Global digitalization, together with new tools for data collection, has made marketing more powerful than ever. Marketers are now swimming in metrics to try and find the best research methods and approaches for estimating promotional campaigns, customer engagement, conversion rates, etc.
The audience and niche value, however, are constantly changing. Thus, the ability to promptly adjust your marketing activities is vital — as is having an understanding of how to successfully navigate your business in the world of ultra-specific niches and emerging markets.
This article will lay out some of the most important aspects and definitions regarding marketing efficiency and effectiveness, offer advice on how to measure marketing effectiveness and efficiency, and explain why it's extremely important to keep these two aspects balanced.
The Difference Between Efficiency and Effectiveness
Today, there are so many easy-to-manipulate metrics out there that marketing teams sometimes make the mistake of focusing too heavily on quantifiable results alone. It may not be obvious to everyone, however:
Focusing on KPI in isolation and ignoring brand-related numbers can minimize your marketing effectiveness.
There are two major mistakes that marketers make with metrics related to profit generation:
- They view marketing effectiveness and efficiency as a whole and something that is inseparable from each other.
- They focus on efficiency first.
If those two statements sound familiar — chances are your company is having a difficult time measuring efficiency and effectiveness in marketing. So what do these characteristics actually mean?
The degree that shows how well your marketing strategy does at reaching short-term and long-term objectives and how it contributes to overall profitability.
The measurable input/output ratio represents the results your company achieves with every dollar spent on current marketing campaigns, marketing department expenses included.
Now, after we sorted the definitions out, let's go over each of them in a bit more detail to finally figure out the main differences between effectiveness and efficiency in marketing management.
How to Identify Marketing Effectiveness?
How your company’s marketing activities perform is ultimately measured by the profit they generate; however, forms of data collection are critical in supporting your current marketing efforts and planning ahead for future campaigns.
At times, marketing effectiveness may be difficult for a business to fully understand and identify. A lot of information is based on non-quantifiable metrics that represent customer interactions with the company, along with brand positioning. These might include:
- Advertising approach in the niche
- The quality of the products or services
- Who the audience is
- The messages of the ad campaigns
- Communication quality
- Channels of distribution
- Price range
These points are important in understanding the visibility of your marketing, the interest of your targeted audience, and the likelihood that customers are going to interact continuously with your product or service. In regular situations, marketing effectiveness may be identified through exploring such key metrics as:
- Market share: The total percentage of the market that your company commands. It also represents the company's sales compared to the overall sales in the industry.
- Brand strength: The perceived value of your product or service by customers. It represents the 'wantability' that customers may have for your brand. This metric is normally measured by 'emotional data' received via customer surveys, quizzes, series of evaluation questions, etc.
- Purchase intent: Purchase intent is the probability that a customer will pull the trigger to make a purchase from you. This abstract metric is identified using a series of data points, including things like:
- Customers’ past purchases
- Engagement time with the website
- Brand interactions
- Attendance at brand-organized events (seminars, webcasts, live presentations, etc.)
- Lifetime value: A quantitative metric that represents the value of any one customer’s loyalty to a brand. This is calculated by taking the difference between lifetime revenue generated per customer and lifetime customer acquisition costs.
By using these metrics, you'll be able to understand not only where your marketing is working, but also where it is ineffective. You could also use these data points as a way of justifying a change in focus on the audience, or growth in directions towards new or more specific niche segments.
How to Identify Marketing Efficiency?
When figuring out how to identify marketing efficiency, you are basically trying to evaluate and measure the success of the marketing campaign you have in place. Here, determining which metrics are the most important makes all the difference for turning investments into revenue.
There is also the chance that some data points are worth less than other metrics, meaning that analyzing marketing efficiency will require more of a holistic approach in the long run.
With the advent of marketing technologies and ways to measure business performance, it is easy for businesses to start drowning in various metrics. In order to avoid that, teams start processing campaign data on the basis of the following marketing efficiency metrics:
- Return on investment (ROI): provides the output of marketing compared to the input of investments. To calculate this metric, marketers subtract the value of initial investments from the final net returns, divide the difference on the number of initial investments, and multiply the result by 100.
- Cost of acquisition: This metric denotes how much money needs to be spent in order for a sale to happen. The cost of acquisition can be also calculated by dividing the marketing expenses by the number of customers acquired. When talking about expenses, aside from ad campaigns budgets, these may also include:
- Technical costs (software licenses),
- Salaries (sales and marketing teams)
- Promo materials production,
- Inventory upkeep, etc.
- Conversion rate: Divide the number of customers who completed the desired action (i.e. bought something, downloaded a guide, subscribed to a newsletter, etc.) by the total number of individuals your ad has reached. This metric helps to compare the advertising efficiency across multiple promotional channels.
- Clickthrough rate (CTR): The percentage showing the number of visitors who clicked on an ad. In other words, it tells marketers how effective a single ad has been. Normally, CTR can be considered to be good if it sits in the range of 4-5%. Much lower CTRs may mean that your marketing campaign targets the wrong audience.
Efficiency in marketing is all about making your campaign work across all metrics. Some of these points may not be that representative on their own; however, when viewed holistically, and in relation to one another, can uplift your marketing efforts to help make cost-saving decisions in all areas of your strategy.
Impact of Efficiency and Effectiveness in Your Marketing Strategy
Many businesses claim that effective campaigns will naturally generate efficient outcomes; however, focusing on only one or the other creates an imbalance and distorts the real causes behind the performance of a particular strategy.
The balance of efficiency and effectiveness in your marketing strategy can always be found in attracting valuable customers with minimal investments. Only by combining the two components together — efficiency and effectiveness — are businesses able to see the full picture.
When you take a deep dive into effectiveness, you are looking for market insights, new niches, and potential groups of customers who are worth spending time to learn more about.
The same is true about efficiency — you deep dive into possible excesses in your campaign's performance, research, planning, and other parts of your campaign strategy.
Now, let’s look at this balancing act a little more carefully.
Low efficiency / Low effectiveness
You don’t want to be on the ‘low’ end with your marketing effectiveness and efficiency. Low efficiency and effectiveness mean that a business isn't effective at making money at all.
If your cost analysis for a marketing campaign shows that your marketing isn’t meeting ROI goals, this is a sign of low effectiveness. The strategy isn’t generating revenue to meet projected goals, based on what you are spending.
You might consider other audiences to advertise to or different marketing strategies. Trimming the fat (optimizing the company's expenses from the ground up) can also help you get closer to your ROI goals.
High efficiency / Low effectiveness
High efficiency is an excellent step in the right direction for your marketing campaigns and planning. If everything you do with your marketing is 'air-tight' with little excessive spending or risk, your team is running a highly efficient campaign.
Since you’re not burning tons of excess cash on your marketing, this is an excellent place for thought-out experiments and further business growth.
You may even be in this marketing model of high efficiency and low effectiveness because you are testing the waters for potential markets and looking for the right formula to create high effectiveness without using too many resources
Low efficiency / High effectiveness
Some groups think spending more is the best marketing approach. Sure, if you own the market, then there isn’t anyone else to compete with. But is this always the case?
For example, if you spend thousands on an ad campaign that loses money in the long run, you may still take a large portion of the market share, or have plenty of brand presence — these metrics will all point to a highly effective campaign, at first glance.
However, focusing solely on the outputs will lead to poor or low efficiency. From a long-term perspective, you will more than likely overspend on marketing. Thus, such a tactic isn’t worth keeping around and should be eliminated.
High efficiency / High effectiveness
This is the best place for your marketing team and company to be. High effectiveness and high efficiency are optimal for marketing because you are spending a minimal amount and getting the highest yield or results from your investments.
In this model, your marketing campaigns are designed to target maximum impact on specific audiences while using a minimum number of resources to engage those customer audiences. There are usually high rates and percentages of conversion, customer value, and ROI.
If you are in this model you have found customers who tend to invest more time and money in your products and services.
Our Successful Experience
Managing and interpreting your metrics may be tough on your own. Looking at your marketing strategy takes reliable software that can interpret your data and a team of professionals who can deliver marketing solutions in a timely manner — and within your budget.
At WTT Solutions, we have the required experience to help businesses create dedicated systems that will assist them in getting highly effective and efficient outcomes through marketing.
One of the products we developed for our client is called SEO Bangkok — a Martech solution for generating, scoring, and building relationships with leads. Our team developed this tool from scratch, offered ways to integrate it with existing APIs, streamlined the data collection process, and ensured that all parts of the final product work perfectly.
A company cannot simply rely on effectiveness or efficiency alone. These two aspects of your marketing and sales approach need to work in harmony — and it is best to work with a professional development partner that will assist you in reaching the highest potential for marketing effectiveness and efficiency.
Today, modern digital tools that serve as the building blocks for a successful marketing campaign are common practice worldwide. Automation, BI, and AI, along with data analysis, help teams quickly identify marketing effectiveness and efficiency, target the most relevant audiences, and convert leads faster.
If you are ready to start working with advanced digital technologies to boost your business, or simply want to get more information on how to identify marketing effectiveness and efficiency, contact our team today. We have the expertise to help you run your marketing activities on any scale.
Fill out the form in the top right corner of this page and one of our professional team members will contact you to answer all your questions. WTT Solutions is ready to help you get organized and be efficient and effective for all of your upcoming marketing campaigns!