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A Full Explanation of How Math is Used in Marketing


Image of a marketing team strategizing, representing a blog article of how math is used in marketing. Image by Freepik.

The Best Marketing Agencies Have Math Geeks on Their Teams to Drive the Fundamentals of Market Growth

 

Analytical Chief Marketing Officers are Needed More than Ever to Decipher Data and Lead

The spaghetti-against-the-wall marketing approach of the past is long gone and, as digital marketing has grown, so has the ability to target and track effectiveness at a whole new level. While changing laws regarding privacy continue to get refined, our ability to specifically track behavior and conversions has not slowed down.


The rise in digital data has also helped underscore a commonly overlooked part of marketing math!


While there is, of course, creativity involved in marketing, it is the tracking and consciousness of the buyer behavior data (and related user experience) that really helps focus and refine the effectiveness and ROI of those creative outreach efforts. As a person who comes from a scientific background, data that lends to “statistical significance” and “managing by facts” scenarios speak to me as they do with the executives we work with.

 

Why is Marketing Data Capture Important?

A marketing team’s ability to capture data today is critical for prioritizing and developing the outreach campaigns that will be most effective in the future. From demographic and psychographics to heat maps and customer focus group data, understanding the nuances of what is driving customers to make purchase decisions (or selecting a competing product/service) is critical. Data has helped turn “marketing hunches” into more empirical-based decisions, helping to cut through the biases and create a fact-based buyer profile that serves as a compass for gaining traction on future marketing initiatives.

 

Can All Marketing Data Be Measured? 

The reality is no, but the marketing world is trying! That’s why “data scientists” and new functional “mar-tech” roles are coming about. The pursuit of data has inspired teams to “review the data and math potential” of most marketing tactics, driving more custom integrated marketing campaigns and media mix modeling (MMM) that has furthered a company’s ability to personalize like never before.


We’ve written about the importance of marketing personalization in the past, and a recent study by HubSpot talked about this again, finding that over 90% of marketers today are seeing more conversions when outreach is perceived as more relevant to the buyer.


Infographic from HubSpot that explains how personalization is key to making more sales.

So, What Data and Math Do CEOs and CMOs Focus On?

Over the last 15 years, the power of marketing and communications has taken on a whole new function within an organization, bringing about more effective programs internally and externally. In fact, marketing has bled into the organization so successfully, that it has spun up multiple marketing disciplines (e.g. Chief Creative Officer, Chief Digital Officer, Chief Commercial Officer).


While the CEO may think having specific people in these specialized roles will create better results, the reality is that it is also diluting the organization’s ability to understand and focus on holistic growth. In other words, interfering with the fundamental role of a Chief Marketing Officer.


Wholistic growth requires 360 degrees of data, and having fragmented information across multiple areas makes it difficult to create a full analysis and makes it harder for everyone to make decisions and put proactive marketing plans in place. A recent study by McKinsey & Company said that companies with CEOs who place marketing at the core of their growth strategy are twice as likely to have greater than 5% annual growth compared with peers. That same study also indicated that, given the evolution of marketing today, CEOs and CMOs are not always on the same page.


A chart explaining how CEOs and CMOs are not always on the same page about the primary role of marketing in their companies.
Image by McKinsey & Company

Can Artificial Intelligence (AI) Help?

You can certainly argue that artificial intelligence (like ChatGPT and others) helps leaders to align when it comes to data and efficiency, but you still need to apply the right marketing knowledge and review to prompt for the correct information.


Marketing Week recently wrote about the “effectiveness ignorance” within the marketing space today, citing an imbalanced focus on the “flashy” versus on the “math” fundamentals of marketing (e.g. cost of acquisition, return on ad spend, etc.) that directs growth. As the author said, it is “time for true marketers to lead again” through the use of modern tools/information as well as good old-fashioned marketing math analysis to help executives get aligned.


What Are Examples of Marketing Math? 

As you seek to understand the best-performing marketing channels, resources, and activities across the company, here is an initial list of key mathematical calculations to help define and back up your efforts from business, marketing, and quantitative perspectives.


  • Average Sales from New Customers - The average revenue generated from each new customer.

  • Break Even Analysis - The point at which total revenue equals total costs, resulting in no net profit or loss.

  • Churn Rate - The percentage of customers who stop using a product or service during a given period.

  • Conversion Value - The total monetary value attributed to conversions.

  • Cost per Acquisition - The cost associated with acquiring a new customer.

  • Customer Retention - The ability of a company to retain its customers over a specified period.

  • Impression Share - The percentage of total impressions that a company's ads receive compared to the total number of impressions they were eligible to receive.

  • Lead Close Rate - The percentage of leads that convert into actual sales.

  • Customer Lifetime Value - The total revenue a business can expect from a single customer account throughout the business relationship.

  • Margin - The difference between the selling price and the cost of a product or service, often expressed as a percentage of the selling price.

  • Market Penetration - The extent to which a product is recognized and bought by customers in a particular market.

  • Market Share - The portion of a market controlled by a particular company or product.

  • Marketing Expense to Revenue - The ratio of marketing expenses to the revenue generated.

  • Net Promoter Score (NPS) - A measure of customer satisfaction and loyalty, based on the likelihood of customers recommending the company to others.

  • Price Premium Percentage - The percentage by which a product's price exceeds a benchmark price.

  • Profit - The financial gain realized when revenue exceeds expenses.

  • Return on Ad Spend (ROAS) - A measure of the revenue generated for every dollar spent on advertising.

  • Return on Customer - The profitability of a company's customer relationships, indicating how well a company is able to generate profit from its customer base.

  • Return on Investment (ROI) - A measure of the profitability of an investment.

  • Sales from New Customers - The total revenue generated from customers who made their first purchase during a specific period.

  • Sales from New Products - The total revenue generated from newly launched products within a specific period.

  • Share of Voice - The share of total advertising exposures a company gets compared to its competitors.

  • Wallet Share Percentage - The percentage of a customer's total spending in a category that is captured by a particular company.

 

Looking for Marketing Programs With an Eye on Your Bottom Line?

If you are like many companies trying to understand why all the marketing twists and turns you have made are not “adding up” to anything measurably effective? Contact us! We’re here to apply some creativity and good old-fashioned mathematical analysis to help you reach your goals. As a former sales executive who lived by the numbers day in and day out, I can’t imagine prioritizing creative marketing without an eye on the bottom line every step of the way.


This blog is part three of the 15 Years of EWISE Blog Series.

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