As a creative professional, it's vital to grasp the business impact of your work, as this is ultimately how your contributions are measured. To help you navigate these high-level business metrics, let's break them down concisely and clearly:
1. MER = "Marketing Efficiency Ratio"
MER is a key metric that upper management looks at on a quarterly, monthly, and weekly basis. To calculate overall marketing efficiency, divide the total company revenue by the total marketing expenses, which should include:
- Marketing Overhead, Employee Salaries, etc.
- Total Advertising Spend
- Additional Media Spend(s)
- Marketing Software/Platform Costs
- Marketing Vendors, Agency Fees, etc.
2. "Blended" CAC = Customer Acquisition Cost
Blended CAC is calculated by dividing the total marketing spend by the number of brand new customers. This metric is essential because the less effective a company's communications are, the more expensive it becomes to acquire customers, negatively impacting the company's profit and ability to reinvest in its workforce. Examples of touchpoints affecting CAC include:
- Paid social ads
- Landing pages (conversion-focused)
- Print ads (billboards, magazines, banners, etc)
- Email + SMS marketing (segmented to non-customers)
- Organic social media content marketing
3. CVR = "Conversion Rate"
CVR is determined by dividing the total number of visitors who became customers by the total number of visitors. All other marketing activities eventually lead to this point, making it a crucial metric. Strive to understand this data, regardless of your role on the team, as it highlights how your skills can improve conversions. Achieving a balance of art and science in your creative work is essential to optimizing CVR.
4. Customer LTV = Lifetime Value Customer
LTV is calculated by subtracting the Customer Acquisition Cost (CAC) from the sum of historical profits and expected future profits generated by your customers. Its significance lies in ensuring that the business generates more profit from a customer than it spent acquiring them. Touchpoint examples affecting LTV include:
- Loyalty programs (apps, dashboards, printed materials, etc)
- Email + SMS Marketing
- Expanded product lines
- Community building
Your clever copy, designs, images, or videos play a critical role in the following:
- Grabbing attention
- Telling a compelling story
- Communicating why people should care
- Controlling user flow and customer journey
- Establishing and increasing brand connection
Ultimately, these creative efforts impact the business by:
- Lowering CAC
- Increasing CVR
- Increasing LTV
- Increasing MER
Understanding these metrics will empower you to align your creative work with the broader business goals, driving success for both yourself and the company you contribute to.