How to measure promotional products and business gifts ROI ?
How does one measure the profitability of promotional gifts?
Last update: 03.08.2018
You
have probably wondered whether promotional products really provide you with any
benefit and how to measure it. I have been in the business of promotional
merchandise for 15 years and I have answered time and time again: the
investment definitely pays off. I sincerely believe this, but unfortunately
there has been no concrete way to measure and confirm my belief. Now there is.
Everyone
who deals with marketing is aware that the profitability of each cent spent on
marketing is carefully measured, and as a result, marketing channels where
measuring this profitability isn’t possible, are less attractive.
In
order to keep up with the times and answer customer questions with numbers, I
looked at the latest US, European and Australian surveys on promotional gifts and advertising gifts, commissioned by international organisations representing many promotional
companies. Based on this data, I was able to compile a formula which will help
you measure the profitability of your investment in promotional gifts and business gifts.
100,000
people participated in the ASI US study, and among other things, it turns out that a promotional gift is used for 8 months on
average. The precise numbers of months of use for each product type are as
follows:
·
umbrellas with logos 14
·
power banks 12
·
promotional bags 7
·
hats
7
·
office supplies 7
·
T-shirts
6
An
important fact is that 57% of people who receive advertising gifts, will regift them once
they have had enough of them.
The
number of times a product is noticed is called the number of contacts, and this
is another very important factor that is measured for promotional products. In
Europe, promotional clothing and advertising bags with logos receive the most contacts or impressions, whereas in the US, promotional bags with logos are
the most popular, followed by caps and hats. Promotional pens are in the top three in both the US
and in Europe, and we shall now take a closer look at the numbers related to
these.
In
the US, one pen is noticed 2,805 times, in London 3,449 times, in Paris 1,204 times
and in Berlin 5,615 times.
Let
us assume that an average advertising pen costs 1 USD, i.e., 100 cents. Thus the cost of
receiving one contact is 100 : 2,805 = 0.036 cents, and receiving 1,000
contacts costs 36 cents, i.e., 0.36 USD. This
means that making visual contact in the US 1,000 times via a pen with a logo
costs 0.36 USD. Impressive!
CPM
stands for the cost needed for acquiring 1,000 contacts – I will use this from
now on so that the information will be clearer and more concrete.
The
study states that the average CPM of promotional gifts in the US is 7 USD,
while it is 32 USD for a newspaper ad, 24 USD for a magazine ad, 10 USD for an
online ad, and 7 USD for a radio ad.
All
in all, the CPM of an average promotional product is about the same as when
advertising online or on the radio, but
according to the study, promotional gifts are the most preferred advertising
tool. The second choice is
newspaper ads, third is radio ads and fourth is magazine ads. There are 2.5
times more people who wish to receive a business gift rather than see an
online ad. When asked to name a brand, 85% of people first think of a company
that has given them a T-shirt or a hat.
More
information on the study is available at the Logotrade blog of business gifts.
It seems that promotional gifts do indeed have a
lot of advantages compared to regular advertising. But still, how does one measure it? Now I will
present you with a long formula, which is certainly as interesting to many
people as it was to me, but if you believe me and do not wish to delve into it,
you can scroll past this. There are many other interesting things below!
Let
us first calculate CPI and CPM in cents, so that the results are more precise and
the rounding more accurate.
CPI
– the cost of 1 showing in cents, i.e., the cost of a contact,
CPM – the cost of 1,000
showings in
cents,
C
– the cost of a product in cents
PL
– the lifespan of a product,
AI
– the average number of total contacts during the lifespan of the product,
I
– the number of contacts per day (or per week/month/year)
AI
= PL x I
CPI = C : AI
C
= 1 USD or 100 cents
CPI
= C/AI = 100 : 2,805 = 0.036 cents
CPM
= 1,000 CPI = 0.036 cents x 1,000 = 36 cents
1
USD = 100 cents or CPM = 0,.36 USD
Example:
we spend 500 USD for 1,000 pens. Thus CPI = 50,000 : 1,000 x 2,805 = 0.0178
cents and CPM (0.0178 cents x 1,000) is 0.178 USD. Let me remind you that CPM
indicates cost per 1,000 contacts.
TC
x 100 – total cost in cents
Q
– quantity
TC
– total cost in dollars
TC
= C x Q x 100 (cost in cents)
CPM = [TC : (AI x
Q)] x 1,000
CPM
= [500 x 100 : (2,805 x 1,000)] x 1,000 = ( 0.0178 cents) x 1,000 =17.8 cents
or 0.178 USD
The
quantity must be taken into account in the total cost, as this influences the
product’s CPM and mistakes may easily occur when leaving quantity out of the
formula!
Let
us try to calculate the CPM of a T-shirt in Berlin, where, according to the
study, the average number of contacts (AI) for a T-shirt is 1,763.
Example:
let us buy 150 shirts for 400 EUR.
CPM
= [400 x 100 : (1,763 x 150)] x 1,000 = (0.15066 cents) x 1,000 =150.66 cents
or 1.50 EUR
For a simple T-shirt with a logo to be seen
1,000 times, you only have to pay 1.5 EUR.
I
made similar calculations with the numbers for a power bank, a pen (now in
Europe), a shopping bag and other promotional clothing. Those that would like
to see these calculations in detail can do so on the Logotrade blog of promotional gifts.
I encourage you to do the same – you can calculate the profitability of your
products in the same way.
Altogether, the cost of 1,000 contacts per gift
is as follows:
·
power
bank 9.15 EUR
·
pen
0.15 EUR (it was 0.36 USD in the US; this depends on the price per pen, which
was 1 USD)
·
shopping bag 0.49 EUR
·
sweatshirt
with a logo 5.75 EUR
CPM
depends greatly on the promotional product itself, its visibility, lifespan and
cost. According to the ASI study, the products mentioned have the most number of
contacts, which every marketer can consider when choosing and ordering
products.
The formula for a promotional gift, advertising gift, business gift and company
gift CPM is CPM = [TC :
(AI x Q)] x 1,000 (euro cents).
AI,
i.e., the average number of contacts per product can be calculated even more
thoroughly.
Let us assume you are a product manager and you
have to choose between ordering work clothing with a logo for the employees or
doing a retargeting campaign online. The CPM of the latter is 0.9 EUR.
When
calculating the CPM of work clothing, we take into account that one employee
should have two sets of work clothes and that he/she works 21 days per month.
Let us assume that every day 10 people are at work and in total the company has
15 employees. We do not take into account the chance that an average person
regifts 57% promotional gifts, since this does not apply to work clothes. The
store is open every day (meaning 30 days per month) and during this period it
is visited by 1,000 people. We learnt from the previous study that on average,
work clothing is used for 9 months. The budget is 300 EUR, we order 2 sets for
each employee, meaning 30 sets in total. Product price per piece is 10 EUR.
Number
of contacts: 1,000 : 30 = 33.3333 contacts per day.
Contacts
per employee: 33.333 x 21 = 700 contacts per employee per month
Contacts
between employees: 10 people per day = 10 x 30 days = 300 contacts per month
Total
contacts per one month: 1,000
AI
= 1,000 contacts x 9 months = 9,000 contacts
AI
x Q : 2 = 9,000 x 15 (divided by 2, since every employee received a spare set
of clothing)
TC
= 300 x 100
CPM
= (300 x 100 : 9,000 x 15) x 1,000 = 0.222 cents x 1,000 = 222.22 cents or 2.22
EUR
The CPM of work clothing (if every employee has
two sets) is 2.22 EUR.
If
we only calculate one set per employee, its CPM is 1.11 EUR. If under the same
conditions the work clothing were a 5 EUR T-shirt with a logo, the CPM of two
products per employee would be 1.11 EUR and the CPM of one product per employee
would be 0.555 EUR.
The
product manager can now choose, but according to calculations, the 1,000
contacts of a T-shirt as work clothing cost less than the 1,000 contacts of a
retargeting campaign.
In conclusion
Hopefully
I have proven to you that it is possible to measure the profitability of promotional
gifts. However, the result is dependent on the combined effect of many factors,
such as the uniqueness, practicality, price, amount and visibility of the
promotional gift as well as the people who use the gifts. Some active users
make many times more contacts than passive ones. So choose carefully what you
give as a gift and to whom.
Recently,
hybrid solutions such as sharing promotional gifts on social media have become
popular and their CPM is even more profitable than a regular promotional gift.
I promise to write about this in more depth, to help you make smart decisions
when giving promotional gifts.
Anti
Saluneem,