The pressure on marketing leaders to produce results is mounting. Budgets have climbed for the past three straight years and big budgets come with big expectations. Interest in advanced analytics activities like attribution are at an all-time high based on the 2016 Hype Cycle for Digital Marketing and Advertising because marketers want to know what works and what is wasted when it comes to spending, investment and execution. Yet promising solutions such as multi-touch attribution remain out of reach to most marketers because of their high cost and the difficulty of collecting the data.

It’s time to get back to basics.

“In their pursuit of advanced ROI formulas, many marketing leaders ignore easily calculated efficiency metrics that can help build visibility and accountability” says Christi Eubanks, managing vice president, Gartner for Marketers.

Start with media efficiency

Most marketers already track media efficiency, a task made relatively easy by the way media is bought and sold. Common efficiency metrics are Cost per Mille (CPM) which is used to buy impressions, Cost per Click (CPC) is used to buy clicks on ads and Cost per Action (CPA) is used to buy specific actions such as an app install or a purchase. Note: Post-campaign metric calculation is denoted by a lowercase “e” in front of the metric such as eCPC or eCPA to denote ‘effective’ CPC or ‘effective’ CPA.”

Extend to owned and earned activities

Media measurement provides a useful template to understand and optimize the cost of all marketing activity. Extend the basic media efficiency formula to estimate the efficiency of owned and earned marketing.

Earned and Owned Marketing Efficiency Metrics

Funnel Stage Email Efficiency Metrics Social Media Efficiency Metrics
 Awareness  eCPM = (Cost / Emails Sent)x1000  eCPM = (Cost / Non-Unique Reach)x1000
 Engagement  eCPC = Cost / Clicks  eCPC = Cost / (Click + Share + Comment + Like + View)
 Conversion  eCPA = Cost / Conversion Events  eCPA = Cost / Conversion Events


Start by determining which stage in the funnel each marketing activity or campaign is meant to target (awareness, engagement or conversion) and choose the calculated efficiency metrics that best assess progress toward those goals. For example, to assess social media impact on engagement, capture and analyze eCPC which is Cost per (Click + Share + Comment + Like + View). To assess email impact on lower funnel conversions such as sales, capture and analyze eCPA which is Cost per Conversion Events.

Cost estimates will be imperfect. Focus on the major costs and don't get hung up calculating down to the cent. Strive for consistency across channels rather than completeness. Look for agency, developer, content, internal labor and platform costs.

Do more with the data you have. Use techniques such as Reach, Cost & Quality (RCQ) and rule-based attribution to better understand which marketing tactics are working. Simple calculations and comparisons can provide a starting point for discussions about where to look to diagnose performance issues or how to shift budget toward more productive activities.

“You may not have every piece of individual-level data needed for sophisticated modeling, but you can derive a wealth of insight from basic campaign performance and media spend tracking,” says Eubanks.

 

Gartner for Marketers clients can read more in Cost Optimization: Use Efficiency Metrics to Build Marketing Spend Accountability by Christi Eubanks.

Related Content

Webinar
Join our on demand webinar to learn how to pinpoint and plan around your most strategic investments. Watch today. 

Performance Benchmarks

Optimize spend and drive maximum marketing effectiveness. See how your organization measures up against peers on over 30 key metrics using Gartner for Marketers Marketing Performance Benchmark