Transcript Marketing Metrics PowerPoint

Marketing Metrics
• Whatever career path you choose in the marketing world, it'll do you
a world of good to have an understanding of and level of comfort with
the math behind the metrics you cite every month. These metrics
allow you to assess the health of your marketing team, and show a
more tangible impact of your team's activities.
• Armed with this information, you'll be able to make better decisions
in long-term strategy, planning, and budgeting of your team, and walk
into any presentation with the CMO or CEO and talk to these numbers
with confidence.
Marketing ROI – Return on Investment
• ROI is calculated as:
(Profit - Investment)
Investment
Break down your marketing by activities or channels, and identify what
brings the most return for your investment. This allows you to get a scope of
how your activities are individually contributing in your marketing strategy,
and will allow you to decrease or increase investment in specific efforts
accordingly.
ROI Example
• Over the past 6 months Rubber Ducky Factory Inc. has spent $5,000
on freelance writers for blog posts. These posts brought in 150 leads,
converting at a rate of 10%, generating 15 customers. These 15
customers had an average order size of 800 rubber ducks. Our rubber
ducks have a COGS of $1 each, and sell for $2.50.
• Gross Revenue - Costs of Goods Sold = Gross Profit
(15 orders * 800 rubber ducks * $2.50/duck) - (15 orders * 800
rubber ducks * $1/duck) = $18,000
• (Gross Profit - Marketing Investment) / Investment = Marketing ROI
($18,000 - $5,000.00) / $5,000.00 = 260%
Marketing ROI Problem
• ABC Sneaker Corp spent $5,000 on a digital marketing campaign. This
generated 300 additional pairs of sneakers sold at $100 each.
• The cost to produce each pair of sneakers is $25.
• What is the marketing ROI?
Marketing ROI Problem
• ABC Sneaker Corp spent $550 on an email marketing campaign. This
generated 25 additional units sold at $50 each.
• The cost to produce each unit is $25.
• What is the marketing ROI?
Marketing Expense to Revenue
• How much is spent on marketing compared to how much revenue is
generated by the company. This metric is for a Marketing Manager or
Director's perspective to see the overall allocation of their
department in respect to overall revenue generated.
• Marketing Expense to Revenue is calculated as follows:
• Total $ Marketing Cost
$ Revenue Generated
Marketing Expense to Revenue - example
• Company A spent $210,000 last year for two salaried employees and
their marketing budget, and they generated $1.4 million in revenues,
• Company B spent $300,000 last year for two salaried employees and
their marketing budget, and they generated $1.7 million in revenues,
• Calculate the Marketing Expense to Revenue.
• Which company did better (better meaning being more efficient with
their dollars)?
MER - example
• Looking at a real world example, in Q1 2011 Google's Marketing and
Sales expense was $1.01 billion, and their revenues were $8.58
billion. This makes for a marketing (and sales) expense to revenue
ratio of 12%.
Customer Acquisition Cost (CAC)
• Total Sales and Marketing Cost
Number of New Customers
• This metric could be over any time period -- a month, a quarter, or a
year. Total Sales and Marketing cost is all the program and advertising
spend, plus salaries, plus commissions and bonuses, plus overhead.
CAC example
• As an example, let’s say we spent $450,000 between our sales and
marketing teams last quarter, and we acquired 45 new customers.
This would calculate to a CAC of:
• $450,000
45 customers
• Answer - $10,000 per customer
Break Even Analysis (Break Even Quantity
(BEQ)
• How many units do you need to sell in order to break even? (i.e.
meaning you neither make or lose money).
• Basically, a break-even analysis lets you know how many units of
stuff—say, how many ham sandwiches, iPhone apps, or hours of
consulting services—you must sell in order to cover your costs.
You'll need several basic pieces of information:
• Fixed costs per month
• Variable costs per unit (or cost to produce product, COGS)
• Average price per unit
BEQ Example
• Suppose you're turning a jewelry-making hobby into a business. You
have $1,000 per month of fixed costs (studio rent, utilities,
equipment, etc.). Your variable costs for each necklace are $50 for
materials and labor. You'd like to charge $70 per necklace, since that's
what similar pieces are selling for.
BEQ = $1000 / ($70 – $50) = $1000 / $20 = 50
• That means you'd need to sell 50 necklaces a month at $70 each in
order to break even.
Use your break-even formula to compare different pricing strategies.
For instance, if you raised the price to $80, you'd only need to sell 33
necklaces—but it might be harder to attract buyers.
On the other hand, if you lowered the price to $60, you'd attract
bargain shoppers—but would need to sell 100 necklaces to break
even.
Example
• Supposing that fixed costs are $150,000. Price per unit is $85 and
variable cost per unit is $75. The contribution margin will then be
$10. Fixed cost divided by $10 results in 15,000.