You didn’t return any results. Please clear your filters.
19 August 2022
‘MROI’ informs Etsy’s marketing strategy
Measuring ROIOnline retailStrategy
Etsy, the online marketplace, relies on a dynamic “MROI” approach to marketing to ensure its return on investment is hitting benchmarks right down to the “last marginal dollar”.
Why it matters
Measuring return on investment is a complex task, with both short- and long-term components. With a growing number of tools and solutions available to help brands understand the instant impact of their expenditure, however, it can be tempting to focus on immediate returns and not think about brand building as requiring an extended duration.
Rachel Glaser, Etsy’s chief financial officer, said on an earnings call that “MROI” aims to ensure that, for its spend, “the marginal dollar is still hitting our internal threshold for [being] ROI-positive”.
Its approach, she said, is “very dynamic”, and includes factors like rising or falling cost per click and cost per thousand, as well as spikes in visits, demand and lifetime value.
“It dynamically will adjust to allow us to keep spending until that last marginal dollar of spend is no longer positive against our ROI thresholds,” Glaser said. “So, we will constantly be rational in that regard. If there is incremental flow-through from increasing top line growth, we would automatically be reinvesting that if we think that the ROI is going to achieve our thresholds.”
Measuring TV success
While it is harder to apply this kind of methodology to media like linear television, Etsy’s model in this area is “semi-dynamic,” reported Glaser.
Building on this theme, one measure of success for Etsy’s TV ads is “within six minutes of the ad running, do we see a result?” said Josh Silverman, Etsy’s CEO. “We really focus on near-term results to give us confidence.”
It also uses a variety of other real-time metrics for TV spend, and looks at the impact on metrics like brand awareness and consideration after a month or two.
Learnings for the long term
In 2021, Etsy used television advertising in Germany at an earlier stage than it normally would, and at a “bigger” level.
This example also demonstrates how the impact of advertising investment has long-term elements, too. “It suggests to me that there might be as much as a year lag from when you make a real investment and cause a splash to when people have had a chance to internalize that, and maybe hear from a few friends about Etsy in a way that’s reinforcing and then come and try it themselves,” Silverman said.