Marketing Effectiveness Score

What's in the MES

In response to requests from our clients for a high level measure of their marketing programs, we are now calculating a Marketing Effectiveness Score (MES) for companies whose data we analyze. The MES blends six component metrics into an overall score that ranges from zero to one hundred. The components are:

• Churn—a measure of whether your company is gaining customers faster or slower than you are losing them
• Existing customer actiivity--measures how much of your customer population is buying at any one time
• Up-sell efficiency--measures whether you are improving the revenue you are getting from each existing customer
• Revenue growth— the bottom line question: Is your marketing working?
• Revenue at risk-- the ratio of the probability-adjusted revenue at risk to the total revenue; a measure of the exposure of the company to customer defection
• Cross-sell efficiency—measures how much of the spectrum of your product offerings is purchased by customers
• Loyalty profile—measures how close the loyalty profile of your customers comes to a revenue-optimized  spectrum, and highlights any dangerous skews

How the MES is calculated

Loyalty Builders calculates a raw score, often a ratio or percent, for each component.  Then each raw score is transformed to a common scale, from zero to one hundred. Finally, the components are combined into an overall score. A bar chart is created, with a bar for each component, so companies can see which of the components pulled up their overall score and which ones may be pulling it down. We recalculate these numbers whenever we analyze a company’s transaction data, so progress can be easily tracked. 

How to use the MES

Once you look at the scores for the MES components, you can see which areas need work. Here are some component-specific tactics that can be applied to whichever areas need attention.

• Churn—If churn is high, typically the problem is the rate of defection rather than the rate of acquisition. You should deploy customer retention and win-back campaigns
• Existing customer activity—If new customer revenue swamps existing customer revenue, consider switching some the marketing budget from acquisition to existing customer marketing, especially up-sell and cross-sell campaigns
• Up-sell efficiency--Besides switching budget to existing customer activities, running reminder campaigns using up-sell predictions will improve this metric
• Revenue growth—Overall growth requires attention to all aspects of marketing. However the quickest, easiest, and cheapest way to raise campaign response rates is multivariate testing of offers and messaging
• Revenue at risk—The first step is to identify potential defectors, and then launch customer retention programs to keep them active
• Cross-sell efficiency—Find good customers who are buying narrowly from the product set and use cross-sell scores to make them attractive offers
• Loyalty profile—Use the Loyalty Profile chart in Longbow to identify underperforming customers (those in Lrank regions where the curve is concave) and run targeted campaigns with personalized offers to increase their revenue contribution

See a sample MES

Our extensive white paper about marketing effectiveness has two case studies in the appendices, one showing the MES for a B2C company and the other with the MES for a B2B company.

Your Loyalty Builders account representative will help you get your MES and discuss ways you can improve it.