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¶ … equation is to determine where to best put our marketing dollars. We are a B2B company. The purpose of marketing is lead gen. So there are a few variables at play -- we can focus on channels that deliver a higher volume of leads, those that deliver a higher level of contacts (qualified leads) and those that have proven to deliver a higher number of customers. The point here is to optimize conversion rates (Drell, 2013). The reason these are different is that the conversion ratio is different for each channel. To simplify, we can look at three channels. You need to choose between channels because marketing funds are limited. Furthermore, there is a business case for focusing on channels that deliver more qualified leads because those require fewer sales reps to process, so carry with them lower costs at other points in the funnel. Let x = dollars (in 000s), and that total marketing budget is $20,000.
Customers = x (FB)(QL)(C1) + x (T)(L)(C2)
Where FB is Facebook, T is Twitter, QL is qualified lead gen rate, L is lead gen rate and C1 and C2 are the respective conversion rates.
To illustrate this equation, let's say you have a $20,000 marketing budget. In the first scenario,...
Assume that the other variables are constants. Facebook generates 20 QLs per $1,000, with a conversion rate of 30%. Say Twitter generates 60 leads per $1,000 with a conversion rate of 5%. With a 50/50 split, you get the following:
C = (20,000)(.5)(20)(.3) + (20,000)(.5)(60)(.05)
C = 60 + 30 = 90 new customers
Based on that, the split is redone, so Facebook has 75% of the budget:
C = 90 + 15 = 105 new customers
Equations like this are used in making business decisions every day. This equation is the first example. It helps marketing departments understand where they get the most ROI on their marketing dollars. In this example, all of the money would go to Facebook ads. In the real world, there are probably diminishing returns that have to be taken into consideration, so the equation would be a little bit more complicated. Another good example of a business equation is with respect to productivity/worker. This equation roughly looks at the principle of better workers cost more. Thus, paying more gets you better workers. The equation seeks to optimize pay levels -- because at a certain point the workers…
References
Drell, L. (2013) Marketing 101: The importance of conversion. Mashable. Retrieved November 20, 2016 from http://mashable.com/2013/11/21/conversions-metrics/
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