Before the holidays began the airwaves, what old people would called television, were inundated with marketing for smartphones, tablets, and gaming systems. That sweet spot between mid-November and the day before Christmas is arguably the most important time in marketing a product to the general public.
But now that the holidays are over, where did those ads go?
At first, I was a little taken aback by seeing mobile games like Candy Crush Saga and Clash of Clans being marketed during, seemingly, every other commercial break post-Christmas as I didn’t recall seeing them earlier in the year. Then I realized how much sense that actually made from a business standpoint, and that’s why people develop apps and games, and there are even sites like XAM Consulting – xamarin application development company when they help you develop an app as well.
Think about it.
Overall consumer interest changed. The expensive devices have been gifted. They are no longer in-demand for the general public. Focus shifted to peripherals and software. Games.
Children, teens, college students, and adults all received various forms of mobile devices for the holidays. Each of them eager to play with their new device, they search for new apps to install and try out. That hit of Dopamine from their brain overcomes them. Excitement makes way for rash decisions. This is why the freemium model is taking over the gaming industry. The game download is free. It gives them that taste. But to experience the full game, or more of the game more quickly, they need to spend money.
By the numbers
According to Flurry’s annual report, Christmas day app downloads were up 91 percent versus an average day in December.
Although that number is gradually diminishing from year to year as adoption in the mobile market grows, it’s a clear flag for business analysts. Christmas day is key to marketing to new device owners.
So, it comes as no surprise companies like King, makers of Candy Crush Saga, will begin to run commercials like this:
Now, let’s break down what all of this actually means in real, tangible, numbers. What’s the ROI?
At the time of writing, Candy Crush Saga is making an estimated $928,408 per day in revenue.
Generally speaking, if app downloads are up 91 percent on Christmas day and King is advertising their app heavily on television it’s safe to say that those numbers will increase for them as well.
Referring back to Flurry’s report, games are downloaded on Christmas at twice the rate of any other day in December. So, if daily active installs for Candy Crush Saga are estimated to be 98,387 we could assume their Christmas day estimate would be closer to 196,774.
If we take the daily revenue estimate ($928,408) compared to the estimated daily active users (6,597,287) we see the average daily revenue per user would be 14 cents.
What does the math mean?
On a typical day, the daily average revenue per user is 14 cents.
Who cares? You should.
Imagine if your customer retention doubled. Even just for one day. What would that mean for your business?
On Christmas day, King should expect 196,774 new installs (up from 98,387). If each user averages out to 14 cents, the additional revenue they could expect to make is somewhere in the ballpark of $27,548.36. Which is nearly a 3 percent increase in revenue for just one day.
And that’s without factoring in any additional marketing. Remember the television ad you watched above? Imagine that being seen by new device owners, existing Candy Crush Saga players that forgot about the game, and so on. That bumps the revenue increase up even more.
Let’s apply it to your business
What if you knew that you had a certain number of customers per day and understood what each one of them provides your bottom line in revenue per day?
What if you knew exactly what day new customers were likely to double if you advertised properly? Shouldn’t that be something you are analyzing on a regular basis?
Chances are, you already have that data available. You just aren’t looking at it properly. Or, possibly, at all.
If you begin to break down the numbers you will see trends. Your customers are giving you all the answers to be successful. Don’t throw money at advertising because you think it will work. Look at the return you get from the ads. Break down the value. If you can’t break down the value you aren’t in a position to advertise yet. You need to find someone to help you.
What if you don’t offer a product and you don’t have daily customers?
The same concept applies.
Instead of daily customers, you may have monthly customers or an average number of clients per year as a consultant like I do. If you take your revenue against that number, you begin to see what each is worth. Then you can get the answer to the age old question “is it worth it to advertise”? Which, in recent years, has become “should I advertise with Facebook / Google Ads”?
There is a standard deviation in business economics that presents the Pareto principle; also called the 80-20 rule. Meaning that 20% of your customers will provide your business with 80% of its overall revenue.
Although not all of King’s 6,597,287 daily active users will spend any money in Candy Crush Saga at all, let alone 14 cents. It’s safe to assume that 20 percent of users (13,457) provide 80 percent of their revenue ($742,726.40) each day. Or $55.19 per user, per day.
Don’t confuse this with the thought that those same 13,457 users spend $55.19 per day every day. The specific user itself can shift. But the ratio will typically follow the 80-20 rule.
Why is this important?
This number is where you should base your marketing investment on. 14 cents per user sounds nice in a report and makes executives feel warm inside. Everyone is spending money, on average. But what does that actually mean?
If they have the illusion of success by way of out-of-context numbers no one will want to dig deeper. But deeper is where the value is.
Let’s dig deeper, shall we?
If $55.19 per user, per day is the baseline you need to break down your marketing in the same manner.
It’s easier than it sounds. If you’ve read this far, you’re doing just fine. You’re almost done.
To put it into context, let’s say you have a marketing budget of $1,000. Whether that’s annually, per quarter, each month, or daily it doesn’t matter. It all depends on the size of your business and that can be scaled as needed. Let’s also say you have revenue of $100,000 annually.
Now you need to figure out how many customers or clients you must secure to generate the revenue. Let’s say you have 20 clients per year. Some long term clients you work with often. Some short term you may only see once or twice and never hear from again.
Still with me?
Applying the 80-20 rule would suggest that four of your clients generate $80,000. The other 16 generate $20,000. So, the value of the top tier clients are $20,000 each. The value of the other clients are $1,250 each. Generally speaking.
This means that when you have an advertising budget of $1,000 and most of your clients are paying you $1,250, on average, per project then you have a reasonable chance of running an adequate campaign with a 125% return.
Even better, if you can land one of your larger clients with that marketing budget you’ve just seen a 2000% return.
Stripping away all math and all potential confusion: If the revenue directly brought in from a marketing campaign is greater than that marketing campaign’s spend, you win.
You can do that right? Just one client.
How do you determine your marketing budget?