Introduction
Conversion funnel is a key component of conversion analytics and means a customer’s path to the company website through the digital marketing tools like email advertising, banners or social media, after which he or she completes several stages of increasing interest in product in order to eventually purchase it. There are different approaches of establishing conversion funnel stages but in this task we will consider four main stages: awareness, interest, desire and action. Each stage is characterized by the smaller number of customer who could manage to reach it comparing to the previous stage (Gillick, 2014).
In this task we are to construct two conversion funnel for different advertising channels: email marketing program and banner advertising in Kijiji. We assume that overall budget for each of the channels is $50,000.
First of all, we have to count, how many emails we can send according to the available budget. The cost per e-mail is $5.5, therefore we can send $50,000 / $5.5 = 9,090 emails in total.
We have research information, that our efforts should be focused on 25-34 years of age people. According to our database, we have 25,000 people matching this criterion. As we don’t have any other information about these people, we will have to randomly choose 9,090 of them and send them a promotional offer.
According to conversion funnel, at its each stage there will be less customers than on the previous stage. We’ve got initial data of the percentage of the people, who will leave the company at each stage of conversion funnel. Thus, in order to calculate the number of people reaching the next stage, we need to multiply the number of people who reached the previous stage and the corresponding percentage of them who advance to the next stage.
Using this approach, we will eventually get the number of people, who will actually buy a condo. The number of people who purchase a product is 17. This makes a conversion rate of 0.2% (17 / 9,090 = 0.002).
You can see the summary of the conversion funnel calculations in fig. 1.
Figure 1. Email marketing program conversion funnel.
Now let’s turn to Kijiji banner advertising program.
Just like in case with email marketing program we have to focus only on our target group of customers, which is people aged 25-34.
We’ve got different parameters of audience, unique visits percentage and CTR for different age groups. Therefore, we don’t have to choose randomly whether to choose 25-30 age group or 30-34 age group. We may compare effectiveness of attracting each customers’ group and choose more efficient option.
Any way we can buy only 1,111,111 banner impressions according to allocated budget ($50,000 / 45 * 1,000) and we have to use them in the most efficient way possible. In case we choose 25-30 age group, we will have 1,111,111 / 3 * 0.42 * 0.095 = 14,778 customers attracted to the website. And if we choose 30-34 age group, we will have 1,111,111 / 3 * 0.4 * 0.102 = 15,111 visitors of our website. Therefore, the second option is more efficient and we invest $50,000 in it.
The further calculations are based on the same conversion funnel principle as with the case of email marketing. As the result, only 49 clients will purchase a condo. This makes a conversion rate of 0.3%.
The final conversion funnel is depicted in fig. 2.
Figure 2. Kijiji banner conversion funnel.
The total number of clients who bought the condo is 49 + 17 = 66.
We can clearly see that Kijiji banner advertising channel is more efficient, because we managed to attract almost three times as many people as in the case with email marketing program.
According to these results, in similar cases in future we should focus exclusively on banner advertising, because it has significantly higher potential of attracting clients. Even according to initial data we could attract a maximum of 1,723,000 * 0.4 * 0.102 = 70,298 visitors to the website. We have a conversion rate of this cannel equal to 0.3%, which will allow us to get 70,298 * 0.003 = 210 people buying condo at maximum for this channel in case of budget increase.
$100,000 is not enough to achieve the objective. As we calculated before, in case of allocating $50,000 on email marketing and $50,000 on Kijiji banners program we sell only 66 condos in total. As we now realize that banner advertising is more efficient, we may consider investing the whole budget in banner advertising. In this case the company will be able to sell 98 condos.
In order to get 100 condos sold using only banner advertising, we should perform reverse converse funnel calculation, according to which we should invest additional $2,124.
As we have discovered in task 2, the Kijiji banner channel is more efficient in sense of attracting customers to our website. We can estimate that even in case we invest the whole sum in email marketing, we get only 37 customers, who buy our product. Therefore, the most optimal way of allocating $100,000 budget is investing it as a whole in banner advertising. The maximum outcome, which can be achieved in this case is selling 98 condos.
In case 5% of those exposed to the email through social sharing, clicked on it and visited the website, there would be 91 of such people, because 25% of the people who received an email would share it on social media (7,212 * 0.25 = 1,818 people). Consequently, in 5% of these cases people would proceed to the website (1,818 * 0.05 = 91).
The further calculations are again the same as shown in part 1. Eventually we will see that such social media activity will not bring the company any additional customers.
In case 20% of those who received emails forwarded to them clicked on the link and visited the website the situation would be the following.
This situation means that it is not necessary for the person to open and read the email to forward it. Thus, 15% of 9,090 people who received the email, would forward it. There would be 9,090 * 0.15 = 1,364 cases like this.
The 20% of people, who received a forwarded email, would go to a website. This means that the website would get additional 1,364 * 0.2 = 273 visitors.
The further calculations are again made the same way as it is shown in task 1. They show that email forwarding will also not bring any additional customers.
References
Gillick, C. (2014). A Simple Guide to Understanding and Creating a Website Conversion Funnel. The Daily Egg. Retrieved March 29, 2016 from http://blog.crazyegg.com/2014/03/03/website-conversion-funnel/.
