(Paid Advertising)

Advertising Performance: Have You Calculated Your APE?

Ryan Chute
Ryan Chute
February 22, 2022
Advertising Performance: Have You Calculated Your APE?

Advertising performance must first be tracked before being strategically improved. No matter what aspect of a business you’re working to improve, you’ll need to define success. What would it look like for that aspect to get better? How can you measure it? By choosing key performance indicators to track and analyze, you can gain a better understanding of your progress over time. That’ll help you make more effective and targeted business decisions. The same logic applies to advertising. We’re often considering the ways in which advertising is like an art, but we also find some instances where we can use scientific thinking and processes to better understand marketing. What works and why? Sometimes numbers can show us where we’ve been, as well as chart the path forward to success. We would never suggest anyone ignore the less-tangible, more artistic, softskills that make for great advertisements. But we are suggesting that marketers use [data analytics](https://envigo.digital/blog/online-marketing/quick-cheat-sheet-digital-marketing-formulas#:~:text=CTR is used to calculate, campaign can be considered as.) too. Let’s start with an equation that Wizard of Ads finds incredibly useful: The Advertising Performance Equation. We like to start here because APE takes into account three other advertising assessment equations we value as well. Read on to learn more!

What is an APE or the Advertising Performance Equation?

The “APE” is the Advertising Performance Equation, where the goal is to determine sales volume. Sales Volume = SoV × IQ × PEF × MPo Before we can understand the APE, let’s dive into the three different equations that it’s comprised of:

  • Share of Voice × Impact Quotient = Share of Mind
  • Share of Mind × Personal Experience Factor = Share of Market
  • Share of Market × Market Potential = Sales Volume of the Advertiser

By taking Share of Mind, Share of Market and Sales Volume of the Advertiser into account, APE offers a holistic, broad advertisement assessment.

What other Formulas are used in Advertising

Why is Advertising Performance Equation (APE) Important for Advertisers?

With an understanding of sales volume, advertisers can trace back what factors influenced a campaign’s success or lack thereof. Let’s break it all down a little bit more to see why this equation matters so much to advertisers.

Share of Voice

Share of Voice (SoV) is the percentage of the total market that your company occupies with its advertising. You can analyze SoV in different media. For example, if none of your competitors are on Social Media, but you are, then you’ll occupy 100% of the Share of Voice for your industry. But, you might only have a small percentage of the SoV across all marketing media for your category.

Impact Quotient

An ad’s ability to convince a viewer is its Impact Quotient (IQ). Average ads can be assigned an impact quotient of one (1). Ads that are twice as convincing can be assigned a value of two (2), and so on.

Share of Mind

Share of Mind (SoM) is the result of Impact Quotient (IQ) on Share of Voice (SoV). In other words, how much did the IQ increase or decrease the SoV? If you have a small SoV because of a small budget compared to your competitors, you could make up for it with influential, convincing ads that have a high IQ. If your competitors spend a lot of money spreading around ineffective ads, then your Share of Mind (SoM) could surpass theirs. What would it take? You’d need excellent advertising materials from your company.

Personal Experience Factor

Personal Experience Factor (PEF) is determined by a customer’s previous experiences with your brand, products or services. If they’ve used your company before with a good result, then they’ll be more likely to return for more purchases. Think of this as your reputation. A neutral reputation should be considered one (1). Advertising cannot make an impact on your PEF, since the actual product or services will determine that. It’s more than just branding for this one. APE is influenced by all aspects of your business and brand, which means its predictive force is powerful. By reaching into copywriting, scheduling, pricing, production, reputation and more, you’ll be sure to get a holistic understanding of how you’re doing with your advertising. If you’d like to better understand how your marketing is working, and how you could make it work better for you, then utilize us at Wizard of Ads. Contact us today to learn more about how we can help you find the success you’re after!

What Other Formulas are Used in Advertising?

While we think the APE is a great start when it comes to understanding your advertising success, there are other formulas we find useful. We’ve chosen seven to highlight, and we think all businesses could benefit from calculating them and tracking them. Here are seven other formulas used in advertising!

Click through Rate (CTR)

_Formula: CTR = (Number of clicks / Number of views) X 100_Click through rate (CTR) helps you understand the overall performance of your advertising campaign. Of all the people who view your ad, the CTR represents the percentage of people who actually click your offer or engage with your Call to Action (CTA). This can also offer you some information about how compelling different parts of your advertisements are. If you have tons of views, that might indicate your headlines are compelling. If you have tons of views, but very few clicks, then your offer, CTA or overall advertisement is probably sub-standard.

Cost per Mille (CPM)

_Formula: CPM = (Cost to Advertiser / Impression ) X 1000_Cost per Mille (CPM) helps newer brands estimate how established they are in their industry. Online advertising that focuses on CPM can help brands increase their exposure in an efficient, scalable and sustainable way. Brands can often spend less money to acquire each impression as their brand grows influence and market share. The lower your CPM, the higher your brand’s power.

Cost per Click

Cost per Click (CPC)

_Formula: CPC = Cost to Advertiser / Number of clicks Cost per Click (CPC) is more specific than CPM. With impressions, the viewer doesn’t have to engage with the ad for it to count. With CPC, the viewer needs to click or actively engage with the advertisement for it to count. This model tends to be more widely used than CPM. With impressions, each one still has a cumulative effect on the audience’s overall actions, but it is less specific and takes time. In theory, multiple impressions over time most believe seven (7) is the magic number The Marketing Rule of 7, movie industry in the 1930s. will lead to converted clicks, and then sales.

Conversion Rate (CR)

_Formula: CR = (Number of Conversions / Number of Clicks) x 100_Conversion Rate (CR) is best used to track revenue generated from advertising campaigns. If you run an ad that’s effective, your conversion rate will be high. That means that many of the people who viewed the offer chose to move on to the next stage of the sales funnel. If 100 people click on your ad, but only 1 of them ends up clicking through to purchase, then your conversion rate is 1%.

Cost Per Action/Acquisition (CPA)

_Formula: CPA = Cost to Advertiser / Number of Conversion Formula: CPA = Cost to Advertiser / (Number of impression X CTR X CR)_Cost Per Action/Acquisition (CPA) measures how much money it takes to get one customer to follow through with a purchase. Understanding how much it costs to gain a new customer helps advertisers understand how efficiently they’re working. If your ads are great, and you’re generating tons of new sales, is that always going to be great? What if you’re spending more money on creating and running your ads than the amount of money they’re bringing in? That could spell trouble for your business in terms of long-run success and resource management.

Cost Per Lead

Cost Per Lead (CPL)

_Formula: CPL = Cost to Advertiser / Number of Leads Generated Cost Per Lead (CPL) shows marketers how expensive it is to produce leads from their ads. If an ad is expensive, then it better generate lots of leads. Maximizing efficiency here would mean spending as few dollars as possible to get as many leads as possible. This can be a delicate balance to find, but efficiency is everything when it comes to long-term success and scalability.

Return on Investment (ROI)

_Formula: ROI = (Total Revenue – Total Cost) / Total Cost Return on Investment (ROI) measures general financial efficiency. Are the dollars you’re spending bringing in less, more or the same amount of money? No matter what metrics you use to track your progress, it’s important that you do choose some and stick with them. By seeing where you are now, you can set goals for the future and then track your progress along the way. What metrics are you going to start with? If you need help choosing a starting place, or if you are looking for support throughout your advertising growth process, then you’ve come to the right place. Wizard of Ads® is committed to offering ambitious entrepreneurs and advertisers the tools, resources, information and support they need to find success. We’d love to work together. Contact us today!

(Online)
(Offline)
Ryan Chute
Ryan Chute

Helping small businesses become BIG brands with a holistic marketing strategy that speaks the same language across all sales and marketing channels.

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Questions? We’ve got answers.

Who does the Wizard of Ads® for Services work with?

Wizard of Ads® for Services work with healthy and growing businesses hungry to grow by multiples, like you.

You are ready, willing, and able to grow your business. You are open to change and are seeking a distinctive angle of approach to gain the time and attention of a too-busy public.

You know that lasting relationships take time, patience, and good energy to nurture and cultivate. We carefully enter into every arrangement with the intention of working with you for as long as you own your business. You prefer lasting partnerships.

You are already a solid operator. You have successfully grown your business and appreciate the impact the right brand story will have to get to the next level in your operation. You know a strong relational message takes time to gain momentum, but it’s worth the one-time short-term discomfort for the long-term gains.

Marketing cannot fix a failing business.

We accelerate what’s already happening in a business. If your business is on the rocks, marketing will only speed up the inevitable.  

You’re focused on lasting change that leads to exponential, profitable growth, not just sales at any cost. Intuitively, you know that communication that enhances every element of your customer's experience and your employee's culture is the key to your success.

Our advertising model works best for services who have a long purchase cycle and sell a more expensive product like jewelry, furniture, luxury products, and automotive.

How does the Wizard of Ads® for Services charge?

Traditional full service marketing agencies are designed to capture the greatest amount of revenue from a client, regardless of results. Every last item is billed and expensed to the client. Typical agency fees can represent a whopping 55% of the entire advertising budget. That means a $5 million dollar advertising budget, you would spend $2.75 million on agency fees.

Think of Wizard of Ads® for Services as the Anti-Agency.

Our income is not tied to your advertising budget. Our income is exclusively tied to your growth. Our goal is to maximize your advertising impact with the lowest reasonable spend. This allows you to spend only what is necessary or to put extra horsepower into aggressively growing in your market.

The genius of this model is that it perfectly aligns our motivations as true partners for exponential profitable growth without the pain of being unaffordable. Ultimately, we are confident in taking the risk of being underpaid in the first few years because we know the results always speak for themselves.

Next, we do not accept commissions, referral fees, kickbacks, or other compensation from any service providers we recommend or engage for production work. Most agencies do. This includes the 15% agency commission for media buying. This approach is considerably different from the compensation plan employed by most advertising agencies, as it eliminates any potential conflicts of interest and allows us to focus our entire attention on helping you grow your business profitably as a true partner. For example, a $500,000 annual media buy would involve a $75,000 commission that we would have removed directly from your media providers' invoices.

This is the perfect pricing model for services who sell goods with a long purchase cycle.

By tying ourselves to gross revenue, we only have one motivation. Your motivation. We have no motivation to convince you to spend more money on marketing than what is necessary, and since we are a variable expense to sales, we NEVER become too expensive to have us on your team.

In almost every case, we end up lowering the amount of money you spend. We will stay within your planned marketing budget, including your media spend, production, and our Annual Fee. Add on the fact that you get any and all commissions back for media buys and various services provided by outside providers, and you will actually save money having us on your team.

Don’t forget, we have the largest buying power in North America for media buying, meaning for every dollar you spend buying media, we only spend 27 cents on average. This stretches your reach, impact, and frequency in a way no other agency (or yourself) can achieve on your own, saving you hundreds of thousands of dollars, eventually millions, every single year.

Clients who heed our advice and embrace our Marketing Strategy quickly add $1 million in incremental revenue to their business, making your investment a smart bet and a bit of a no-brainer.  

There is no longer any guesswork, hope, or fear that our marketing strategies are going to work. If our client’s are able to abandon any limiting beliefs about marketing, deliver operational excellence, and play the long game, our marketing strategy will accelerate their profitable growth.

Wizard of Ads® for Services pricing model is based solely on the top line revenue of your company. It consists of an Upfront Fee and an Annual Fee. These fees are inclusive of scheduled travel, services, and all other expenditures as outlined in the Consulting Agreement.

The Upfront Fee covers the intensive Uncovery Process, the first year’s Media Buy, the Creative Process, and the Market Research while the Annual Fee goes toward implementation, ongoing creative and consulting, and next year's media buy. You get a team of 3.5 people, with direct access to a top tier Creative Lead and Media Buyer, and on-demand access to me as your Master Strategist. You will also have a full-time Account Manager keeping everything on track.

While the upfront does have an initial pinch, it is easy to amortize the investment over the many years we will be working together to grow your business. Wizard of Ads® retain clients for 10 years, on average. The sale of the business is the number one reason for termination. We actively terminate the bottom 1% of clients who are unwilling or unable to follow our strategies.

Wizard of Ads® for Services believes that all rewards should be directly correlated to the success of our clients. This means that the Wizard of Ads® for Services only receives a raise when the company achieves growth. For example, if your gross sales for the year have increased by 25%, the Annual Fee you pay us in the following year will also be increased by 25%. Likewise, if your gross sales decrease, our Annual Fee will decrease by the same percentage during the following year.

This is an exceptionally easy and fair way to track and reward success. This model was developed by Wizard of Ads® over 35 years ago and has served us well because it serves our clients well.

As a rule of thumb, we take the risk of working for considerably less than our actual value in the first few years as we help accelerate growth. This means you need to be willing to pay us exceptionally well when you start doing even better.

When should I engage The Wizard of Ads® for Services?

There are four key revenue stages for engagement with the Wizard of Ads® for Services.

  1. Under $3.6 million in revenue
  2. Between $3.6 and $10 million in revenue
  3. Between $10 and $20 million in revenue
  4. Over $20 million in revenue

Under $3.6 million in revenue is an investment in your brand. This will serve you well in establishing your brand story early on and help you with your name, logo, and truck wrap design. It's easier to create pictures from a story than it is to make a story based on pre-drawn pictures. You'll be glad you did. Everyone on a fast path to growth is.

Most clients start with Wizard of Ads® for Services between $3.6 and $10 million in revenue. They have often seen a natural ceiling with their leads for demand service and are looking for ways to push past the ceiling. This can only be done with a properly executed brand strategy, specifically in mass media with a sticky story.

Between $10 and $20 million in revenue, Wizard of Ads® for Services has some natural economies of scale. This is a sweet spot where Wizard of Ads® for Services can offer some added value in getting the ball rolling.

Over $20 million in revenue is actually the lowest cost point of entry as a percentage of revenue, but not the cheapest time to start with the Wizard of Ads® for Services. Leveraging all economies of scale aside, we have been left out of the upside along the way, so engaging when over $20 million in revenue means we have to mend a lot of fences damaged along the way. This is also where clients see significant savings in their media buys and production costs.

There are also three market sizes to consider.

  • Primary Markets are the top 50 cities in America.
  • Secondary Markets are the smaller cities in America.
  • Tertiary Markets are the more rural trade areas in America.

When considering an engagement with The Wizard of Ads® for Services, consider what size market you are in. For example, a $3.6 million company in a Primary Market will struggle to get the necessary reach needed to make a splash. You either have to be more patient than a larger company or spend more money to accelerate your reach.

Alternatively, a $5 million company in a Secondary Market will look like a pretty darn big fish in a medium-sized pond.

A $20 Million company in a Primary Market will feel like a $50 million company using our strategies to potential customers.

The key to remember is that the earlier you start with the Wizard of Ads® for Services, the lower the investment to get started. As they say, the best time to plant a tree was 20 years ago. The second best time is today.

Are production costs included in your fees?

Offline, the Wizard of Ads® for Services Creative Lead will create the ad copy, cast the voice actors, source the production house, direct the performance, pick the music bed, manage all the edits, and provide you with the completed ad for final approval before sending to air on your behalf. This is included in our fees.

You pay for the production house, actors, royalty-free music, and jingles directly to avoid any potential for markups, commissions, or management fees.

We have many friends in the industry that give our clients good deals due to the large volume of work we provide them. We will introduce you to them.

Online, the Wizard of Ads® for Services Digital Lead will either coordinate production in-house or work with your preferred digital vendors. The scope of work will be determined and fees will reflect the scope of work to be done.

How long before a brand-forward strategy starts working?

In approximately three months of activation, we’ll just be getting live on air. In six months (3 months on air), you’ll be getting anecdotal feedback from people that you are being heard, but there will be no direct line to revenue.

After 6 months on the air, you’ll think you made the biggest mistake of your life signing up for this branding nonsense. After 9 months on the air (12 months in) you’ll see the light at the end of the tunnel.

At 12 full months on the air, you’ll know why you did this branding thing. Two years from now, we'll be clinking champagne flutes as you wonder why you didn’t do this sooner.

How long before we’re live?

The general guideline is 70-120 days, depending on the level of production needed and if there is a name change to your business.

This includes an onsite visit, a deep dive into research, and getting things created, negotiated, approved, produced, and live on the air.

  • Uncovery - 15-30 days based on travel. 1-2 days onsite.
  • Research - 30-60 days based on the scope of work.
  • Creative and Media Buy Process - 45 to 60 days
  • Offline Production - 15 days for radio. 30 - 60 days for television.
  • Online Production (if switching) - 60 days

This means planning for roughly 90 to 120 days in the proper development and production of a completely unique Marketing Strategy before anything hits the airwaves.

Are you exclusive?

Creatively, yes. During the term of this Agreement, all Creative Partners assigned to your Account shall not engage, directly or indirectly, as an employee, officer, manager, partner, consultant, agent, owner, or in any other capacity, in any competition of the client, including any company engaged in marketing consulting.

For clarity, the Creative Partner is defined as the individual Wizard of Ads® Partners who is responsible for creating your creative strategy and ongoing creative copy. Competition is defined as companies that engage in the same industry and business units (e.g., Furniture, Automotive, etc.) as you. The market area is defined as the area where the marketing message naturally reaches through DMA or 60 miles from the city center of the client's service area(s).

Naturally, we exclude any potential future competition in markets where you are not currently active at the date of signing.

We do not limit Media Buyers in any market. Media Buyers get better deals for larger volumes, making it beneficial for the client to have the Media Buyer available to do as many buys as possible to secure the best deals on the client’s behalf.

Do you do digital marketing?

Wizard of Ads® for Services can provide a host of digital marketing solutions for services. Wizard of Ads® has specialized Partners that provide digital services that serve services effectively. Under no circumstances will digital marketing services be offered without Wizard of Ads® for Services core solution.

It is most likely that Wizard of Ads® for Services will work with your existing digital partners and suppliers. If you do not have a reliable digital provider, we would be happy to introduce you to a number of great providers that play nice with Wizards.

Do you do jingles?

Wizard of Ads® for Services can assist you in getting a jingle for your business. Like any other tactical element of a marketing strategy, we do not produce a jingle for the sake of a jingle.

If you do not have a story or a strategic reason to have a jingle...or an ad campaign to tie it to, do not waste your hard-earned money on a jingle. You are wasting your time and money.

When you do build a single unified marketing strategy that incorporates a jingle for a specific (often scientific) reason, we have a Jingle Wizard who has studied the art and science of jingle design.

He will score you an original, royalty-free jingle, including professional singers, musicians, and producers. He will not knock off a generic jingle from a publicly available music bed that sounds like everyone else's jingle.

Your jingle will serve a very specific reason and produce a very specific result. Have you guessed how much we love jingles yet?

Who owns the copyrights?

Wizard of Ads® for Services owns copyrights for two very specific reasons. We also provide a fair use clause in all contracts to ensure you are in no way limited to the access of your creative works, whether you are working with us or not.

The first reason we own your copyright is to ensure that we do not have to go up against our own creative works in other markets we serve. This means you are not allowed to lend, give, borrow, tweak, rent, lease, or sell your creative works to any other company at any time.

The second reason we own your copyright is that we can establish a one-time value for your creative works in the event that someone steals the content. Upon selling you the copyrights, you can go after the perpetrator for theft and make a considerable bounty in a slam dunk case.

Here is how Wizard of Ads® word the fair use of your copyright for as long as your business is in operation:

All writing and/or marketing materials we create for you are not works-for-hire. Wizard of Ads® for Services hereby irrevocably grants you, and your successors in interest, the non-exclusive, royalty-free, non-transferable, and worldwide right to use the Works in connection with the marketing of your business pursuant to the Marketing Strategy for so long as your business is operational.
How do I measure brand results?

There are a number of interesting ways to measure results. Some people like to get unique identifying telephone numbers, or create branded URLs that redirect to landing pages or the website. However, much of this is a waste of time and energy as it never tells the true story of the brand journey and how it affected the decision-making process.

Other indicators of brand effectiveness include tracking new customers, reactivated customers, or running a brand equity survey to get a sense of your share of mind. Digitally you will see direct search increase, which cannot be affected by anything digital, as well as branded keyword inquiries increase. You’ll, of course, need to get your digital people to add these to your campaigns if you hope to see an increase in conversions.

Wizard of Ads® for Services racks the simplest of indicators. Top line revenue. When your branding takes effect, and the company responds in kind from the phone call or form fill-on, top-line revenue will increase. Efficacy is plotted on a T12, and total lead volume from all sources is tracked.

12 things you should know before signing up.
  1. Quality relationships take time. Branding is a long-term strategy. That’s why most services do it wrong, or not at all. There is always a lag between the start of the new campaign and the time it takes your customers to connect the dots. You MUST BE READY, WILLING, AND ABLE to endure this lag period. In our experience, the lag is typically 6 to 9 months, depending on how competitive the marketplace is, your company’s reputation, your budget in relation to reach, and the eight uncontrollable environmental factors. During this time, we will be helping you implement a transition plan to ease the pain. The good news is that this lag only happens once.
  2. Decisions by Committee. We completely reject the notion of decisions by committee. We work with a single, courageous decision-maker. We welcome decision influencers, but we only look to the Owner for the final decision. All decision-makers and influencers must be involved in the Uncovery and Marketing Strategy Presentation if they want to offer input in the future. It is critical that we have a 100% fully approved plan that can be defended and championed by all leaders in the organization.  
  3. Proven Strategy. That means we are not the low-cost provider. With hundreds of service clients and a playbook of strategic devices, tools, and tactics, this isn’t a guessing game for us. We know what to do to make your goods and services appealing to potential buyers. If you can deliver the goods, we can  build the relationships. If you are uncomfortable with the idea that you are paying us less now so that you can pay us considerably more once revenues allow, please do not commit. We intend to be your true partners, in sickness and in health...so long as you own your business.
  4. Automatic Payments. Everything is on automatic payments. If you struggle with managing cash flow, figure that out in your business first. We accept all major credit cards and ACH payments.
  5. We Cause Problems. If you don’t have a capacity issue now, I promise you will in about 9 months. Let’s deal with recruitment out of the gate as part of your comprehensive marketing strategy.
  6. We Own the Copyrights. All writing and/or marketing materials we create for you are not works-for-hire. We irrevocably grant you, and your successors in interest, the non-exclusive, royalty-free, non-transferable, and worldwide right to use the Works in connection with the marketing of your business pursuant to the Marketing Strategy for so long as your business is operational.
  7. Brand Building. We will be steering you to limit the use of discounts, rebates, coupons, and sales to attract clients. We know this feels counterintuitive to many, and we will clarify our reasoning. Rest assured, we have considerable experience in creating similar offers that are not damaging to your profitability, your brand’s integrity, and your preferable long-term client relations.
  8. Creative Authority. We must have creative authority over the words. You can accept copy as written or reject it outright, but you cannot modify the words yourself. If you do not like something as written, we are happy to discuss it and make the necessary change to maintain the integrity and intention of the words chosen. Alternatively, we will scrap the concept and create new copy that you are happy to get behind 100%.
  9. Proprietary Algorithm. The media buy must be structured in a very specific way, including running a full 52-week schedule. It is based on brain chemistry, not P&Ls. Once we have committed to the buy, it’s important to avoid adjustments unless they are calculated additions.
  10. Knucklehead Factor. You should expect knuckleheads. For example, when you start running ads that are certain to get attention, you need the courage to continue running those ads, even when you receive complaints. We celebrate complaints. It means we’ve made people feel.
  11. Digital Weasels. In about three months from the time your advertising campaign hits the airways, your digital marketers will show you a marked increase in direct and organic traffic. Some Digital Marketers will mistakenly claim this success as their own. Done properly, you can continue to spend less and less on digital lead generation by increasing your branded keyword online presence.
  12. Annual Marketing Meetings. Travel permitting, we prefer to hold Annual Marketing Meetings (AMMs) outside your city. Years of experience have taught us that we get better results when decision-makers are outside their sphere of influence, away from the day-to-day distractions of the office.

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