The role of digital marketing in export initiatives

decision making Jul 20, 2022
 

The first step would be to understand why digital marketing is important.

Well, digital marketing is useful in a Go to Market program that eventually leads to export.

In the short video, you can see that digital marketing is different from traditional marketing. Traditional Marketing is difficult to measure.  Digital can track and measure, which is really useful.

You might consider to stop reading right now and make a decision:

  1. If you are already exporting, you would look back at your historic data and calculate the returns.  If you are happy reaching your ROI goals, congratulations.
  2. If not, you are about to discover how digital marketing can improve return on marketing and the overall profitability of the export initiative. The benefit is that customer acquistition cost can be reduced when tracking, measuring and optimizing as indicated in the short video. 

The main reason being happy is a higher customer life time value**. 

The role of marketing during the Go to Market Journey is 

  • Getting well-known in the target group (customers, distributor and media (PR)) 
  • Earning the buyers trust
  • Show that you are locally present and active

The most common role is branding. 

However, in the very beginning, the role of digital marketing, is

  • research and market survey, which is valuable and cost efficient
  • getting to know the market demand and competition, i.e. business intelligence
  • understanding customer behaviour and available value propositions

in order to get good data to adapt the product for a good product/market fit 

All along the Go to Market Journey digital marketing can provide a predictable flow of business. 

It's more like building a process with digital support systems, rather than just selling and marketing.

Note: This is important when you have a Go to Market program based on distributor strategy  

If you would like a more detailed understanding keep on reading:

What is a Good Marketing ROI?

  • The rule of thumb for marketing ROI is typically a 5:1 ratio. 
  • Exceptional ROI at around a 10:1 ratio.
  • Anything below a 2:1 ratio is considered not*** profitable.

***) Since the costs to produce and distribute goods/services often mean organizations will break even with their spending and returns.

How To You Calculate Marketing ROI?

There are several ways to calculate marketing ROI, the core formula used to understand the return on marketing is straightforward:

(Sales Growth - Marketing Cost) / Marketing Cost = Marketing ROI 

However, it’s important to note that this formula makes the assumption that all sales growth is tied to marketing efforts. It's normally the not the case (although marketing provides a major contribution).

In order to get a realistic view of the marketing impact and ROI, we would also include organic sales.

(Sales Growth - Organic Sales Growth - Marketing Cost) / Marketing Cost = Marketing ROI 

When using marketing ROI formulas, it’s important to understand the total ROI marketing efforts generated. Being aware of varitions based on the marketing strategy and campaign efforts, as well as the overhead related to campaign implementation.

Let’s explore some of the building blocks of your marketing ROI calculations:

Total Revenue: Looking at the total revenue from a campaign, marketers can get overview of their efforts. Using the total revenue when measuring marketing ROI is ideal for strategic planning, budgeting allocation and the overall marketing impact.

Gross Profit: By calculating the gross profit,marketers understand the total revenue that marketing efforts generate in relation to the cost of production or delivery of goods and services. Important when exporting.

To do this, marketers should add the following to their marketing ROI formula: = (Total revenue - cost of goods to deliver a product).

Net Profit: CEOs might ask marketers to calculate the impact of their marketing efforts toward net profit by adding the following to their formula: = (Gross profit - additional expenses).

When export managers require investment decisions to go ahead with a new market.

The financial analyses might need to be more detailed. Then marketers calculate ROI through customer lifetime value (CLV), which shows the value of each individual customer relationship.

Customer lifetime value is the total amount a customer will spend from acquisition through the end of the relationship with a business.

The Simple Customer Lifetime Value Formula:

Customer Lifetime Value = Average Total Order Amount * Average # Purchases Per Year * Retention Rate.

In other words, customer lifetime value is the average order total multiplied by the average number of purchases in a year multiplied by average retention time in years. This provides the average lifetime value of a customer based on existing data. 

This formula helps assess long-term ROI across the customer lifecycle:

The formula for customer value can also be written as: (Total Customer Benefits - Total Customer Costs) = Customer Value 

Business intelligence is essential when preparing for a Go To Market Strategy.

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