Calculating the Advantage: How quodos Referrals Outperform Social Media Ads
You invest in marketing to grow your business - do the numbers make sense?
Retailers and businesses of all sizes are investing in social media marketing in order to reach their customers. Google and Facebook are two of the largest companies in the world, and advertising revenue comprises 80% of Google's, and a whopping 97.9% of Meta's overall income. That is a lot of ads.
Social media companies, of course, are not charities. They charge retailers a premium to advertise on their platforms, because they have the eyeballs that you want to target. Google dominates search, with 91% of global search traffic. The social network landscape is a little more varied: Facebook and Instagram (both owned by Meta) have three billion and 2.4 billion monthly active users, with the relative newcomer, TikTok, enjoying enormous growth to now exceed 1.1 billion monthly active users.
The problem for social media companies - and for the retailers who advertise with them - is that the reach for retailers on these platforms is declining. As competition heats up in the social media space, and the curated feed that Facebook provides loses ground to the algorithm-driven feed of TikTok, more and more of the content being presented to social media users consists of viral videos or memes - giving less space for company advertising. This has lead to the average post being made by a business on their Facebook page being seen by less than 2% of their followers, as the social media companies push paid advertisements into each user's feed instead.
This is your money. It's vital that the numbers add up!
Let's do some simple calculations on how much a typical retailer must spend on a social media site in order to generate a sale. The numbers we will use here of course will vary - depending on the precise market and product - but they are based on real-world data and should be generally accurate (as of 2024) for most retailers.
A Facebook example
If you are advertising on Facebook, the first key metric is the cost per click (CPC). CPC is the cost you pay for every user who clicks on the link that you include in your Facebook ad. CPC can vary widely, but let's assume for our example that you are paying €0.50 per click.
Next, let's assume that you are converting users on your website - for a restaurant, it could be somebody making a booking with your business, or for an online business it could be someone purchasing a product there and then on your website. The conversion rate is the percentage of users who click on your ad, and then go on to make a purchase. Again, this can vary widely, but 2% is a reasonable number to assume for the average retailer.
Finally, let's assume that the average order value (AOV) for your business is €50. This is the average amount that you expect a user to spend when they make a purchase. In order to expect to make a €50 sale, you would expect to spend €0.50 x 50 = €25 on Facebook advertising. Of course your numbers will vary depending on the profile of your business, but this calculation should allow you to land a reasonable estimate of the cost per sale to your business.
Referrals to the rescue!
quodos allows a retailer to financially reward your existing customers by successfully referring new customers - your existing customers are only rewarded after the friends and family that they have referred, have transacted at your business. Take the example above. You could offer a €10 discount to an existing customers for each new customer that they bring on board, incentivise each new customer with another €10 discount, and still have headroom left over the pay the referral fee.
This gives you two sales - the new, referred customer's purchase and the subsequent referrer's purchase - which would cost you €50 in Facebook advertising - for €20. There is a fee to quodos for enabling the referral to take place, and after that fee you are still miles ahead.
Not only that, but because you now have a dedicated connection with these customers (they have your offer on their phone), you can now retarget these customers in a way that is impossible with social media.
At quodos, we believe that the future of marketing is connecting you as a retailer financially with your customers. You should be in your customer's pocket, with the ability to push your latest offers and incentives that make sense to your paying customers. The best customers that you don't have look like the best customers you already have - what better way to get your next best customer than by getting your current best customer to recruit them for you?
Imagine the growth potential when your best customers become your brand ambassadors. Let's make it happen with quodos. Contact us today to learn more.