conversion equations for marketers

Conversion Optimisation Equations

Marketing, and digital marketing, in particular is all about numbers. Sure there’s creative and imagination and feats of amazing technical splendour… but all that fabulousness translates into the bottom line.

For some who might prefer the more brand end of the marketing continuum, equations might not be their favourite thing.  As a hand reference, here are some of the equations that we use on a daily basis across client campaigns for conversion optimisation.

TRADITIONAL ROI

Revenue – Investment
      Investment

MORE MEANINGFUL ROI

Profit – Investment
      Investment

MARKETING ROI

Gross Profit – Mkt Investment
      Mkt Investment

MARKETING : REVENUE

    Marketing Cos   t
     Revenue Generated

% DIFFERENCE

Result 2 – Result 1
     Result 1

RETURN ON MARKETING SPEND

Revenue
    Spend

COST PER LEAD

Cost
    No of leads

COST PER ACQUISITION

       Cost per Acquisition
    No of Conversions

ACQUISITION (CAC)

Total Sales – Marketing Costs
    No of New Customers

LIFETIME VALUE (simple)

(Annual Profit – No of Years)-Acquisition Cost

CUSTOMER LIFETIME VALUE 1

(Annual Profit x No of Years)-Acquisition Cost

CUSTOMER LIFETIME VALUE 2

((Avg Monthly Transactions x Avg Order Value) Avg Gross Margin) Avg Lifespan



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