The True Value of a Video Marketing Campaign
Let’s take a look at a hypothetical company in the consumer product space, mid-market size generating $10-50 million in revenue. This is the typical client we serve. A company like this should plan a yearly marketing budget of 10-20% of their gross revenue. So that would be a total budget of $1M-10M, respectively. We explained this in further detail in a recent blog post here.
This hypothetical company shouldn’t spend their whole marketing budget on a video campaign. As with almost everything in business, diversification is the best idea. But we say a good rule of thumb is to put half of your marketing budget into traditional video campaigns. So that would be $500k-$5M respectively. Here’s why we recommend video with such conviction…
As quoted from LinkedIn.com:
Social video generates 1200% more shares than text and image content COMBINED. Viewers retain 95% of a message when they watch a video compared to 10% when reading it in text.
If that’s not convincing enough, here are a few more incredible statistics:
84% of people say they’ve been convinced to buy a product or service after watching a brand’s video.
Social media posts with videos receive 48% more views than those without.
93% of businesses report gaining a new customer thanks to a video posted on their social media.
Videos on landing pages increase conversion rates by up to 80%.
So let’s say our hypothetical company wants to pull the trigger on a video campaign. What kind of return on investment can they expect? Here’s a breakdown with some estimated numbers:
Let’s say our company’s gross revenue was $20M last year. That means their marketing budget should be about $2.4M (12%). If they used half of that money to run Meta ads throughout the year, we can calculate how much that would increase their sales. The latest reports show a CPM (cost per thousand impressions) in the United States at roughly $10.00. That’s $10,000 per million impressions on that ad. The CPM for you will vary, but it all depends on factors such as how competitive your market is, your demographics, the time of year, and so on. With a $1.2M budget, we can expect about 120 million total impressions from their campaign.
The next thing we need to calculate is the conversion rate of those customers through the sales funnel. For an average campaign, you can expect a CVR of 0.0002. For an excellent campaign, you can expect a CVR of 0.0006. However, CVR can be even higher than that over time if your funnel includes things like email newsletters, limited time offers, and package deals. For now, let’s say you can expect 72,000 more customers from this campaign if it’s done right.
In order to break even on the initial investment in the campaign, they would need at least $16 in sales per customer, which is not that hard at all.
However, where the real money comes in, is in the LTV, or lifetime value of each new customer. If you are able to get that customer to purchase multiple products, or a package deal, or get their friend/family member to buy something too, or make multiple purchases from you over many months or years— all of those extra sales came with no extra marketing spend. Over the lifetime of each customer, you’re looking at easily doubling or quadrupling the initial investment into the campaign. And this is especially true if you’re able to get these customers on an email list, because then you’ve already done the qualifying work to find them and you can market to them for free, virtually forever. As long as your emails continue to offer value in the form of promotions/sales, free advice or content of some type, etc. You will be able to easily retain these customers over time.
Here’s the equation we’ve been using for this example. Feel free to experiment with different CPM’s, CVR’s, and Income Per Transaction:
(Last Year’s Gross Income * 12%) /2 = Budget for Ads
(Budget for Ads / $10,000 Cost Per Million Impressions)*1,000,000 = Number of Impressions
Number of Impressions * 0.0006 CVR = Number of Sales
Number of Sales * Income Per Transaction = Initial Revenue
Initial Revenue + Lifetime Value - Initial Investment = Gross Revenue
Of course, this equation is just for demonstration purposes only. It doesn’t account for variations like the effectiveness of your campaign, consumer demographics, competitiveness of your market, CPM, CVR, and amount of income per sale. But we believe this is a good representation of the sort of impact an excellent video marketing campaign can make.
When spending this kind of money on marketing, you want to work with a team that you know will do it right, with years of experience and the resources to pull it off.
NEUWAY has been filming commercial content for over a decade, generating millions for our clients. We’re ready to help you reach your goals and we’d love to hop on a call with you to learn more about your company. Let’s see if we’re a good fit. Contact us to schedule a meeting today!