In marketing, efficiency may involve increasing conversion rates while reducing the costs of acquisition, whereas effectiveness may involve supporting a wider range of marketing objectives while contributing to the greater good and ROI of the organization. While each goal is not mutually exclusive of the other, where do marketers draw the line between efficiency and effectiveness?
What Do We Mean By Efficiency and Effectiveness?
The first obvious question is, what is meant by efficiency, in relation to marketing? The adjective efficient means, quite simply, “achieving maximum productivity with minimum wasted effort, time, or expense,” so efficiency would relate to maximally productive marketing efforts with minimum wasted expenses, time, or effort. Metrics such as click-through rates, conversion rates, and other measurable means are used to demonstrate marketing efficiency. Efficiency tends to be focused on less spend or greater savings. Inefficiency is more challenging to pinpoint, because it takes a greater understanding of the processes and procedures that are going on to know which are inefficient.
The word effective is said to mean “successful in producing a desired or intended result,” so for marketers, it would mean being successful in one’s contributions to marketing campaigns, resulting in sales, conversions, and increased click-throughs for a business. Effectiveness tends to be focused on greater profitability. If there is no ROI (or reduced), then generally, a marketer could be said to be ineffective. InsightSquared put it very succinctly: “Being effective is about doing the right things, while being efficient is about doing things right.”
“Marketing should be measured in its impact on the company's ROI. The conversion rates and costs of acquisitions should be looked after by the marketing team to improve campaign performance. Those are good indicators of the campaign's health and are a call to action for campaign optimizations. Still, marketing's main goal should be the effectiveness and the results brought in terms of revenue. Marketing monthly spend shouldn't exceed the revenue generated by sales in that period,” said Ana Aragon, director of marketing & communications at White Shark Media, a digital marketing agency and PPC management service provider.
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Marketers Can Be Both Efficient and Effective
Obviously, the best results come when marketers, as with all employees, are both efficient and effective at their jobs. If they are pursuing the right goals and are efficient at doing so, with higher ROI than otherwise, not wasting time or effort while doing so, it’s easy to be happy with the result. On the other hand, employees can be effective at their jobs while not being efficient, and conversely they can be efficient at their jobs while not being effective. Efficient employees save time, effort, and cost, but if it comes at the expense of ROI, they are not very effective. Effective employees do their jobs well, and accomplish their tasks, but if it’s at the expense of time, effort, or cost, they are not very efficient.
A real-life example of efficiency versus effectiveness is a person who has set a goal of going to the gym regularly. They start by going to the gym 7 days a week. Because working out makes them very hungry, they end up eating an extra meal a day, which is typically fast food. They get discouraged because in spite of spending so much time at the gym, they are not seeing any positive changes in the mirror. Actually, they are seeing changes — mostly weight gain. They have been effective at achieving their goal of going to the gym regularly, but not efficient, because they are wasting time and effort. They set the wrong goal to begin with — they should have set a goal of getting in better physical health. They could have gone to the gym once a day, four days a week, eaten healthier food each day, and been efficient and effective at achieving their goal of being healthier.
According to Sara Spivey, chief marketing officer at Braze, a NYC-based customer engagement platform provider, it’s not a matter of choosing efficiency over effectiveness, as they are both critical for marketing success. “Marketers shouldn’t draw a line between the two, as both can and should be done in tandem. Rather than worrying about striking the right balance, the focus should instead be on measuring each appropriately to reach larger marketing goals. For example, efficiency may be measured in conversion rates and cost per lead, while effectiveness can be seen in closed opportunities and return on spend.”
Measure, Then Re-Examine Goals and Outcomes Again
As most marketers realize, continually measuring the results of one’s marketing efforts is critical to their success — after all, without metrics, how can one know if they were successful or not, or more importantly, is the budget that is being spent on marketing producing a return on investment?
How are marketers typically measuring success? According to a report from HubSpot, only 15% of marketers measure the success of their content programs by how many leads they generate, however 67% of brands use lead generation as the sole metric to determine content success. Additionally, 75% of marketers use their reports to show brands how campaigns are directly impacting ROI, but ROI is only part of the equation.
Is an SEO campaign producing results? What about Facebook ads? Google AdWords? The email marketing campaign? How about the radio ads? Each of these marketing efforts produces data that can be used to measure its success or failure, depending largely on the expected or desired outcome. Are they reducing CAC while increasing leads or sales? How are they affecting the CLV?
Spend Efficiently to Become More Effective
Michael Welts, chief marketing officer at Wasabi, a cloud storage and services provider, said that by reexamining marketing mechanisms, brands are able to refine and improve conversion rates, which has the effect of lowering Customer Acquisition Costs (CAC). For Wasabi, that meant creating thought leadership and educating the market on cloud storage. “We've found that the simplicity of a message coupled with a direct and easy call-to-action (CTA) has resulted in an increased level of free trials which are a leading sales and adoption barometer for our business.”
For other brands, it may be time to reconsider the efficiency of its current media marketing program, as there may be many opportunities to optimize it. “For example, you may look at your total spend for search engine marketing and realize that you haven't allocated enough dollars here and you may be missing out on thousands of conversions. Because search engine marketing can be directly attributed to sales conversions it may make sense to move your dollars around a bit to prioritize here vs. brand or lead gen activities,” said Welts.
These types of changes can lead to an increase in the effectiveness of the marketing campaign, based on the efficiency of what is being spent on specific areas of the media marketing program. In order to become more efficient, brands need to focus on quantifiable goals, expectations, and strategic direction.
Like other experts we spoke with, KC Karnes, head of content marketing at CleverTap, an AI-powered customer lifecycle and user retention platform, said that both efficiency and effectiveness are important, as long as marketers are going after the right targets and have the right intentions. “The caveat is you can be efficient at optimizing metrics that don’t impact the bottom-line and drive real growth. That is, efficiency can either exacerbate a bad problem (like having a leaky retention bucket), or help accelerate a good thing — like growth sustainability,” he said.
As an example, Karnes cited a marketer that is focused on driving more app installs, 95% of which are abandoned after a few days. This is a prime example of ineffective marketing. “You’re ‘efficiently wasting money’ because you’re not actually growing your user base with those installs. They (your users) aren’t sticking around!”
Karnes isn’t suggesting that app installs are bad, only that this type of mindset is neglecting other parts of the life cycle, and is confusing movement with progress. “This is why alignment around growth metrics is so important and why teams need to focus on the entire customer journey and its experience together.”
Retaining a user over an extended period of time — or even better, indefinitely — is what truly effective marketing looks like, and that is where sustainable growth is found, Karnes pointed out, rather than in new app installations.
“Instead of being focused on new installs alone, look at the relationship between installs and retention rates — and the stuff that happens in between for a user. In other words, are you actually effective or just efficient at one metric/stage,” he suggested.
Nobody likes to believe that they are ineffective at their job, but it’s not much better to be considered an effective but inefficient marketer. By prioritizing goals and desired outcomes, marketers can become more efficient and effective while increasing leads, sales, CLV, and ultimately, ROI.