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What is the difference between efficiency and effectiveness marketing measures?

By Dave Chaffey 21 Apr, 2014

Efficiency vs effectiveness definition & explanation

efficiency-vs-effectivenessI think many would think the meaning of efficiency and effectiveness are similar terms for describing the performance of a business process.

If so, think again, since whatever the type of process you really need both types of measures when identifying the most suitable goals and measures to assess your marketing or business effectiveness. It's fine to say the difference doesn't matter especially, but I think that understanding the difference helps you create a better set of measures!

I hope to show why the difference is important in this article where I'll give a brief definition of each and show examples of efficiency and effectiveness measures applied to digital marketing.

Definition of efficiency

The simple, often used, definition of efficiency is ("doing the thing right").

We need this measure for marketing activities and business processes since it helps us see when we are minimising resources or time needed to complete a process, i.e. we are keeping our costs low. In digital marketing, for example, efficiency involves increasing conversion rates and reducing costs of acquisition.

Within digital marketing, common efficiency measures across the areas of the the digital marketing activities of the RACE framework are:


  • Cost of acquisition (CPA)
  • Clickthrough rates on Ads or Adwords


  • Bounce rate
  • Pages per visit


  • Conversion rate to lead or sale
  • Checkout conversion rate


  • Repeat conversion rate
  • Activity of customers on email lists or followers on social sites

Definition of Effectiveness

The simple definition of effectiveness is ("doing the right thing").

In digital marketing, effectiveness involves supporting broader marketing objectives and often indicates the contribution of the online channel.

Across the digital marketing activities of the RACE framework, examples of effectiveness measures are:


  • Revenue or goal value per visit
  • Audience share compared to competitors
  • gap analysis of total search demand


  • Average order value
  • Number of items per order


  • Margin
  • Customer satisfaction with site experience


  • Hurdle rate of percentage active online customers, subscribers or followers
  • Customer lifetime value
  • Customer satisfaction experience across whole site

You can see that sometimes it's not possible to definitively state which is which, but for the main thing is to review that you have a good coverage of each.

An example of efficiency and effectiveness measures

I created this example based on the balanced scorecard, popularised in a Harvard Business Review article by Kaplan and Norton (1993).

It is still used in many large organisations and can still be used to today to help translate vision and strategy into objectives and then, through measurement, assessing whether the strategy and its implementation are successful.

Balanced scorecard sector Efficiency Effectiveness
Financial results (Business value)?
  • Channel costs?
  • Channel profitability
  • Online contribution (direct)
  • Online contribution (indirect)?
  • Profit contributed
Customer value
  • Online reach (unique visitors as % of potential visitors)
  • Cost of acquisition or cost per sale (CPA/CPS)
  • Customer propensity
  • Sales and sales per customer
  • New customers
  • Online market share
  • Customer satisfaction ratings
  • Customer loyalty index
Operational processes
  • Conversion rates
  • Average order value
  • List size and quality
  • E-mail active %
  • Fulfilment times
  • Support response times
Operational processes
  • Conversion rates
  • Average order value
  • List size and quality
  • E-mail active %
  • Fulfilment times
  • Support response times

The balanced scorecard combines efficiency and effectiveness measures and was a response to over-reliance on financial metrics such as turnover and profitability and the tendency for these measures to be retrospective rather than looking at future potential, as indicated by innovation, customer satisfaction and employee development.

In addition to financial data, the balanced scorecard uses operational measures such as customer satisfaction, efficiency of internal processes and also the organisation's innovation and improvement activities including staff development.


It is useful to identify efficiency and effectiveness measures separately, since online marketing and web analytics often tend to focus on efficiency. Hasan and Tibbits (2000) note that the internal process measures in particular are concerned with the efficiency and the customer and business value perspectives are indicated with effectiveness, but these measures can be applied across all four areas as we have shown.

10 Steps to Actionable Analytics for Digital Marketing from Smart Insights



Hasan, H. and Tibbits, H. (2000) Strategic management of electronic commerce: an adaptation of the balanced scorecard, Internet Research, 10(5), 439, 50.

Kaplan, R.S. and Norton, D.P. (1993) Putting the balanced scorecard to work, Harvard Business Review, September-October, 134, 42.

By Dave Chaffey

Digital strategist Dr Dave Chaffey is co-founder and Content Director of marketing publisher and learning platform Smart Insights. Dave is editor of the 100+ templates, ebooks and courses in the digital marketing resource library created by our team of 25+ digital marketing experts. Our resources are used by our Premium members in more than 100 countries to Plan, Manage and Optimize their digital marketing. Free members can access our free sample templates here. Dave is a keynote speaker, trainer and consultant who is author of 5 bestselling books on digital marketing including Digital Marketing Excellence and Digital Marketing: Strategy, Implementation and Practice. To learn about my books, see my personal site Digital marketing books by Dr. Dave Chaffey. In 2004 he was recognised by the Chartered Institute of Marketing as one of 50 marketing ‘gurus’ worldwide who have helped shape the future of marketing. Please connect on LinkedIn to receive updates or ask me a question.

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