To see the results of advertising, you need to know such an indicator as DRR – the share of advertising expenses. We will tell you how to calculate DRR in this article.
When to calculate DRR and how to do it
First, let’s talk about what DRR is in advertising. This is canada whatsapp data an indicator that shows what percentage of income for a certain period of time was spent on advertising. It is calculated using the formula: “advertising expenses / advertising revenue × 100%”.
The DRR must be determined at each advertising launch. Based on the calculation results, it is possible to:
- analyze the results and return on advertising costs;
- identify the most effective channels and review promotion methods;
- determine advertising costs for the near future.
To correctly calculate the DRR in marketing, you need to know what profit the advertising brought. If we are talking about online promotion, then you can use call tracking and end-to-end analytics for this.
To do this, you need to do the following:
- set up end-to-end analytics;
- set the interval for determining when writing your youtube scripts consider: the value;
- select the required advertising channel;
- collect information on costs and profits separately;
- determine the DRR using the formula given above.
The metric can be calculated both for total costs and for each channel. The second method is better, as it allows you to understand which promotion methods work and which do not, and optimize costs based on this.
The company ordered the setup and management of contextual advertising. The budget for the campaign implementation was 36 thousand rubles. During the advertising period, the business received 33 million rubles from contextual advertising alone. Using the formula, we get the DRR for this channel of 0.1%.
When calculating the metric, we did not take into account how to calculate it expenses on other channels of interaction with customers and sales that came from there or thanks to managers. Therefore, the indicator turned out to be extremely accurate for analyzing the payback of contextual advertising only. 0.1% is an excellent result indicating the effect of advertising.
It is important to note that the DRR metric is burkina faso business directory not related to the payback of a business or a certain type of goods. When calculating it, only direct advertising costs are taken into account, for example, television or online. The formula does not take into account the cost of production and other costs not related to advertising (for this, there are POI, ROMI metrics).
It turns out that a low DRR does not indicate good profit. It only indicates that advertising campaigns are working effectively. To get a full picture of profitability, you need to calculate other metrics.
Difficulties in defining the indicator: what needs to be taken into account and cannot be missed
It seems simple: we insert the values into the formula, calculate, and if the DRR is less than 100%, then the advertising is effective. However, many do not take into account how long the transaction lasts. If you are promoting sushi delivery or another “quick purchase”, then there are no problems. But if your products are expensive, then the buyer decides to buy longer than the campaign lasts, and this must be taken into account in the calculation.
For example, advertising lasts for one month (March). During this time, managers receive 15 requests, with 5 people immediately buying the product, and the remaining ten moving how to calculate it further along the sales funnel. 5 of them close the deal only in April, and another 5 in May. With a regular calculation of the DRR, we would only take into account the income and expenses for March and miss out on about 70% of the profit received thanks to the advertising campaign. With full coverage of all values, the indicator would be higher. Thus, if the sales cycle is long, then you need to either show advertising during the entire period of the consumer’s movement along the sales funnel, or view the path of all applications received from advertising, and calculate the DRR after the time has elapsed.
Another point that is often missed when determining the DRR is the profit received during the advertising placement. When evaluating outdoor, radio or TV advertising, it will not be possible to evaluate this indicator, but with digital promotion the situation is different.
When analyzing online channels,
you should only consider the profit received from advertising, which will allow you to get accurate results. This can be important if there were eight transactions during the advertising campaign, how to calculate it but all the buyers came from recommendations of friends. Then it turns out that advertising was pointless and unprofitable. Although if you substitute all the income received from incoming clients into the formula, it may seem that this is not the case. In general, when calculating the DRR, you need to consider where the applications come from and whether advertising affects this.
Finally, when thinking about how the DRR is calculat, one cannot ignore the efficiency of the sales department. For example, if a manager gets 20 sales from 200 applications, then his conversion is 10%. It should not decrease when advertising is launch and traffic increases. If leads have increased to 400, but sales remain 20, this does not mean that advertising is ineffective, despite the poor DRR value. In this case, it is necessary to check the work of the sales department by conducting an audit.