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- ➗ Run profitable ads by understanding unit economics
➗ Run profitable ads by understanding unit economics
Important business metrics to guide your ad strategy.
Self-referential ads are great.
I love this McCann ad because:
Passionate copywriters likely seek out interesting ads. This ad uses the perfect medium to get to their target audience.
The message is crystal clear and only uses 8 words. Brilliant.
It uses a clever visual that supports the key message of “hungry” copywriters.
The use of whitespace draws attention.
Here’s another great recruitment ad:
🏷️ Create an offer that gets customers in the door
Sometimes media buyers are too cheeky or creative and forget about clarity.
If you have a great product, often times all you need is for customers to experience your business firsthand to win them over.
A clear and compelling offer will get more customers into your funnel, earning you long-term value over their lifetime.
Take a look at this simple and direct 1-800 Contacts ad:
Here’s some back-of-the-napkin math that might make ads like this work:
$30 per month subscription
20% churn per year (average of 5 years per customer)
40% gross margins
This works out to the following:
$360 average annual revenue per customer
$144 gross annual profit per customer
$720 lifetime value per customer ($144 / 20% churn)
$240 customer acquisition cost (CAC), based on 1:3 CAC:LTV ratio
This means these ads would be profitable as long as they acquire customers for $240 or less.
I’m making assumptions here but what’s important to understand are the unit economics.
An inexperienced marketing department might view a $240 CAC as unprofitable if their average revenue per month is just $30. However, the long-term profitability is what creates a strong business case for this type of direct response advertising.
🎲 Random ads I enjoyed this week
This billboard ad for Liberty Science Center:
This ad from Smirnoff:
🧠 Clever ad of the week
🏆 Placement of the week
🗣️ Quote of the week
“The more you tell, the more you sell.”