Last time I wrote about two terms that are sometimes used interchangeably and you can catch that here. That started me off thinking about how there are a million other similar terms in marketing, so I’m writing about two more.
Effect and efficiency are also related to one another. With these two it’s not so much that they are used interchangeably. It’s more that some people don’t stop to consider that because they are different, they ought to be monitoring both.
Marketing is action taken that communicates ideas about what you provide or sell to potential users or customers. It is not necessarily all about making more money.
Marketing aims to do one or more of the following:
Effectiveness is how good something is at a task. So, how good is a firm’s marketing at raising awareness or attracting users or customers?
To know what good looks like, you need to first define your goals. These may be about increasing sales, but not only that:
And that’s where effect and efficiency come in. They are two common and related measures of how good marketing (or anything) is.
“How much?”
Here are some examples:
I’m not covering how you might reach those conclusions here. Have a poke around my blogs and site and you'll find some relevant stuff. Or follow me on LinkedIn.
There are a few issues with effect. One is whether the impact that you have measured is caused by the marketing. Let’s assume here that it is.
Finance’s response may well be, “so what?”
Particularly if you are talking about effects farther up the purchase funnel, like subscribers. An effect on its own is not useful unless you can put it into some context:
There’s the apples and oranges problem. Even if you get a handle on the effects of different marketing channels, your effects are all in different units which makes it tricky to make decisions about moving marketing effort around across channels.
That’s where efficiency measures come in.
“How much per x?”
The same effect examples expressed as efficiencies:
If you start to measure your email campaigns that way, you’ll eventually be able to identify what “your” typical means in terms of a subscription rate. When campaigns perform better or bomb you can investigate what was different about them. Those insights mean that you can do more of what leads to better and eradicate the duds.
Repeat for each marketing channel and you’re well on your way to data-driven effectiveness. But you still have the problem that you can’t easily compare channel efficiencies to one another to be able to make decisions about channel choice. You need to do two more things to get to that place.
In the example above, it’s quite easy to get the efficiency “per” bit into a common currency by putting a cost against the lead magnet and catalogues. Google Ads is already expressed as a monetary spend. It’s a bit harder for the effect – how many email subscribers equal a qualified lead? How many qualified leads equal a sale?
One way is to apply assumptions. You can create these by looking at your own data to see what it tells you about the ratios between your actions, leads and sales. A superior but therefore more complicated and expensive way is to measure the effects of each channel against the effect that everyone ultimately wants – sales.
The advantage of that approach is that you will be able to identify and act on information about diminishing returns. Efficiency is not a constant and it tends to reduce at higher levels of activity in a channel. You win the easier to convince customers first, then it takes more and more effort to win over the more reluctant. Your returns to each input diminish.
Effect is about quantity – the degree of change that your marketing had. Efficiency is about effect per x. So, outcome relative to the effort put in. Efficiency is useful because it allows you to compare different types of effects if you calculate them on the same per basis. Comparisons help decision-making.
Neither effect nor efficiency in isolation are good enough to base big decisions on.
If you only chase quantity, you may soon become bankrupt. And if you maximise efficiency, you’ll miss great opportunities. Both are purely quantitative measures too. You need to bring quality (of customers) into your decision-making too to win the long game. High quality customers will look different from business to business.
If you want to know more, give me a call.
Feel free to use, with credit to me please :)
© Jo Gordon Consulting Ltd 2021