Handling of Direct Marketing Costs
Donkey Republic wants all of its bike owners to build a financially attractive business, and have the motivation and budgets to achieve our collective business goals. These goals are often expressed in terms of revenue per bike per month, and/or utilization of bikes. Marketing efforts, both local and global, are key to achieve these goals. We rely on our local partners to develop local marketing channels, while managing the global marketing channels.
Technically seen, the main marketing channels today consist of Google searches (both paid and unpaid, aka organic, via regular display or map display), affiliates via hubs, discount codes or special affiliate URLs, on-street visibility, and word of mouth.
In order to increase our traction in each of these categories, our marketing team is working hard, as well as spending generous budgets. We develop content, build links and optimize our website and product to improve our SEO performance, create PR initiatives, we make lists of potential affiliates such as hotels, hostels, tourist info, guided tours, AirBnb key services, events, OTAs, intercity transport services, etc; we place various physical marketing on the bicycles as well as other estate we can find and we are working on referral schemes to improve word of mouth.
Summary of the policy
In running marketing activities, Donkey Republic is budgeting with two key principles:
1- We will own global marketing overhead, similar to bike owners’ local marketing overhead. That is marketing staff and costs of various initiatives or external cost items that cannot be allocated directly on a rental such as public relations, link-building or search engine optimization activities, and supporting local marketing activities are costs borne by Donkey Republic 100%.
2- When we go to a new location, we have a period of 4 months, where we spend extra marketing resources to achieve an initial presence and Google Ads / SEO performance. In the first 4 months, all marketing costs, including Google Ads (however excluding affiliate costs registered into the Donkey system) are borne by Donkey Republic.
Why does this policy exist?
A marginal rental on Google Ads costs typically up to 50% of the booking value, and in average 20% of the booking value. This average marketing cost eats up all of the Donkey margin, and makes it unfeasible for Donkey Republic to place Google Ads. However, we know that partners would want more rentals if they can be achieved with a reasonable cost rather than the bike sitting idle. Hence, we need to divide the direct marketing cost between Donkey Republic and partner just as we divide the cost of affiliates. The Google Ads cost is similar to any other affiliate channel in the sense that we can directly track which GoogleAds converted which bookings, and allocate costs accordingly.
Marketing efforts performed by Donkey Republic (with no cost to Bike Owner)
The items below are indirect marketing costs that Donkey Republic is running on an ongoing basis with internal and external resources free of charge to Bike Owners:
- Continued optimization of Adwords
- Continued improvements to website and booking engine
- Influencer marketing
- SoMe marketing
- General branding
- Identifying and making deals with local affiliates
- Identifying and making deals with global affiliates
- Tests and ad hoc marketing efforts
- Design, production and delivery of marketing materials
Determining the Desired Google Ads Amount for a City
The idea is that DR agrees with the Bike Owner on an acceptable maximum cost per booking from Adwords in a city. The reason we think the maximum amount per booking is relevant is that this gives Bike Owner a line up to which a rental is profitable. Based on this DR's marketing will continually run Adwords and put money into more Adwords marketing as long as we do not pay more than the agreed maximum amount on bookings. Note this also means we will not have a cap on the total money we spent on Google Ads, as we want to keep spending for as long as the spend brings more money in.
We will determine the Google Ads spending in the following manner:
1- DR will identify the average revenue from a booking coming from Adwords in the given city.
2- Partner will communicate to Donkey Republic the maximum Google Ads cost per booking that she is willing to pay. Unless instructed otherwise, DR will use 50% of the booking value to be the default maximum cost of a Google Adword.
3- DR will send in the performance of past month, and agree on the new month on an ongoing basis.
When determining this figure, Bike Owners should consider marginal profitability, and you should take into account sales taxes, Donkey commissions, and maintenance costs associated with a rental. Note that Google Ads conversions concern bookings, and average bookings value is determined by avg no of bikes booked multiplied by the average duration of the rental.
This policy will take effect as of 01.07.2017.
The policy is also translated to Terms and Conditions with an update (see items 1.25 - 1.27; 4.7; and 4.15 - 4.17). We will communicate with each of you when we launched marketing activities, and when we expect to start sharing the direct marketing costs as outlined above.
Unlike affiliate commissions, Google Ads and marketing material costs are not kept as cost items in Donkey Republic back-end system at the moment. Donkey Republic accounting department reports the direct marketing costs not captured in the system and makes a separate invoice for these.