This guide explains complex subjects in a practical digital example to help you understand these concepts or other buzzword bingo lingo.
Advertising to sales ratio:
The advertising-to-sales ratio is 10%, which means that 10% of its sales revenue is spent on advertising.
Compound Annual Growth Rate:
CAGR is next year’s estimated sales, assuming growth continues at the same pace.
Don’t forget inflation (rising costs) and discount rate (value over time) when calculating CAGR.
Correlation:
A statistical measure that expresses the extent to which two variables are linearly related (meaning they change together at a constant rate). It’s a common tool for describing simple relationships without making a statement about cause and effect.
For example: when organic traffic goes up, direct traffic has a 45% positive correlation (goes up as well).
Causation:
The direct impact or return of a specific action. The “why” in “why something changed”. Often a consequence of qualitative research translated into action (more budget towards a specific channel) or specific output (better copy a customer understands).
For example: the facebook campaign targeting Ghent delivered new visitors to the vegetable pages.
Diminishing returns:
Saturation. Low or close to no extra impact or value.
For example: adding more keywords to our Google Ads campaign only gained us 2% extra clicks. We’ve hit saturation in the current state of demand and competition.
Discount rate:
The discount rate represents how much value is assigned to benefits received today rather than in the future. Discounting is the process of converting a value received in a future time period to an equivalent value received immediately. In other words: the discount rate considers what the future profits from a marketing campaign/project are equivalent to today if the funds were invested in the firm’s normal business operations.
Example: using a discount rate of 3%, the present value of €1.03 received in one year is €1 today. If the €1 is in the bank for more than one year, the investment yields compound interest (the interest on the interest).
Lag time:
The time between purchases, in the best case, per Stock-Keeping-Unit (SKU)
Example: 30 days lag time for refilling a soap dispenser with soap X
PDP:
Product detail page
Push back / push forward:
Waiting to do a purchase / purchasing an item sooner than planned or expected
For example: people push back to buying a new TV until Black Friday.
Sample Ratio Mismatch:
The ratios of samples don’t match our expectations (a 50/50 split). Having a skew like this can invalidate an A/B test.
Example: 52.63% of users are in the control group, and 47.37% are in the variation.
SKU (Stock-Keeping-Unit):
The unique number in stock that represents a specific product or variant of the product.
Example: BDO099873
Take rate:
The percentage of the value of the transactions platforms or payment providers facilitate that they get to keep as revenue. Take rates to depend on the strength of its underlying network of users and the degree of competition within the industry.
Example: 3% and a €0.5 per order
Timeshift or Adstock:
When you spend money today, some of that effect will happen today, but some of that effect will linger until tomorrow, or the day after, and so on.
For example: Sending out an e-mail today, can make someone open it in a few days.
Uplift:
Can be used in the context of A/B testing and/or campaigns. Incrementality of the impact on the tested indicator. Most of the time this is clicks, conversion rate, or sales.
For example: Changing the copy on the button, generated a 20% uplift in clicks.
Variance:
is a statistical measurement of the spread between numbers in a data set. More specifically, variance measures how far each number in the set is from the mean (average), and thus from every other number in the set.
For example: outperforming or underperforming videos in a Facebook video objective campaign due to different causes (ex.: subject, story, quality, seasonality, audience, reach, …)
If any example doesn’t bring you clarity, reach out to get it explained to you better.