In order to forecast the economic impact of the banner advertising strategy it is important to determine the right metrics for how the strategy will achieve your overall marketing objectives. The first task is to qualify the size of the opportunity for the online marketing of your brand. This is done by answering these questions. What is the percentage of your target market online?What are the potential sales and economic impact of brand enhancement to this market?The next step is to determine the cost of converting the potential customer to a sale. This is called the conversion cost. The conversion cost is estimated differently for each banner advertising model.

CPM = CPM X CTR X percentage of customers who will order online.
CPC = CPC X percentage of customers who will order online.
CPL = CPL + cost of closing the saleCPS = CPS + cost of marketing affiliate program divided by estimated number of salesThe percentage of the customers who will order on-line will be directly related to the degree of targeting for your banner.

(i.e. how qualified are the users of the site that you will advertise upon? How much do they have in common with your target market? It is often cheaper to advertise on sites with a low degree of targeting but that will result with a low click through rate. Also sites with a low CPM and high click-through rate generally bring less qualified visitors with a low conversion rate. Therefore you have to do the projections and weigh CPM, CTR and conversion rates to determine the best equation. The next step is to estimate the impact that banner advertising will have on branding. This is determined by looking at the CPM, or for other models, by estimating the click through and conversion rates and working it back to estimate the number of impressions your banner will have. Then compare the CPM to the estimated dollar value that each impression will have on branding. This should estimate the return on investment for the banner advertising campaign. Compare it with the conversion costs for other elements of the marketing mix to determine the percentage of the overall advertising budget that should be appropriated to the banner campaign.

Your banner advertising budget should answer the following questions.

– What is the total advertising appropriation?
– What is the total banner advertising appropriation?
– What is the banner advertising appropriation relative to specific target markets?
– What is the total advertising expenditure as a percent of sales?
– What is the estimated return on investment for the proposed expenditures?
– What is the reasoning and evidence to justify the amount of the total advertising appropriation?
– What is likely to happen with an increase/decrease in budget appropriation for each element of the marketing mix?
– What are competitors spending on their banner advertising strategies?Is the budget affordable?