Marketing Insights - The Art and Science of Creating Demand

That quote was pulled from a classic Saturday Night Live skit with Chevy Chase impersonating Gerald Ford at a presidential debate.  However, it may be just as relevant today, as we head into the new world of demand generation, and marketing automation – I bet many of you didn’t realize how much math would be required in your marketing role.

Conversion rates? Effective rates?  Averages of rates?  How about the difficulties of calculating conversion as a lead moves from inquiry to qualified lead to opportunity to a deal?  What if you have multiple funnels?  

When tackling some of the campaign analysis that is required to look at response rates, ROI or funnel conversion, the math can get quite complex.  Let’s look at some golden rules, and see if we can find some answers.

Rule #1. Work Backwards, From the Results That Would Make Sense.

There are many different ways to calculate rates, and there is some debate on the best way to calculate an average rate (Open, Click-Through, Conversion, etc.).  Two methods seem to be most prevalent, so let’s look at an example using each method and see where we should land.

Campaign 1 – 100,000 visitors to the landing page, 100 forms submitted, 0.1% Conversion Rate
Campaign 2 – 1,000 visitors to the landing page, 100 forms submitted, 10% Conversion Rate
Campaign 3- 1,000 visitors to the landing page, 100 forms submitted 10% Conversion Rate
Campaign 4- 1,000 visitors to the landing page, 100 forms submitted, 10% Conversion Rate

• Method 1: Calculate the rate for each campaign, then average all of the rates, so in this case your average conversion rate would be 30.1%/4 = 7.5% conversion
• Method 2: Sum the data for all campaigns, then calculate the rate to get an average, so in this case it would be 400/103,000 = 0.4% conversion

These two methods produce very different rates, which would have very different resulting actions.  If you look at the raw data, it would be obvious that Campaign 1 performed poorly compared to the other campaigns, but if you used Method 1 to calculate averages – it may not be obvious you have a problem with conversion in one of your campaigns.  Method 2 however would clearly indicate something has gone wrong – and may lead you to delve deeper and find the campaign(s) that is driving the issue.  That would be the “Result That Makes Sense”, and therefore by “working backwards” I would choose Method 2 to calculate averages of rates.

Try using the principle when you come across other “debatable” marketing calculations.

Stay tuned for Part 2 – Double Counting Inquiries, and Part 3 – Conversion by Deals or Revenue?