Understanding Basic Terms & Measuring ROI
This will be a really basic overview of some terms that will be helpful for you to understand. There are definitely more terms out there than are covered here, but the point is just to help you get familiar with them as you begin to run your own campaigns or talk to professionals who will be helping you.
Impressions = the # of people who were shown your ad. It’s important not to confuse this with, “the number of people who physically saw, and paid attention to my ad.” That (at least for now) isn’t being measured. So, an “impression” is when your ad is “shown” to someone.
Impression vs Result-Oriented Ads = in general, you can target your ads based on impressions (paying just to get them in front of people) or pay based on result (paying for each click, conversion, download, etc.). Obviously, the advantage to paying for results is that you know, that when you pay money to the platform, you’re paying for something that actually happened. However, this tends to be significantly more expensive. When you pay for impressions, you’re paying each time your ad gets shown to people. This means that if you create a super engaging ad, and it performs well, you could actually drive results for cheaper. The difference is that you’re going to get billed regardless of how the audience responds.
CPM = cost per mille (or, thousand). This is an “impression-based” ad form. You pay per 1,000 views. For example, you may run a Facebook Ad campaign, using Impressions as a goal, and pay $10.00 per 1,000 impressions. Facebook will show your ad in the feed (or wherever you choose) to 1,000 users (or perhaps the same user multiple times), and you pay $10.00, regardless of how many people converted.
CPC = cost per click. This is pretty straightforward. You’re paying each time someone clicks on your ad.
CPL = cost per lead. The cost of securing an actual lead (a form filled out, a phone number submitted, an email given, etc.).
CPA = cost per acquisition. The cost of acquiring a customer, deal, etc.
Putting it all together.
In general, the main thing you want to make sure of (especially those of you who decide to run campaigns on your own) is that you’re measuring everything. There are loads of details that are well beyond the scope of this article (like scores of your ad’s relevancy, how it’s being perceived, making multiple copies to test which performs best, testing against different demographics, testing different landing pages with different ad groups or demographics, retargeting customers who saw your ad once with a different ad, and so on…) but the main idea is that you want to be tracking your ROI, at least in this basic way:
You should be able to use these numbers to put together to ensure that you’re making more than you’re spending. It’s that simple.
So, for example:
1) I’m paying $10.00 cpm (per thousand views), and my CPC is running at $25.
2) For every 10 who click, 1 converts to a lead.
3) So, my CPL is $250 (because you have to pay for 10 clicks in order to get 1 lead, at $25 per click)
4) And it takes 10 leads before I secure a deal, so my CPA is $2,500.
5) ROI = for every $2,500 I spend, I get a house under contract, and my average profit is $8,000.
And that’s it! Obviously, you’ll need to adjust for your market, your profit %, and your particular business… but that’s a really rough, broad introduction to how to measure those things.
So now that you have a rough grasp of measuring you ROI and the terms you’ll be seeing, what channels do you market on? What’s the difference between SEO and PPC? Is Facebook good for REIs?
An overview of available channels.
Bottom line: spend money with Google, to appear across the web, or in search results when people type in certain phrases.
Benefits: get in front of people at the exact moment they’re looking for services like yours. For example, if you show ads on Facebook or Instagram, you’re interrupting people. You’re getting inserted into their feed. So, while they may be your demographic, and even looking to sell, they’re not in the frame of mind to sell. People go to Facebook to tune out or go to Instagram to look at pictures. They’re not necessarily in the mindset to engage in business. With Google AdWords, you can pay to be shown exactly when someone is typing in a phrase like “sell my house for cash”, and then make your ad say, “We’ll buy your house in cash, get an offer in 24 hours!”. That’s pretty powerful.
Downsides: it can be expensive and needs to be managed well. You can significantly raise or lower your cost depending on the words you choose, how narrow or wide you want to target, whether you target based on location, and what your website or landing page says.
Facebook / Instagram
Bottom line: create visual ads (videos, images, etc.) and get in front of people where they’re (statistically anyway) paying the most attention. Invite them to get an offer or click over to your site.
Benefits: no other platform has as robust of targeting as Facebook. It’s literally scary how narrow you can get with your audience, and in general, the more niche you go, and the better/more relevant your ad, the more cost effective it will be. It’s also not as flooded as AdWords, and REIs haven’t saturated it just yet. The leads (from what I’m hearing from our Facebook Ads manager anyway) can be secured for cheaper, if done right.
Downsides: as was said above, you’re interrupting people from browsing/tuning out, not getting in front of them when they’re looking for a service like yours.
Bottom line: get found in the search results when people are looking for services like yours.
Benefits: people tend to trust organic results more than “sponsored” ( = paid) ones, so there’s potentially more conversion for someone who skips past the ads (people who paid to be there), and finds you ranking high. The assumption is that you must be there by virtue, and that if you’re in the top 5 results, you’re one of the best. It also allows “free” leads, after the investment to get ranking high. With paid ads, the leads stop once the dollars stop. With SEO, the leads can continue, while you simply manage your organic work, unless a competitor outranks you or the algorithm changes. So, a website ranking at #3, that continues to stay there, will continue to get leads month over month (without paying ad fees), while the pay per click leads stop the moment you stop spending.
Downsides: it’s incredibly hard to rank in the top 5 spots. In fact, it’s never been harder, and you’re competing against websites that have a domain authority (an indicator of how well you’ll rank) of 20-30, while your brand-new website will be starting at 0. Also, if Google changes their algorithm (and they do, constantly), you may need to adjust, and at all times comply with their best practices lest you get penalized and dropped from the rankings. And while it’s definitely possible to measure ROI, it’s not as clear or clean cut as with PPC. Therefore, it can take longer to see a lead, and requires some pretty heavy lifting. It’s not as easy as paying some money and you show up. There’s an investment period required if you ever want to be shown.
There are other platforms that are probably less used by REIs, such as Snapchat, Reddit, LinkedIn, etc. These are all paid systems though, so you should be able to apply the principles we covered on CPM or PPC if you’re interested in testing them.
That’s probably it for the really relevant channels for REIs right now. In the third (and final) article of this series, I’ll talk about how to choose the channel that’s right for you, and then how to test and measure ROI to make sure it’s worth continuing.