Lets start with the budget. There are many ways to determine how much should be spent on advertising. Here is one:
- Determine the target audience. There is more on this in the section below, but to put it simply, a brand must determine who they’re trying to reach. The more specific this goal the better the outcome. A message is always more powerful when it’s tailored for the recipient. Determining your target audience will help a brand understand the type of content they should create and how to reach their target audience.
- Set campaign goals: Does the brand want to increase awareness, drive website traffic, or generate leads? Setting clear goals will help determine the success of a campaign.
- Consider the cost per acquisition (CPA): This is the amount of money a brand is willing to spend to acquire a new customer or lead. The max CPA is calculated by dividing the available budget by the number of acquisitions a brand hopes to make. For example, if the budget is $40,000 and a brand wants to acquire 400 new customers, the CPA would be $100. It can be very useful to look at the average CPA in the industry, to help ensure that goals and budget are reasonably set.
- Consider the LVT: Another way to determine a reasonable CPA is to consider the lifetime value (LTV) of a brands customers. The LTV is the estimated revenue that a customer will generate over the course of their relationship with the business. If the LTV is known, it can be used to determine how to spend to acquire a new customer. For example, if the LTV is $5000 and a brand is willing to spend 5% of the LTV to acquire a new customer, the CPA would be $250.
- Determine the budget: Using the CPA and the estimated number of acquisitions desired, a brand can determine the budget for its video marketing campaign. If the CPA is $250 and they hope to acquire 200 new customers, the budget would be $50,000. In the scenario above, that budget would catalyze a 1 million dollar return.
- Monitor and adjust budget as needed: As a video marketing campaign proceeds, its progress should be tracked and the budget adjusted as needed to endure that a brand is on track to meet its campaign goals.
Target Audience
The target audience of a video ad will influence the total cost of a video marketing campaign in a number of ways. First, the size of the target audience will play a role in determining the budget. If the target audience is large, it will likely require a larger budget to reach them through advertising. This is because larger audiences typically require more ad impressions to reach and more resources to target effectively.
In addition to the size of the target audience, the demographics of the audience will also be a factor in determining the cost. For example, if the target audience is highly affluent, the budget may need to be higher to reach them through channels that they are likely to use, such as premium cable television or streaming services. On the other hand, if the target audience is more modest in income, the budget may need to be lower and the marketing campaign may need to focus more on economical channels, such as social media or online advertising.
The location of the target audience is also a factor in determining the total cost of a video marketing campaign. If the target audience is located in a densely populated urban area, it may be more cost-effective to reach them through targeted digital advertising, as there will be more potential impressions in a smaller area. If the target audience is spread out over a large geographic area, it may be necessary to use more traditional forms of advertising, such as television, which may have a wider reach.
Finally, the level of competition for the target audience’s attention will also influence the cost of a video marketing campaign. If there are many other companies competing for the same audience, it may be necessary to allocate a larger budget to stand out and effectively reach the target audience.
Length and Complexity
In general, longer and more complex ads tend to be more of an investment. Here are a few ways that the length and complexity of a video ad can affect the total cost of production:
- Production costs: Longer and more complex video ads tend to require more resources to produce, including more personnel, equipment, and shooting days. This can drive up the production costs of the ad, which will be reflected in the overall budget of the campaign.
- Talent fees: A longer ad may require more time from the talent, which can increase their fees. Similarly, a more complex ad may require more skilled or experienced talent, which can also affect the fees.
- Post-production costs: A longer ad may require more time to edit, while a more complex ad may require more advanced special effects or sound design.
A long and complex ad may be worth it in certain circumstances, depending on the goals of the marketing campaign and the target audience. For example, if the product or service being advertised is expensive or requires a significant investment from the consumer, a longer and more complex ad may be well worth the investment. Or perhaps it would serve the brand to is create an aspirational vision and reinforce the brand’s prestige. In this case, the extra time and resources spent on the ad is a justified investment in the brand’s image and reputation. Another instance is when the product or service being advertised is complex (like a new concept or piece of technology), a longer and more complex ad may be necessary to fully explain the benefits and features of the product to the target audience. The extra time and resources spent on the ad may be justified by the need to educate the audience and convince them to try the product.
Production Quality
The production quality of a video advertisement can significantly affect the total budget of a video marketing campaign because higher production values typically require more resources, such as specialized equipment, talented crew members, and sought-after locations. For example, a video advertisement that is shot in a studio with a small crew and minimal special effects will generally have a lower budget than one that is shot on location with a larger crew and more complex special effects. Similarly, a video advertisement that uses high-end cameras and lighting equipment will generally have a higher budget than one that is shot with more basic equipment. In addition to the resources required for production, the post-production process, which includes editing, color grading, and sound design, can also contribute to the overall budget of a video marketing campaign. Higher production values often require more time and expertise in the post-production phase, which can increase the budget.
Ad Frequency
Ad frequency refers to the number of times an advertisement is shown to a unique user within a given period of time. Advertisers can use ad frequency to increase a user’s exposure to a specific product, service or message., which increases that user’s likelihood to buy Ad frequency can affect the total budget of a video marketing campaign in a few ways.
- First, increasing ad frequency can increase the overall budget of a campaign. For example, if an advertiser wants to show their video advertisement to their target audience once a day for a week, they will need to purchase more ad impressions than if they only wanted to show the advertisement once a week.
- Second, decreasing ad frequency can also affect the budget of a campaign. If an advertiser decides to decrease the ad frequency of their campaign, they will save money because the number of impressions needed to achieve that frequency will decrease. However, keep in mind, a decrease in frequency could affect the potency of your campaign.
Distribution channels
The cost of reaching the target audience through different distribution channels can vary significantly, and choosing the right channels can help to maximize the effectiveness of the campaign while minimizing costs.
Television: Television can be a expensive distribution channel for video advertising, particularly if the target audience is large or the ad is being broadcast during prime-time hours. The cost of television advertising varies based on the network or programming being used to reach the target audience.
Online video platforms (or Over-the-Top (OTT)): Online video platforms, such as Hulu, Paramount and Peacock can be a cost-effective way to reach a large audience with video advertising. Advertisers can target their ads to specific demographics or interests, and the cost is often based on the number of impressions or views the ad receives.
Social media: Social media platforms, such as Youtube, Facebook, Instagram, and Twitter, can be used to deliver video advertising to audiences with even more specific targeting. The cost of social media advertising is typically based on the number of impressions or clicks the ad receives, and can be adjusted based on the target audience’s demographics or interests.
Tracking
It is also important for brands to track the performance of their video ad campaigns and adjust their budget, as needed, based on the results. Tracking the performance of video ad campaigns allows brands to make data-driven decisions about their advertising efforts. By analyzing the data from their campaigns, marketing managers can identify what is working well and what is not, and make adjustments accordingly. This can help brands optimize their ad campaigns for maximum efficiency and effectiveness, and ultimately, drive better results for their business.
In practical terms, tracking the performance of video ad campaigns on platforms like Facebook can be done through the use of tools like Facebook Ads Manager. For example, if a brand is running a video ad campaign on Facebook and they notice that the ads are not performing as well as they had hoped, they can adjust their budget or audience targeting to improve the performance of the ads. They can also experiment with different ad formats or creative approaches to achieve better results.
The Formula
So, is there a mathematical formula that can be used to determine how much a brand should spend on video advertising? While there is no one-size-fits-all formula, there are tools and resources available that can help brands estimate the cost of a video ad campaign based on their specific goals and target audience. For example, Google Ads has a “video campaign budget calculator” that allows brands to input their target audience, distribution channels, and other factors to estimate the cost of a video ad campaign.
By considering the target audience, distribution channels, length and complexity of the video, production quality, and ad frequency, brands can determine the appropriate budget for their video ad campaigns. Ultimately, the amount that a brand should spend on video advertising will depend on its specific goals, target audience, and resources.
If you’re interested in jumping straight into the world of video marketing, come gather ’round the campfire. Whether you’re an old pro looking to shake things up or a novice looking to create your first video, we’d love to chat with you!
The play button is the most compelling call-to-action on the web.-Michael Litt
Co-founder and CEO of Vidyard