposes of the sample calculations we are going to be using the following metrics:
$1,000,000 total revenue
200,000 new visitors
4,000 leads
$600,000 costs of goods/services
$400,000 gross profit
$300,000 business expenses
$100,000 total net profit
Here are the calculations that we recommend be done using your metrics, how to do them, and some sample calculations.
Visitor Calculations
$ Total Revenue / # Total Visitors = $ Value per visitor
# New Leads / # New Visitors = % Lead Conversion Rate
$1,000,000 total revenue from 200,000 new visitors - that is $5 value per visitor
4,000 new leads from 200,000 new visitors - that is 2% lead conversion rate.
Lead Calculations
$ Total Revenue / # Total Leads = $ Value per lead
# New Customers / # New Leads = % Sales Conversion Rate
$1,000,000 total revenue from 4,000 total leads - that is $250 value per lead.
900 new customers from 4,000 total leads - that is a 22.5% sales conversion rate
Customer Calculations
$ Total Revenue / # Total customers = $ Avg ticket per customer
$ Cost of services / # Total customers = $ Cost of goods/services per customer
This is about what it costs you to serve each customer
$ Total Net Profit / # Total customers = $ Net Profit per customer
This is your profit “margin” per customer
$1,000,000 total revenue from 900 total customers = $1,112 avg ticket per customer
$600,000 cost of g/s from 900 total customers = $667 cost of g/s per customer
$150,000 total net profit from 500 total customers = $112 net profit per customer
So using our metrics we now have the following calculations.
$5 value per visitor
2% lead conversion rate
$250 value per lead
22.5% sales conversion rate (1/5 close rate)
$1,112 avg ticket per customer
$667 cost of g/s per customer
$112 net profit per customer
Have a Clearly Defined Sales Process
Even if you do understand your numbers, you will find it very hard to implement and measure effective changes if you do not have a clearly defined sales process.
Sales Process: a step-by-step plan of how prospects are converted into customers. The sales process clearly defines specific sales actions within each step as well as in what order they are taken.
Every organization will have their own specifics within the sales process depending on their unique market and offerings - but all sales processes will generally align to a common format.
First, consider the overall customer journey, outlined by the acronym AIDA:
Awareness - the prospect becomes aware of your product.
Interest - the prospect is interested in your product.
Decision - the prospect decides to purchase your product.
Action - the prospect actually purchases the product.
Now let’s consider the general format of a sales process:
Source Leads (Lead)
Introduction (Cold)
Qualification (Warm)
Presentation (Qualified)
Proposal (Qualified)
Negotiation (Hot)
Deal Closed (Customer)
Now consider how the sales process aligns with the customer journey:
It is very important that you have charted out a prospect's customer journey through a clearly defined sales process - so that you can have accurate metrics from stage to stage.
The total time it takes to go from initial awareness to close, as well as the amount of resistance you will meet at each stage, depends on your unique market and product.
*NOTE: Generally, higher ticket products and services require a longer sales process (several weeks or months), while lower ticket products and services are much quicker (days).
Once you clearly understand the speed that prospects move from stage to stage as well as the percentage that do advance versus those that drop out - it becomes very easy to see how seemingly small improvements to any of the metrics will affect sales funnel performance, speed and profitability.
Monitor Benchmarks
*Disclaimer: It’s important to remember that benchmarks are not directly comparable business to business because of how unique each business model is - so they are really just a starting point for calculations and measurement. A profitable conversion rate for one company might mean financial death for another, so you should do some research into your specific market and determine what your unique benchmarks are, and take each of these with a grain of salt.
Target metrics will be very unique to your specific business and the market you are in, and there are certain “benchmarks” that can be used to determine the “health” of your current sales process.
For example: A healthy opt-in rate in many markets is 2%. This means that 1 out of every 50 new visitors ends up opting in to the offer / signup form etc… that you have on the site.
If your actual opt-in rate is only .05%, it means that adjustments can be made to dramatically improve the optin rate. If it were to increase to 2%, that means the rest of the funnel will have its metrics increased by a whopping 4x!
As a general rule of thumb – if your opt in rate is around 2% – it’s considered decent. 5% is amazing, and the best that I’ve ever seen are in the 8-10% range.
Here are some common benchmarks for Digital Services and Goods.
Email subscriber opt-in rate (no lead magnet) 2% Good, 5% Great, 8-10% Incredible
Lead Magnet Opt-in (from Organic Traffic) 30% Good, 45% Great, 60% Incredible
Lead Magnet Opt-In (from Paid Ads) 20% Good, 30% Great, 40% Incredible
Low Ticket Offer after Lead Magnet Opt-in 1% Good, 2.5% Great, 5% Incredible
Small Order Bump in Checkout 20% Good, 40% Great, 60% Incredible
Upsell to Bigger Offer after Purchase 15% Good, 25% Great, 35% Incredible
Here are some common benchmarks for E-commerce websites:
Product views 45% good, 55% great, 65%+ incredible
Add-to-cart 15% good, 20% great, 25%+ incredible
Transaction 3.5% good, 5% great, 8%+ incredible
*When also considering traffic sources, referral and email still hold the top spots.
Here are some common benchmarks for B2B Services (Business to Business)
Qualified Lead Conversion Rate 2.5% Good, 3.5% great, 4.5%+ incredible
Contact Form Rate 4.5% Good, 5.5% great, 6.5%+ incredible
Call Rate .8% Good, 1.2% great, 2%+ incredible
Here are some common benchmarks for B2C Services (Business to Consumer)
Qualified Lead Conversion Rate 9% Good, 12% great, 15%+ incredible
Contact Form Rate 1.5% Good, 2.5% great, 3.5%+ incredible
Call Rate 2% Good, 3.5% great, 5%+ incredible
Determine Where to Start
If you know your numbers, you have a clear understanding of your sales process and you have audited its existing performance and determined some benchmarks - it’s now time to determine in which stage of the sales process to deploy video.
The idea is to optimize each stage of the sales process so that you are maximizing the number of leads that move to the next stage, and minimizing the number of leads that drop out.
While it is impossible to ever have 100% of your leads end up converting, even very small improvements higher up in the funnel (even 1% or 2%) can make a major difference later in the funnel.
For example:
If 1,000 site visitors become 20 leads (2% lead conversion) who then become 6 qualified leads (30% qualification) who then become 2 sales (35% sales conversion).
That means 1,000 site visitors = 2 sales.
If we just increase the lead conversion by 1% more, watch what happens:
1,000 site visitors become 30 (3% lead conversion) leads who then become 10 qualified leads who then become 3-4 sales.
By increasing the lead conversion 1% - we may have nearly doubled the gross revenues.
There are a LOT of variables to consider when improving each phase of the sales process, but the most important thing to understand is that different stages of the sales process require very different types of changes in order to see improvement.
This is an extremely nuanced and complex subject that entire books are written about on a regular basis - so there is no way we can cover it all in this post.
But what I want to do is at least provide some general principles to what kinds of changes are usually needed in different parts of the sales funnel - so that you have some frame of reference if you are looking to improve.
Let’s get into it:
If lead conversion rate is low:
First check the source of traffic and make sure you are “targeting” the right people. If the people visiting your site are not the correct demographic - you will have a low lead conversion rate. If you are running ads - make sure the CTR (or click through rates) of the ads are above 1% and preferably 2-4%. Anything below 1% is very low and either your ads aren’t communicating well enough or you are targeting the wrong people.
Next, look at your website's “landing pages” (the first pages that new visitors see) and make sure that you are quickly and clearly communicating to the visitor that they are in the right place. A lot of low conversion rates are a result of poor landing page experience in which a user immediately bounces off of the website before spending any time. (Pro tip: a great way to gauge landing page experience is to check the “bounce rate” in your analytics. A bounce rate below 40% is excellent. Below 30% is fantastic. 55% is the rough average and anything above 70% is bad)
If the ads or other source of traffic is good, and the bounce rate is within benchmarks - you likely aren’t giving people reason enough to connect. This could be as simple as creating a clearer CTA (call to action) and making it easier for people to connect. (People don’t like long and complex forms) The most effective way to increase lead conversion is with a powerful video. An effective video on a landing page usually increases conversion rates by as much as 300 - 450%! Keep the video short (between 60-90 seconds) and make sure it properly shows off your brand's quality. The first impression that is made by video is extremely powerful - but if the video is not perceived as professional then your brand will not be perceived as professional. If the video is perceived as professional, high-quality, impactful and powerful - then your brand will be as well.
If sales conversion is rate is low:
First, audit your qualification process. If you are not converting enough of your leads it could be because you are not qualifying your leads well enough during discovery - or perhaps you are not doing enough pre-qualification on your website and in your marketing. The best salesperson in the world will not be able to sell anything to the wrong person. So always start your audit at the front of your sales process, at the very top of your sales funnel and work your way down. That’s the best way to reveal the problem.
If you are confident that you do have good, qualified leads - then a low sales conversion rate is usually due to a low quality offer. Most people’s minds may go immediately to price, but it’s not that simple. Sometimes, the price is fine - it’s just the terms that are holding people up. Sometimes, the price and terms aren’t an issue, it’s just that the value of the product or services is not being communicated well enough. The best way to determine the issue here is to go straight to your prospects and ask them. Reach out to deals that didn’t close, and ask them what the challenge is. You might find that there is a relatively simple aspect of your product’s value that is not being communicated and an adjustment to how you are conducting your demo’s or presentations can fix it. I’ve seen relatively small adjustments to a sales process (even as small as changing some language or the format of proposals) make a massive difference to closing rates!
Projecting ROI (Return on Investment)
When you are considering an investment into ANY new video marketing campaign accurately projecting ROI is a must.
You want to make sure that your investment will be profitable when all is said and done, you want to have at least a rough idea of what kind of timeframe there will be to see that profitability, and you want the value of projected results to exceed the risk of the initial investment.
Video is the most effective way to entice, educate and communicate value to prospects. And it can be leveraged in pretty much every marketing channel except for print (web, social, tv) - and in every stage of the funnel (ads, marketing/prospecting, retargeting, lead qualification, lead commitment, lead conversion, remarketing etc…)
Below are the steps to project and calculate the ROI of a video marketing campaign.
Step 1 - Determine where in the sales process to start
Step 2 - Create projections for before/after video inserted into the sales process
Step 1 - Determine where in the sales process to start
Review your numbers and determine where to leverage video first. Generally, video can improve the conversion rates at any stage in the sales process, but it makes the most sense to start the improvements in the area where they will have the most impact - which is usually earlier in the sales process.
Audit the performance of your ads and marketing, and follow through down the sales process.
Are your click through rates (CTR’s) or engagement low on ads?
Is your lead conversion rate on your landing page low?
Is your add-to-cart rate high but checkout rate low?
Do prospects go radio-silent after you send quotes?
Do prospects ask questions late in the sales process that they should have already had answers to?
By answering these questions you will get a better sense of what area of your sales process could most benefit from improvement.
Here are a few guidelines to follow when leveraging video to address these areas:
COLD ADVERTISING
(by “cold” we mean audiences of new potential customers. NOT retargeting)
If CTR’s are below benchmarks, you want to first make sure your ad targeting is accurate. It doesn’t matter how good your ad is if you are targeting the wrong people. Once you’ve verified that your target audience is correct - using an entertaining, engaging and impactful video in your ad creative (rather than just text and image) can increase CTR’s substantially. A few key things to remember when using video in your “ads.”
ADS are “interrupt” in nature, so keep them short (30-60 seconds).
Lead with benefits - no one being interrupted wants to learn about your product or service. Start by talking about them. Their pain, their desires, their needs.
Stories are more engaging than anything else. If you want the video to get watched - tell some kind of a story.
If CTR’s look good, but lead conversion is below benchmarks, you should upgrade the video on your ad’s landing page, or insert one if you don’t have one already. A video on a landing page can increase lead conversion by 300-400% depending on the market, so it’s a MUST.
SALES PROCESS
(After a visitor becomes a lead)
After the lead is generated is really where the “sales” process begins. Up to that point, success is determined by marketing efforts.
Above we’ve covered two areas where video can be leveraged to increase conversion rates during marketing - but that’s just the tip of the iceberg.
Retargeting videos, email nurturing videos, blog video, training videos, unboxing videos, customer testimonial videos, tv commercial videos, funny social videos etc… can all be leveraged in your cold marketing efforts to bring more people into the sales process, and to better pre-qualify those people.
*A note about pre-qualification: The goal of pre-qualification is to only bring people who are likely to become customers into your sales process. Through marketing efforts, you want to make sure that your product is clearly communicated as attractive to the “right” people - and simultaneously not attractive to the “wrong” people. The sales process requires time and energy invested by your sales team - so you DO NOT want that time and energy wasted on prospects that should not even be there.
Of course, there will always be people that get into your sales funnel that are not the right fit - and early qualification during discovery will weed those people out. But the idea is to minimize those “unqualified” prospects as much as possible.
One of the most powerful aspects of leveraging video is that it can “automate” the work of pre-qualification.
Using video to clearly communicate your value and offer - prospects can get a clear sense of whether or not they are in the right place long before they make initial contact. This means that even if your numbers are all above benchmarks, you can likely still dramatically increase the productivity of your sales team by using video early in your marketing and remarketing to better “pre-qualify” prospects and fill your sales pipeline with much higher quality leads.
The end result of correctly leveraging video for pre-qualification is that:
Your pipeline has more leads
The lead are much higher quality
Time-to-close will shorten
Client budgets will be higher
And respect for the value of your offerings will stronger, and will be established much earlier
WARM CONVERSION
(by “warm” we mean audiences of people that have already interacted with your business in a meaningful way. These are mostly your established leads, but can also be previous customers, email list subscribers, or extremely engaged social followers)
There are too many variables to cover in this post when it comes to increasing warm conversion rates. But below is a short list of ways video can be leveraged in some key areas.
Branded UGC (User generated content)
Testimonial Videos
Authority Videos
Demonstration Videos
Brand History
Training Videos
Convincer Videos
Trust Videos
Event Recaps
etc…
And here are some common distribution channels to leverage:
Product pages
Sales pages
Within presentations
Within proposals
Shopping Cart pages
Checkout pages
FAQ pages
Email Nurture Landing Pages
Discount Landing Pages
Special Offer Landing Pages
Etc…
The above are really the tip of the iceberg - but you are probably starting to realize that there are a wide variety of ways to leverage video to increase conversion rates and ultimately generate more profit.
So audit your current sales process, and determine where the best place to start would be.
Step 2 - Create projections for before/after video inserted into the sales process
Now that you’ve determined where the best place to leverage video would be - dig into your numbers and begin creating projections for what kind of impact leveraging video could have.
As an example, let’s say you decide to leverage video on your landing page (which is, by the way, one of the most popular places to leverage video as most businesses still haven’t done this).
High Ticket Service Projections
Let’s use some sample numbers from a high-ticket building window repair service.
Total Clients Served: 80
Avg Ticket Per Client: $25,000
Gross revenue: $2,000,000 (total of all sales)
Cost of Services Sold: $1,000,000
Business Expenses: $750,000
Net Profit: $250,000 (total profits left over)
Now let’s look at the current MONTHLY metrics:
Visitors to website monthly: 1,000
Leads generated: 25 (2.5% Lead Conversion Rate)
Leads closed: 6 (24% Close Rate)
$150,000 revenue per month (avg $25k per close)
Now we run some realistic projections.
*Keep in mind the general benchmarks for B2B landing pages: 3.5% Good, 4.5% great, 5.5%+ incredible, and the top 10% of businesses will generally achieve 11-12% lead conversion.
So when projecting the potential increase of a 2.5% lead conversion rate, we should assume that the BEST result will be a 4x increase, but it’s much more likely to see a 1.5 - 2x increase.
Let’s assume an increase of 1.5x in lead conversion.
Visitors to website monthly: 1,000
Leads generated: 37 (3.75% Lead Conversion Rate)
Leads closed: 8 (24% Close Rate)
$200,000 revenue per month (additional $600k revenue per year)
Let’s assume an increase of 2x in lead conversion.
Visitors to website monthly: 1,000
Leads generated: 50 (5% Lead Conversion Rate)
Leads closed: 12 (24% Close Rate)
$300,000 revenue per month (additional $1M revenue per year)
Of course, the above example is dealing with a high-ticket professional service - so relatively small improvements to conversion rates early in the funnel can have a “huge” impact.
Next we will look at some projections from low ticket.
Low Ticket Service Projections
Let’s use some sample numbers from a lower ticket energy drink company.
Total Clients Served: 12,000
Avg Ticket Per Client: $75
Gross revenue: $900,000 (total of all sales)
Cost of Goods Sold: $540,000
Business Expenses: $300,000
Net Profit: $60,000 (total profits left over)
Now let’s look at the current MONTHLY metrics:
Visitors to website monthly: 90,900
Leads generated: 3,000 (3.3% Lead Conversion Rate)
Leads closed: 1,000 (30% Close Rate)
$75,000 revenue per month (avg $75 per close)
Now we run some realistic projections.
*Keep in mind the general benchmarks for B2C landing page conversion rates - 9% Good, 12% great, 15%+ incredible
So when projecting the potential increase of a 3.3% lead conversion rate, we should assume that the BEST result will be a 4x increase, but it’s much more likely to see a 1.5x-2x increase.
Let’s assume an increase of 1.5x in lead conversion.
Visitors to website monthly: 90,900
Leads generated: 4454 (4.9% Lead Conversion Rate)
Leads closed: 1336 (30% Close Rate)
$100,217 revenue per month (additional $100k revenue per year)
Let’s assume an increase of 2x in lead conversion.
Visitors to website monthly: 90,900
Leads generated: 5999 (6.6% Lead Conversion Rate)
Leads closed: 1799 (30% Close Rate)
$134,986 revenue per month (additional $719k revenue per year)
The MAPA Cycle
It’s important that you consider the specifics and realities of your market and your business when projecting.
The industry benchmarks we’ve covered are good averages, but they do not necessarily directly apply to any specific. There are simply too many variables at play - so benchmarks are great to use as guidelines, but should always be taken with a grain of salt.
The important thing to remember is that you should always be:
Measure & analyze your numbers
Projecting improvements based on individual changes
Making those changes
Measure & analyze and measuring performance after those changes
Projecting additional changes
This cycle of measurement, analyzation, projection, action (MAPA Cycle) should NEVER end - and it will eliminate the most dangerous and detrimental activity in all of business: guessing.
In every part of your sales funnel, in every aspect of your sales cycle, in every conversation with a prospect, on every job, before every change, after every big win or big loss… this one principle is always true: guessing kills growth.
So instead of guessing, ask.
Ask in the form of measurement, in the form of analytics, but always ask.
The number one reason that businesses do not get what they want is that they don’t ask for it.
They don’t ask why the results aren’t there.
They don't ask how to get the results.
They don’t ask where to look for results.
They don’t ask what to do to improve results.
They don’t ask when to change or what to change.
You have to ask. And when you ask, ask confidently, ask specifically, and ask consistently.
Budgeting
Once you’ve worked out some realistic return projections for the video campaign - it’s time to determine a realistic budget for video production and distribution.
A “healthy” ROI for a marketing campaign is heavily dependent on the specifics of your market and business - as well as your cost structure.
The more profit margin that exists customer to customer, the higher ROI ratio tends to be.
ROI Benchmarks
As a general guideline, here are some ROI benchmarks for marketing campaigns:
*Note: In most businesses anything below 2:1 is risky, as it does not leave much margin for COGS (costs of goods sold) and ABS (allowable business expenses.)
3:1 is average
5:1 is very good
7:1 is exceptional
10:1 is amazing
15:1+ is incredible
Some examples:
If the projected increase in your lead conversion rate will translate to $250k of additional profit over the next year - you will likely be able to invest at least $50-75k (5:1 - 3:1 ROI) into video production and distribution.
If the projected increase in your lead conversion rate will translate to $2M of additional profit over the next year - you will likely be able to invest at least $400k - $650k (5:1 - 3:1 ROI) into video production and distribution.
Of course, these are just examples and your specific targets, projections and budgets should be based on your unique business model, market and margin.
Budget Allocation & Distribution
It’s important that you consider the cost of distribution in your projections. The split between the creative cost and the media buy is much more dynamic thanks to the digital age.
30 years ago the creative/campaign split was 90/10. 90% went to the media buy and 10% to the production of the creative asset.
However, the digital age has seen that ratio almost completely invert itself for some brands. For example, Nike has a 20/80 split - with 20% going to the media buy and 80% going to production.
Many of today’s top ad agencies strategize about 40/60 split, 40% to media buy and 60% to production.
The important takeaway here is that there is not a one-size fits all solution. What matters the most is that you have a strategy in place and you are constantly applying the MAPA framework to that strategy.
As a general guideline you may want to use a split of 35/65, and let your brand guidelines dictate whether the media buy or the creative get’s the lion's share of the spend.
If your brand perception is strongly tied to the “high-end” shine of production value within each video asset, you will likely want the creative to take the 65% or more.
If your brand perception is more about the message itself and that top tier production value isn’t required in order to stand out, then you will likely want the media buy to take at least 35%.
As some examples, take a look at the following allocations for different marketing scopes with a 35/65 split.
$50k Budget = $33k Creative / $17k Media Buy
$100k Budget = $65k Creative / $35k Media Buy
$250k Budget = $163k Creative / $87k Media Buy
$500k Budget = $325k Creative / $175k Media Buy
Takeaway
As a final note, please remember that the benchmarks and examples mentioned are not necessarily hard and fast rules, but simply some starting figures to use.
The specifics of your unique business and market need to be weighed heavily when measuring and when projecting.
So whether you are planning the budget and media buy for an upcoming national TV commercial, a corporate landing page video, or a social media advertisement - I hope this post has provided some valuable insight and direction on how to project ROI for your video marketing campaign.
If you have any additional questions, feel free to let me know in the comments.
And to have Intrigue Studios produce your next video, start a conversation here.
