Digital Marketing

Digital Marketing 2nd Module 2017-2018

Assignment #3

Name: Jingwen Chen

Student Number: 1702010162

1. The average click-through rate for non-rich media banner ads is 0.15%. The prevailing click-through price for a search ad was approximately $0.80. For a price per impression of the banner ads to result in the same price per click of the search ads, (a) what would the CPM rate of the banner ads have to be? Still, if the click-through price for the search ads is the benchmark for pricing the banner ads, (b) what is the cost per purchase given the conversion rate of the banner ads is 5%? (2 points)

a) The CPM rate is 1.2, the calculation as below:

Cost per mille=Cost per click×Cost through rate×1000 =0.15%×0.8×1000 =1.2

b) The cost per purchase is 16 as the calculation below:

Cost per purchase (action) =Cost per click/Conversions rate= 0.8/5%=16

2. Assume you are going to choose a site to place your banner ad on. For both site 1 and site 2, the following behaviour rates and impact values apply.  

Behavior rates

• The prospect conversion rate PCR: 2%
• The offline induced buy rate OIB: 5%
• The offline buying rate OBR: 40%

             Impact Values:

• Ad-brand impact: $0.02
• Web site brand impact: $0.30
• Offline profit: $15.00
• Online profit: $23.00
• New customer LTV: $125.00

However, the repeat buyer rate for site 1 is different from that for site 2. For site 1, the repeat buyer rate is 90%; for site 2, the repeat buyer rate is 60%. Additionally, Site 1 charges $1.50 for cost per click and Site 2 charges $2.50 for cost per click. On which site should you place your banner ad on?

The problem is CPC of two sites are different, so the web chain is main focus on the event 2 which is click through to company website:

Result 1 NNR*($0)

Result 2 (R2): (1-NNR)*(1-CTR)*(Ad Brand)

Result 3 (R3): (1-NNR)*CTR*(1-PCR)*OIB*(Ad Brand + Web Site Brand + Offline Profit)

Result 4 (R4): (1-NNR)*CTR*(1-PCR)*(1-OIB)*(Ad Brand + Web Site Brand)

Result 5 (R5): (1-NNR)*CTR*PCR*(1-RR)*(Ad Brand + Web Site Brand + Online Profit + Lifetime Value)

Result 6 (R6): (1-NNR)*CTR*PCR*RR*OBR*(Ad Brand + Web Site Brand + Online Profit – Offline Profit)

Result 7 (R7): (1-NNR)*CTR*PCR*RR*(1-OBR)*(Ad Brand + Web Site Brand + Online Profit)

According to the formula above, the value of two sites are same in R1 – R4, however, the R5 – R7 are different because the RR:

• Both site 1 & site 2 has same R1- R4

R1+R2+R3+R4=

NNR*($0)+

(1-NNR)*(1-CTR)*(Ad Brand)+

(1-NNR)*CTR*(1-PCR)*OIB*(Ad Brand + Web Site Brand + Offline Profit)+

(1-NNR)*CTR*(1-PCR)*(1-OIB)*(Ad Brand + Web Site Brand)

=0+(1-NNR)* (1-CTR)*0.02+

  (1-NNR)* CTR*(1-2%)*5%*(0.02+0.3+15)+

  (1-NNR)* CTR*(1-2%)*(1-5%)*(0.02+0.3)

=(1-NNR)*[0.02*(1-CTR)+CTR*(0.75068+0.29792)]