The Foundations of Marketing Online

Before you make any decision regarding Internet marketing for your business you must understand several important things. Unfortunately, most business owners don’t know or ignore these important factors, and therefore, fail before they even start their Internet marketing campaign.

You can go to seminar after seminar and not find this core area mentioned. Yet, it’s the most important ingredient in your campaign planning process. Before you jump into SEO, PPC, Affiliate Programs, Joint Ventures, Social Networking etc. you must have a solid business foundation in place.

You need to know your financial matrices. Look, I know that you are not an accountant but to be successful at any form of marketing you must know your key financial ratios. Why is this you say? Well, you need to know how much to spend on PPC advertising, what percentage to give affiliates, how much time to spend on social networking, how much time to spend on SEO or if it’s worthwhile hiring a dedicated SEO person internally etc. The list goes on.

So where do you start?

Okay, well here is some initial guidelines. I can’t go into the detail of “Management Accounting for Marketers” but you will get a solid idea about what’s required. In fact, if you take a hands on role in your business’ finances you will already know most of the following.

Firstly, you need to find out your costs, then separate them into fixed costs that exist if you makes sales or not (rent, computers…) and variable costs that increase as you make more sales (materials, bandwidth…). Now, pick a reasonable sales price, you need to find your profit per sale (this is called contribution in accountant speak). After that, work out your break even point. Your break even point is the number of sales it takes to cover all your fixed costs.

Okay I admit it, it can be a bit confusing but hear me out. It’s really important that you get to grips with this.

Right, now next up. You need to get data on your Internet marketing matrices such as your conversion rate, your cost per lead and your cost per sale. These need to be added to your cost structure. This entails a pilot run where you test and measure various parts of your website. Traffic from different sites and advertising platforms will have different conversion rates. You will be able to allocate resources based on optimal conversion.

Once you have established reliable marketing matrices then you have the basic tools to work out an Internet marketing strategy. Here are some basic questions you will be able to answer:

Do I spend more on Advertising or SEO?

What’s my Return on Investment for Internet Marketing?

Is is better to charge less and sell more or to charge more and sell less?

How fast can I churn my ad spend – is it better for me to make a 5% return over one week or an 8% return over two weeks? ( I know what I would prefer)

In conclusion, it’s only after reviewing your fundamental financials that you can develop an effective Internet marketing campaign.

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Feargal holds an M.B.S. in Entrepreneurship and Marketing and B. A. in Accounting and Finance. He is a member of the Marketing Institute of Ireland. He is an entrepreneur who has been involved in the area of Internet marketing since 2004. He is passionate about helping small businesses make sales.
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One Response to The Foundations of Marketing Online

  1. Once again, thank you for the quality article!