A Case Example: Display Ads vs. Trade Shows

Let’s look at a hypothetical example of how the overall costs of lead-generation tactics can affect your ROMI, for better or worse. In this example, we’ll compare the costs and results of using online display ads rather than trade shows.

At first, this might seem like an odd comparison, since these tactics are so diverse. If you use these two tactics, your efforts will look very different in terms of how you invest in either one. But if you use the terms I’ve introduced in this chapter, it’s easier to compare their results and cost-effectiveness. You can find out which tactic provides better results in generating leads and/or is driving the better ROMI value.

Let’s begin with a couple of assumptions. First, let’s assume that your product can be sold using either display ads or trade shows. Also, let’s assume that you know how to use both tactics to effectively reach your target customer. (For example, you know which trade shows your target customers are most likely to attend.)

You have a choice between spending $5,000 for PPC online display ads or spending $25,000 to attend a trade show. You want to determine which tactic will give your company the most actionable leads and the best ROMI.

At first glance, the choice between using display ads rather than trade shows might seem like a no-brainer. It might seem more sensible and cost-effective to use the display ads because this tactic will be far less expensive than the trade show. But if you look closely at each type of campaign and at the ROMI that each tactic gives you, you might be surprised at how the results compare.

For the display ads, you might negotiate a PPC rate of 10¢ per click. A budget of $5,000 gives you 50,000 clicks. But of the 50,000 clicks on your online display ad, only a few will turn into actual leads. Most Web surfers who see the ad will click on it out of curiosity. Some will click on the ad more than once. Many of them will take a quick look through your website, but only a few will actually fill out the online form to say they are interested in buying your product. Of the 50,000 clicks your display ad receives, only 1% may convert to an actual lead. This gives you 500 MLs.

When you start to qualify those leads, separating the good leads from the bad, that number will probably be reduced even further. Only 33% of the MLs may convert to MQLs. This gives you about 166 MQLs. At this point, your CPA is around $30 ($5,000 ÷ 166 MQLs = $30.12 per MQL). But the process doesn’t end there.

Once you hand the leads over to sales, perhaps only one-third (i.e., 33%) of the 166 MQLs may be converted into SQLs, for about 55 SQLs. And only one-third of the SQLs may result in an actual sale. From 55 SQLs come about 17 sales. Therefore, your CPS is about $294 per sale ($5,000 ÷ 17 sales = $294.12).

Whether display ads in this case give you a positive or negative ROMI depends on what type of product you are selling, the cost of it, and how many sales you hope to make from one potential customer.

If you are selling a product for $300 and it is a one-time sale, your display ad campaign was not very cost-effective. With a $294 CPS, you’ve made a profit of only $6. If your product sells for less than $294, you’re in trouble. In this case, you’ve just lost money using this tactic.

However, the display ad tactic might still be cost-effective if your new customer has an LTV. If you think this customer might buy 10 products from you over the next year at $300 apiece, you stand to gain revenue of $3,000. If so, your $294 CPS (and the $20 CPA) will be very cost-effective in the long run because you may get more than one sale. In time, you may get a larger profit and a better ROMI.

Now let’s take a look at the trade show tactic. You may determine that it will cost you $25,000 to attend an appropriate industry trade show. This cost includes the expenses of renting space at the show, designing and building a display booth, creating additional creatives (marketing materials, giveaways, tchotchkes, etc.), airline fares, hotel rooms, car rental, and other expenses for sending three company reps there.

Use of display ads would, of course, be less expensive. But trade shows have several advantages. First, trade shows give you better access to your target audience than online display ads. In today’s economy, attending a trade show is a serious investment. People and companies must spend money to register for a trade show and to travel to it. So if they attend a show, they are usually in the market for your type of product. In other words, they may be looking to buy.

If 250 trade show attendees sign up as leads for you (assuming, again, that you attend the right show), those leads will usually be more qualified than the 500 or so leads you would receive from display ads. Of your 250 MLs, maybe 80%, or 200, will convert to MQLs. This gives you a CPA of about $125 ($25,000 ÷ 200 MQLs = $125). That is a more expensive CPA than the $30 CPA that you pay for using display ads. But because the leads from the trade show are more qualified, they will eventually pay for themselves.

The second advantage of the trade show is, because the leads are more qualified, your marketing staff can spend less time and effort weeding out the good leads from the bad. It may take your staff less time to qualify 200 MQLs from the 250 trade show MLs than it would take them to qualify 166 MQLs from the 500 MLs from the display ads.

Also, since the leads from the trade show are usually looking to buy, your salespeople can focus on leads that have a better chance of turning into sales. Of the 200 MQLs that you get from the trade show, maybe 100 will convert into sales. This is more than the 17 sales received from the display ads. Your CPS for the trade show is $250 per sale ($25,000 ÷ 100 sales = $250). This is less than the $294 CPS for the display ads. Plus, you made more sales (100) and earned more income.

Again, whether the trade show provides a positive or negative ROMI—and whether it is actually more or less effective than using the display ads—depends on your product, its cost, and the customer’s LTV. If you sell a $300 product and the trade show results in 100 sales at a $250 CPS, you make a $50 profit per sale. This is slightly more (at least initially) than the $6 profit per sale on the sales of the same $300 product to 17 customers at a $294 CPS using the online display ad. But the $50 profit you make on each trade show sale is still a rather small profit.

However, if your customers have LTV, the trade show sales may lead to additional sales. If, for example, you’re promoting a business-to-business product at industry trade shows, your customers are more likely to make additional purchases. If 70 companies out of the 100 trade show sales are impressed with your product, they may decide to buy 5 or 10 more units, perhaps for use in all their business locations.

On the other hand, maybe your product sells better online. Maybe you have an innovative website that people will want to return to many times after they’ve made their first purchase. You may see additional sales from them. If so, using display ads to bring new potential customers to your website and turn them into longtime customers might be a better option. In that case, you would limit your use of trade shows for lead generation.

Again, there’s no right tactic to use in all cases. The point is not to prove that one tactic is better than another but rather to determine which tactics will be cost-effective and provide a positive ROMI for your business and your products. If using both display ads and trade shows will provide your company with actionable leads and a positive ROMI, then by all means, you should use both. But you should know which tactics provide you with the best ROMI.

Once you know which tactics result in the best ROMI, you can concentrate on making those tactics your primary ones. You can also use them as baseline tactics and test other tactics against them. It may turn out that your test tactics will eventually produce a better ROMI and become your new baseline tactics.