# How Does Maths Help In Marketing?

###### Synopsis

It is very important for a marketing team to have a good hold on basic mathematics and key business metrics to justify marketing budgets. Math is used in marketing to constantly track, analyse and optimise the return on investment and to estimate the gain from marketing activity. This article also includes different types of ratios that are very useful for marketing. Read the article to know more about application of maths in marketing.

###### Synopsis

It is very important for a marketing team to have a good hold on basic mathematics and key business metrics to justify marketing budgets. Math is used in marketing to constantly track, analyse and optimise the return on investment and to estimate the gain from marketing activity. This article also includes different types of ratios that are very useful for marketing. Read the article to know more about application of maths in marketing.

Does marketing require maths? Definitely yes! There is a strong correlation between marketing and mathematics. Marketing helps run a business and a business has to make money to exist which requires a lot of maths. Basically, marketing activities are a cost to a business and therefore, it’s important for a business to estimate the gains from marketing activities otherwise without objectifying the gains. Also, it is very important for a marketing team to track performance and analyse its activities in order to improve their marketing campaigns and also to help finance teams to justify the budgets allocated. Therefore, a marketer has to constantly track, analyse and optimise its marketing activity in order to give better returns from the same budget provided. Thus maths is used in marketing for quantifying the productivity and efficiency of investment.
Also, in marketing, a lot of people tend to make decisions based on instinct, however, everyone has some individual biases. So, taking data backed decisions becomes important to avoid these biases which is where having a good hold on basic mathematics and key business metrics/ ratios become important.

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Marketing has direct and indirect gains, for a business, for example, some ads just bring a brand recall value in the consumer's mind while some are direct call to action ads. Earlier, traditional marketing channels like TV, billboards, and print media use to provide lesser control to marketers in terms of defining the audience persona like age, gender, demographic, gender, interests, location, etc. to create a targeted ad with greater returns and avoiding irrelevant eyeballs but since it’s a digital era, digital marketing is taking over the traditional channels of marketing, therefore, quantifying the impact of any campaign is now easier but at the same time, in digital marketing one has to wear analytical hats to run experiments with a different variable in marketing campaigns to come up with the optimised campaign in terms of financial returns.

A marketer has to run experiments to understand returns with respect to controllable variables like various types of promotions and offers, targeting different customer segments, trying different channels of marketing, and so on

To analyse the results of such experiments, some financial ratios can be very useful. Some examples of most commonly used simple yet powerful financial ratios and metrics used in marketing communication are:

1. ROI( Return on Investment) - This ratio tells the return generated by any campaign with respect to the budget provided. A marketing team has to always report the ROI they were able to generate from the marketing from different marketing campaigns they are running under a given budget. It is their key responsibility to maximise the returns or at least make sure that the ROI is always more than a certain limit decided by company management. Therefore, ROI tracking becomes a crucial part of their job.

Formula - (Revenue - expense)/ expense

2. NPS (Net promoter score) - This is used to measure a customer's willingness to promote a company. This is generally used to quantify the level of customer satisfaction and how likely the customers will self market a product/brand.

Formula - % promoters - % detractors
3. Conversion rates - This is a measure of the number of users who converted (bought what you are trying to sell) as a percentage of the total number of people who have seen a campaign

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Formula - (number of users converted/total users visited an ad)*100

4. CTR ( Click through rates) - This is a measure of the number of users who clicked on an ad as a percentage of the total number of people who have seen a digital ad

Formula - (number of clicks/total users who visited an ad)*100
5. CPC ( Cost per click for paid campaigns) - This is a measure of money one has to spend for each click on a digital ad campaign

There are many ratios similar to the ones mentioned above that a marketers use in their communications for many functions as follows -
1. To report to the management about the performance.
2. Justify the budgets required for a campaign

3. Optimise and improvise various marketing activities.
4. Calculate the direct and indirect impact of the campaign on the business growth

5. Taking data backed decisions

Hope this article helps you in understanding maths in marketing.

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