why gross margin?
TRANSCRIPT
Why Gross Margin?by BossData - Advanced Analytics
ACT ON ACTUAL PROFITABILITY OF YOUR DIGITAL MARKETING CAMPAIGNS IN REAL TIME
INCREASE PROFITABILITY.
THINK PROFIT.FORGET TURNOVER.
REDUCE WASTE OF MARKETING SPEND.
ONLINE INSIGHTS.BUSINESS ACTIONS.
BOOST POSITIVE CONTRIBUTORS.
Current objectives
Budget vs. RevenueRevenue vs. ROAS
Revenue €200Marketing cost €20“Profit” €180
In most cases this is what we see.
Revenue €200- Cost of goods, tax, shipping, .. €150
Gross contribution margin €50- Marketing cost €20
= Net contribution margin €30
Your economic reality
Imagine them on true contribution margin
Revenue €200- Cost of goods, tax, shipping, .. €180
Gross contribution margin €20- Marketing cost €25
= Net contribution margin - €5
Your economic reality
Imagine them on true contribution margin
A company objective is to maximize shareholder value.
“How can I efficiently analyze my
profitability across products, campaigns,
brands, product groups and digital
channels in real time?”
Business Marketing
Make an impact in real-time
“How can I implement a marketing
management strategy that is focused on
profits per transaction instead of
revenue per transaction?”
● Implement gross margins in your reporting
PHASE 1: ANALYTICS
● Implement gross margins in your (digital) channels
PHASE 2: MARKETING
● Improve campaign management based on future net cont. margin
PHASE 3: NEXT LEVEL
Gross margin implementation - what can you expect?
Gross margin per transaction Google Analytics
Performance segmentation per
channel*Truly gross profit in Google Analytics
Real time management based
on correct ROI
Decisions based on your economic reality
Less advertising waste → higher profitability
*Organic / Direct / Google Ads / Bing Ads /
Facebook / LinkedIn / Affiliates / Comparison
websites / ...
MarketingBusiness Next level
The solution for your reportingWhy you want it
MarketingBusiness Next level
Poll : Which channel would you increase investment in?
Before → Looking at revenue metric
After → Looking at gross margins
MarketingBusiness Next level
Before → vergelijk.be doesn’t seem to be a positive contributor (below average ROI)
After → based on gross margins vergelijk.be is a positive contributor (above average ROI)
● Advertising in France generates very low margins -> Before scaling up France,
first we need to re-assess which products & categories return positive results.
● Reseller : certain brands that were being sold were not profitable enough ->
use data as leverage to negotiate new buying price with manufacturer.
● Prevent race to the bottom: we increased pricing -> Do not only use
conversion rate to make the decision. A lower conversion rate but higher
margins might still results in better bottomline results.
● Low margin market : we saw direct competitor declaring bankruptcy because
they did not keep track of gross margin in real-time.
What’s in for you? Examples :
MarketingBusiness Next level
● Budgets out targets in: moved from a budget driven to true performance
driven marketing. For as long as you generate the correct net contr. margin
keep pushing.
● Increase support: finance department gets live insights in added cont. margin
via marketing.
● Organisation change: a marketing department becomes profit center instead
of cost center.
● Extra leverage towards suppliers: reorganised purchasing department
workflow to be able to negotiate better prices.
What’s in for you? Examples :
MarketingBusiness Next level
What’s in for you? Examples :
MarketingBusiness Next level
● Implement gross margins in your reporting
PHASE 1: BUSINESS QUESTION
● Implement gross margins in your digital channels
PHASE 2: MARKETING QUESTION
● Improve campaign management based on future net cont. margin
PHASE 3: NEXT LEVEL
Gross margin implementation - what can you expect?
Bid management methods
Max cost per conversion
Max cost per transaction
Return on Ad Spend
(ROAS)
Return on Investment
(ROI)
Budget based
Effective Revenue
Share (ERS)
Other
How are you currently managing your digital campaigns?
MarketingBusiness Next level
Via these methods your daily campaign management is based on revenue.
When looking at the way your business works, this is not your reality.
Don’t we all desire to be able to manage campaigns based on the additional
profit / nett margin they generate and preferably in real-time 24/7…
That’s possible, we can go even further and do this on product level per
transaction. Let me explain…
Why are these methods not really effective?
MarketingBusiness Next level
Don’t accept to work with averages margins
MarketingBusiness Next level
Business Marketing
“By using averages to analyze your
campaign / channel performance you
are never leveraging the full potential of
your campaign / channel”.
“The trouble with averages is they
conceal all the really interesting stuff
that's going on beneath the surface. All
these online insights could be used to
improve your diverse business actions”.
ProductsMarketing
spendRevenue Profit margin % Profit margin
Added cont.
margin
Product A €10 €200 4% €8 €-2
Product B €10 €100 20% €20 €+10
Product C €10 €150 10% €15 €+5
Product XYZ €... €... …% €... €...
Total €100 €1,000 7% €70 €-30 Current analysis based on averages
Smart analysis based on each product
individually
Looking at campaign performance
MarketingBusiness Next level
Your decisions should be based on the potential profit margin per product.
Gross margin per transaction
Google (Ads)
All channels
Bing (Ads) Facebook Advertising
LinkedIn Advertising Affiliates
Comparison websites
Marketplaces
MarketingBusiness Next level
The solution for your marketing channels
● Implement gross margins in your reporting
PHASE 1: BUSINESS QUESTION
● Implement gross margins in your digital channels
PHASE 2: MARKETING QUESTION
● Improve campaign management based on future net cont. margin
PHASE 3: NEXT LEVEL
Gross margin implementation - what can you expect?
Take your bid management to the next level
MarketingBusiness Next level
Wouldn’t it be interesting if you could set marketing bids proactively based on a
mix of constantly changing variables?
Optimal bidCompetitor pricing
Purchase price
Selling price
Channel performance
RoPo
Business goals
Competitor pricing
Transaction variables
Google Ads / Bing Ads / Facebook / LinkedIn Ads
/ Marketplaces / Etc.
Company data
Automatically &
ROI based bids
Product data
● Cost accounting formula● Business goals & targets ● Gross margin reporting
setup and/or BI tooling?
PHASE 1: BUSINESS
● Google Analytics setup● Gross margin reporting● Implement gross margins in
your digital channels
PHASE 2: MARKETING
● Move from revenue to gross margin management.
● Automate bidding logic based on gross margin
● Improve bid management based on predictive bidding logic
PHASE 3: MANAGEMENT
Gross margin process?
Gross margin bid management
MarketingBusiness Next level
After the gross margin implementation we can label each product based on its
unique gross margin. By separating these campaigns we can apply different targets
and analyze each campaign differently. Below an example for Google Shopping.
Very high margins
Campaign A
High margins
Campaign B
Medium margins
Campaign C
Low margins
Campaign D
Best selling products
Campaign E
Products in promotion
Campaign F
Branded searches
Campaign G
What is gross margin marketing?
When you deduct all variable costs associated with a transaction (cost of goods, payment provider, logistics, handling & marketing) from the transaction
revenue, you have your gross margin.
Based on this real-time metric we manage campaigns & make sure we impact your bottom line in a positive way”