Pricing the Funnel with Marginal Stage Value (MSV)

ABSTRACT

Stop managing to a fixed cost target

Ecommerce advertising is usually managed by channel metrics: CPM, cost-per-click (CPC), cost-per-acquisition (CPA), return on ad spend (ROAS). Those numbers are essential for tuning a campaign inside a single platform, but they can't answer the question a merchant actually lives or dies by: in real time, what does it cost to move one shopper one step further down the funnel, and how much should I be willing to pay to do it? This paper answers that question with a single measure, Marginal Stage Value (MSV), the dollar value of advancing a shopper one stage down the funnel. With that, you can operate your paid media according to a single rule: at each stage, keep your cost per action below that stage's MSV.

Rather than focus exclusively on platform metrics, we propose a reframing around four funnel stages measured directly on your own site:

• getting an engaged visitor to the site (Engaged User Rate)
• getting that visitor to build a cart (Active Cart User Rate)
• getting them to start checkout (Initiate Checkout Rate)
• getting the sale (Complete Checkout Rate)