Let’s take a look at a hypothetical company in the consumer product space that wants to grow their business by investing in marketing. This company knows that in order to grow, every year they must make steady investments back into their company. As long as they strategize their investments properly, they are all but guaranteed growth into the following cycle (be that monthly, quarterly, or yearly). There are many ways to invest into your company and marketing is just one of them. If they choose to go the marketing route, which we highly recommend for a company selling consumer products, their yearly budget should be 10-20% of their gross revenue. We explained this in further detail in a recent blog post here.
This hypothetical company doesn’t have to spend their whole marketing budget on a video campaign. They could opt to spend some money on text and image ads instead. But 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 decides video marketing is the right solution for them. 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 $500,000 last year. That means their marketing budget should be about $100,000 (20%). If they used that money to film a single commercial and run it as an ad on Instagram, we can calculate how much that would increase their sales. The latest reports show a CPM of $6.70 on Instagram ads. Extrapolating that out, it would cost $6,700 per million impressions on that ad. However, other reports say that Instagram’s CPM can be as low as $3.5, but it all depends on factors such as how competitive your market is, your demographics, the time of year, and so on. With a $100,000 budget, we recommend they choose to spend half of it on the video production itself and the other half to cover the cost of ads. Here’s why:
With a $50,000 budget for ads, they can expect to generate almost 7.5 million impressions, conservatively. Let’s continue with the conservative estimates and say of those 7.5 million impressions, just 3% are converted into clicks that redirect people to a sales page. That’s 225,000 potential buyers. Of those 225,000 let’s say 10% actually buy something. That’s 22,500 sales.
If this hypothetical company is making just $10 per sale, our hypothetical marketing campaign is generating them $225,000 in revenue. After considering the $100,000 investment, they’re grossing $125,000. That’s a 225% return on investment!
Our hypothetical company went from grossing 500k last year to 625k this year with one video marketing campaign.
If they again invest 20% into a new campaign the following year, they are putting up $125,000 instead of $100,000. If they keep their production costs the same, and put the other $75,000 into running ads, they can expect to gross $335,700 total from the campaign. That means instead of making $625,000, they’ll make $835,700 by the second year.
If they repeat the process one more time, by the third year of marketing they will gross over 1 million in revenue. That’s three years of advertising with video and they’ve DOUBLED their company size.
So let us ask you. After reading all this, what is the true value of a video campaign for you? Replicate the math for your own company and calculate out the value a video marketing campaign could bring to your company.
Here’s the equation we’ve been using for this example. Feel free to experiment with different CPM numbers, Click Conversion Percentages, Number of Sales, and Income Per Transaction:
(Last Year’s Gross Income * 20%) - $50,000 for Production Expenses = Budget for Ads
(Budget for Ads / $6,700 Cost Per Million Impressions)*1,000,000 = Number of Impressions
Number of Impressions * 0.03 Click Conversion Percent = Number of Potential Buyers
Number of Potential Buyers * 0.10 Purchase Conversion Percent = Number of Sales
Number of Sales * $10 of Income Per Transaction = Total Revenue
Of course, this equation is just for demonstration purposes only. It doesn’t account for variations like the effectiveness of your video, competitiveness of your market, and amount of income per sale. But we believe this is a good representation of the sort of impact a video marketing campaign can make if done correctly. 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 track record and the resources to pull it off. You can try to do it on your own and risk hundreds of thousands, or you can choose to work with a company like ours.
Our company Neuway Media has been filming commercial content for over 6 years, 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 free consultation today!