The Simple Economics of a Brand Academy (Download Brand Academy ROI Calculator)

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If you work in marketing, you probably often wonder whether you are exploring all your options to maximize your customer acquisition while keeping acquisition costs low.

Marketing is an increasingly competitive activity: companies try their best to make their product visible, but the path from awareness to decision is fraught with multiple pulls. The fierceness of the ecosystem and the number of competitors mean that old marketing techniques are becoming increasingly ineffective. Businesses need to work smarter and not only harder.

Let’s take a simple example: feeding your CRM and growing your contact list. If you ask people to sign up to your newsletter, what do you reckon the sign-up rate will be? 5%? 10%? Now imagine that you create and publish a brand academy: a learning and development hub that is full of enticing content that really matters to your company prospects. They are required to provide their contact details when they sign up. Once they log in, they find great learning content about relevant topics for their field of work – precisely the topics your company wants to position itself as an expert.

Think Hubspot Academy, a place to go for great inbound marketing and sales content. Or Gainsight University, where one can find excellent topics on customer success. Brand Academies are very innovative content marketing tools. If someone is watching your courses and getting certified on your academy, this shows a very high level of interest on your field of expertise — hence, in your products or services.

We already know that video is the best training format for such academies: it allows for a very diverse instructional delivery (which is great for retention) and it is an immersive experience that can simplify very complex ideas. In the same way “software is eating the world” (Andreessen Horowitz), video is eating marketing!

This article will show you how to calculate the return on investment of using video training as a customer acquisition tool with a simple step-by-step approach to the economics behind it. We all know that most companies require some sort of numeric proof that any investment is worthwhile. The simple economic argument in this article will help you build a bulletproof business case for such investment.

 

Let’s start by defining two KPIs that are crucial to understand the impact a Brand Academy can have: Customer Acquisition Cost (CAC) and Customer Lifetime Value (LTV).

Customer Acquisition Cost (CAC): CAC is an estimate of the cost of acquiring a customer. It can be calculated by dividing the sum of all sales and marketing expenses by the number of new customers acquired in the period that money was spent.

Customer Lifetime Value (CLTV): CLTV is an estimate of the average total value of a customer, over their lifetime (from signup to churn). It can be calculated by dividing the ARPA (Average Revenue per Account) times the Gross Margin (%) by Customer Churn Rate.

 

There are four sequential steps to follow to calculate the ROI of a brand academy:

Step 1) Gather your CAC and CLTV data

Step 2) Gauge level of investment in a Brand Academy

Step 3) Estimate CAC improvement with a Brand Academy

Step 4) Calculate your Brand Academy ROI

 

You can follow the steps in this article using your own numbers to reach a tailored conclusion to your company. Click here to download our Brand Academy ROI Calculator.

 

Step 1) Calculate your current Customer Acquisition Cost (CAC). Check your marketing and sales expenses in the past 12 months and consider the number of new customers acquired in that period. Here’s an example:

Company A has spent 500.000 euros in marketing and sales in the last 12 months. It has acquired 5000 customers during that period. Company A’s CAC in the last 12 months is 100 euros. The average Customer Lifetime Value (LTV) for Company A is 1.000 euros.

 

 

Step 2) Estimate your annual online brand academy investment: calculate the annual cost of the tool, the person in charge and the creation and maintenance of content

Our example company would have an overall spend of 50 thousand euros per year in a brand academy. This includes the platform subscription, fifty percent of a team member’s time to manage the platform and 25 thousand euros per year allocated to content production.

 

We’ll be glad to give you an exact quote at bugle — just contact us!

 

Step 3) Estimate CAC improvement with a Brand Academy

With the launch of your brand academy, your company will generate more qualified leads. These leads will go trough the marketing and sales funnel and will ultimately result in more sales.

Company A will now spend 550.000 euros in marketing and sales for the next 12 months (including the investment in the new brand academy). Company A CAC estimates a (very conservative, it is likely to be significantly higher) CAC reduction of 1 euro, from 100 to 99 euros in the next 12 months. Achieving that, it will be able to acquire 5.555 customers during that period, 555 more than in the previous 12 months.

 

 

Step 4) Calculate your Brand Academy ROI

Once you have gathered all of the above, you are ready to calculate the ROI. You will consider the incremental value from the CLTV of additional customers, subtract the annualised brand academy investment and finally divide the result by the brand academy investment. The formula looks like this:

((Increased number of customers * CLTV) - (Online video training investment per year)) / (Online video training investment per year)

Company A: (555 X 1.000 euros – 50.000 euros) / 50.000 euros = 10.1X

Not bad, right?

 

You can use this formula to assess whether customer acquisition through online video is something you should be investing in, and what the resulting proceeds would be — download our calculator here and check out your results!

 

Remember the bugle team is always glad to help and advise while you weigh up this Brand Academy possibility. Our SaaS is perfect for that. Contact us!

 
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Writen by João Ferro Rodrigues
16-Oct-2018 14:29:00

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