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Your Ad Forecast: Sunny, With A Chance Of Profit

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How do you predict the performance of your ads? With a performance forecast, of course.

But how do you set up performance forecasting? Is it a total pain in the butt?

Unfortunately, this is why many companies don’t put forecasting in place, and therefore, don’t harness the full power of their ad campaigns. The good news is that AI-powered forecasting handles the legwork for you and makes smarter decisions. 

So how does it all work? Let us walk you through the process to help you project your conversions, conversion rate, cost-per-lead, sessions, and impressions. 

The road to smart forecasting starts here.

Expectation Setting

Expectation setting is the first step to link your business goals, budgets, and marketing performance. It’s a profound mix of awareness, intent, nurturing, geo targeting, audience segmentation, and more.

As you can see, there’s a lot to consider at this stage, but AI helps weigh it all to come up with the best forecast for your (and your client’s) goals. It helps if you can project your budget properly and have a rough estimate of the results you can expect based on the media spend. Setting realistic, smart goals for your budget sets you up for success.

When you have smart, realistic goals in place to work towards, you can set realistic KPIs for your clients. This helps protect your agency against unrealistic expectations from clients, over-servicing, and ultimately, the dreaded churn.

A benefit of realistic forecasting is that when your results far exceed your forecasted goals, it gives you the opportunity to upsell your current strategy.

  • Should you add new campaigns?
  • Should you test new channels?
  • Should you increase the budget?

When your results are good, your SOW can quickly change. Typically, once your agency proves you are capable of delivering great results, your clients will begin to ask “What else should we be doing?” 

Even better? They’ll be willing to pay for these additional services.

How To Start A Forecast

There are two general approaches when it comes to performance forecasting: bottom-up vs. top-down.

Bottom-up Forecasting

Here, you start with key input metrics (e.g. conversion rate by channel, expected traffic by channel, and ROAS). Then, you adjust the budgeted spending to reach or assess your desired top-line goals. Sometimes, this will show the disconnect of your client’s desired goals vs. the available budget. This is a good thing, as you can find it before you even begin the campaign and make your client aware that their goals aren’t realistic with the quoted budget.

Top-down Forecasting

In the top-down approach, you start with a revenue goal and total budgeted spending available. Then, you set targets for key metrics such as traffic (using estimated CPCs, etc), conversion rates and ROAS. Finally, review these targets against expected/actuals to see where your strategic focus needs to be.

When you understand your client’s business goals (long term vs. short term, awareness versus performance, etc.) it will impact media allocation and the expected return on ad spend (ROAS).

Key Inputs

Time to crunch a few numbers.

With ads, you want to look at your customer LTV, or lifetime value.

Ask yourself “What can I afford to spend to win 1 new customer?” You can then forecast the sales from a customer today but also determine the value of that customer for the remaining forecasted period to truly assess your ROAS. For example, if you’re a SaaS platform that earns recurring revenue, make sure you attribute that ongoing revenue to the acquisition to get true LTV. 

NOTE: If you’re not sure how to make this calculation, check out XXXXX (link)

From there, if paid search is your chosen channel, determine how much traffic costs. Use a tool like the Google Ads Keyword Planner to gather the historical keyword cost data. 

Then, determine your average conversion rate. Use historical data if you can find it, including within Morphio, or otherwise, use low estimations:

  • Paid search = ~3-5%
  • Organic search =1-2%

You can then build your conversion rate forecast on these numbers.

The expected ROAS will apply more for eCommerce and SaaS businesses that have a predetermined cost of a product that customers can purchase without the aid of a salesperson or team member. This calculation is the total conversion value/ad spend. 

Other Considerations

There are a few other things to consider with performance forecasting, including seasonality, historical trends, and future value. 

Seasonality refers to whether or not you get more conversions during certain months of the year or even days of the week. Does your media cost (gross and CPC) remain stable or changed based on the day of the week or month of the year?

You’ll also want to compare your metrics to your historical trends. Are they consistent or are they trending up or down?

Lastly, take a look at your projected future value. Do any upsell or cross-sell opportunities exist? If so, take advantage!

Summary

To forecast your campaign performance, Morphio analyzes the effectiveness of your digital advertising approach and projects your results in a rolling 30-day window. These projections can be visually compared to your historical performance the previous month or the same month last year. 

Performance forecasting is a powerful AI tool that allows your team to experiment with your budgets, set realistic goals, and put your agency in position to deliver above those goals and upsell on further campaigns.

 To get started, book a demo to begin your free trial. 

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