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6 Examples of Marketing Efficiency

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Marketing efficiency is the result you achieve with a dollar of marketing spend. This can be calculated in several different ways for different marketing objectives. The following are common types of marketing efficiency metric.

Cost Per Lead

The efficiency of promotion is often measured with cost per lead.
cost per lead = promotion cost / # leads
For example, a solar panel installer who generates 5,000 leads with a $100,000 campaign:
cost per lead = $100,000 / 5,000 = $20 per lead

Customer Acquisition Cost

The efficiency of the entire process of generating leads to closing a sale can be measured with customer acquisition cost.
customer acquisition cost = cost to acquire / # customers
Cost to acquire includes all promotional and sales costs. For example, a solar firm that spends $250,000 to close 500 deals:
customer acquisition cost = $250,000 / 500 = $500 per customer

Brand Recognition Cost

A promotion campaign may be designed to create brand recognition as opposed to leads. In this case, efficiency can be measured as the cost per percentage point improvement in brand recognition.
brand recognition cost = promotion cost / recognition improvement
For example, a firm that spends $1 million to improve brand recognition by 10%.
brand recognition cost = $1,000,000 / 10 = $100,000 per percentage point improvement in brand recognition

Cost Per Reach

A strong brand may be focused on maintaining a high brand recognition rate as opposed to improving it. In this case, efficiency can be measured as the cost to reach your target audience.
cost per reach = cost of reach / (reach / 1000)
A firm that reaches 10 million people with $200,000 has a cost per reach
cost per reach = $200,000 / (10,000,000/1000) = $20 per thousand people reached

Sales Efficiency

Sales efficiency is total revenue expressed as a percentage of the total costs of your sales. This includes all sales related salaries, commissions, incentives and expenses such as office space.
sales efficiency = (revenue / sales cost) x 100
For example, a firm with revenue of $2 billion and a sales cost of $100 million has sales efficiency of:
sales efficiency = (2000/100) x 100 = 2000%

Marketing Efficiency

Marketing efficiency is total revenue expressed as a percentage of total marketing costs including promotion, product development and sales expressed as a percentage of revenue.
marketing efficiency = (revenue / marketing cost) x 100
For example, a firm with revenue of $2 billion dollars with total marketing costs of $250 million has marketing efficiency of
marketing efficiency = (2000/250) x 100 = 800%
Marketing efficiency should not be confused with a profit rate as this doesn't include any non-marketing costs such as the unit costs of your products. However, it serves as a useful benchmark and metric for measuring improvement to your marketing results.
Overview: Marketing Efficiency
Definition (1)
The results achieved with a dollar of marketing spend.
Definition (2)
The revenue generated by a dollar of marketing spend.
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This is the complete list of articles we have written about marketing metrics.
Brand Awareness
Brand Recognition
Churn Rate
Conversion Rate
Cost Per Lead
Acquisition Cost
Experience Score
Lifetime Value
Customer Metrics
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Market Share
Wallet Share
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