why gross margin?

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


Poll : Which channel would you increase investment in?

Before → Looking at revenue metric

After → Looking at gross margins


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 :


● 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.




PHASE 1: BUSINESS QUESTION

● Implement gross margins in your digital channels

PHASE 2: MARKETING QUESTION


PHASE 3: NEXT LEVEL


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?


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?


Don’t accept to work with averages margins


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


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


The solution for your marketing channels


PHASE 1: BUSINESS QUESTION

● Implement gross margins in your digital channels

PHASE 2: MARKETING QUESTION


PHASE 3: NEXT LEVEL


Take your bid management to the 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?

Hope we could have inspired you.

Matthias Laqueur

[email protected]

mailto:[email protected]

Gross margin bid management


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”

why gross margin?

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