What are Marketing Metrics?

Marketing metrics are the set of

measures that helps marketers quantify,
compare, and interpret marketing
performance.

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 Table 4.4 Marketing Metrics
External Internal
• Awareness • Awareness of goals
• Market share • Commitment to goals
• Relative price • Active support
• Number of complaints • Resource adequacy
• Customer satisfaction • Staffing levels
• Distribution • Desire to learn
• Total number of • Willingness to change
customers • Freedom to fail
• Loyalty • Autonomy

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 Designing Marketing Metrics
Step By Step
• Performance measurement processes
differ at each organizational level.
• It consists of four steps:
1. Setting performance standards
2. Specifying and Obtaining feedback data
3. Evaluating it
4. Taking corrective action

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1. Setting standards of performance
– Performance standards derive largely from
the objectives and strategies set forth at the
SBU and individual product-market entry
level.
– Performance-based measures are often tied
to the compensation of those individuals
responsible for attaining the specified goals.

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– The shift from primarily using financially
based performance measures to treating
them as part of a broader array of marketing
metrics.
– Using the SMART acronym (specific,
measurable, attainable, relevant, and
timebound).

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• Profitability analysis
– Determine the costs associated with specific
marketing activities to find out the profitability
of such units as different market segments,
products, customer accounts, and distribution
channels.
– Limitations:
• Many objectives can best be measured in
nonfinancial terms.
• Profit is a short-term measure and can be
manipulated.
• Profits can be affected by factors beyond control.

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• Full costing: Analysts assign both direct, or
variable, and indirect costs to the unit of
analysis.
– Indirect costs involve certain fixed joint costs
that cannot be linked directly to a single unit
of analysis.
– Direct costing involves the use of contribution
accounting.
• The shift to activity-based costing (ABC).

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• Measures of customer satisfaction
– Understanding and measuring the criteria
used by customers to evaluate the quality of
the firm’s relationship with them.
– Some companies ask customers one simple
question: How likely is it that you would
recommend us to a friend or a colleague?
– Face-to-face approaches
– Using CRM data to measure the lifetime value
of customers.
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2. Specifying and obtaining feedback data
– The sales invoice or other transaction
records.
– Marketing research projects.

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3. Evaluating feedback data
– To identify any deviation from the plan, and if
so why.
– At the line-item level, whether for revenue or
expenses, results are compared with the
standards set in step one of the control
process.

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4. Taking corrective action
– Prescribing the needed action to correct the
situation.
– In most cases it is difficult to identify the cause
of the problem.
– Delayed responses and carry-over effects.

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 Design Decisions For Strategic
Monitoring Systems
• Identifying key variables
• The key variables to monitor are:
– Those concerned with external forces.
– Those concerned with the effects of certain
actions taken by the firm to implement the
strategy.

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 Design Decisions For Strategic
Monitoring Systems
• Tracking and monitoring
– Specify measures needed on each of the variables to
determine whether the implementation of the strategic
plan is on schedule—and if not, why not.
– Real-time monitoring of critical strategic information.
• Strategy reassessment
– Can occur when the firm evaluates its performance to
date along with changes in the external environment.
– A strategic monitoring system can also alert
management of a significant environmental change.

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 Design Decisions For Marketing
Metrics
• Who needs what information?
• Sales information is needed by:
– Top management.
– Functional managers.
– Marketing managers.

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 Design Decisions For Marketing
Metrics
• Sales analysis
– Involves breaking down aggregate sales data
into various categories.
– The objective is to find areas of strength and
weakness.

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 Design Decisions For Marketing
Metrics
• Sales data is grouped under:
– Geographical areas.
– Product, package size, and grade.
– Customer.
– Channel intermediary.
– Method of sale.
– Size of order.
• These breakdowns are not mutually
exclusive.
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 Design Decisions For Marketing
Metrics
• Sales analysis by territory
– The first step is to decide which geographical
control unit to use.
– Next, compare actual sales against a
standard to single out territories that fall below
standard for special attention.
– Category and brand development indices are
often used.

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 Design Decisions For Marketing
Metrics
• Sales analysis by product
– Before deciding which products to abandon,
management must study such variables as:
• Market-share trends.
• Contribution margins.
• Scale effects.
• The extent to which a product is complementary
with other items.
– Particularly helpful when combined with
account size and sales territory data.
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 Design Decisions For Marketing
Metrics
• Sales analysis by order size
– May identify which orders, in monetary size,
are not profitable.
– This may lead to:
• Setting a minimum order size.
• Charging extra for small orders.
• Training sales reps to develop larger orders.
• Dropping some accounts.

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 Design Decisions For Marketing
Metrics
• Sales analysis by customer
– Typically show that a relatively small
percentage of customers account for a large
percentage of sales.
– The key is to find useful decompositions of
the sales data that are meaningful in a
behavioral way.
– Three useful variables in doing so are:
recency, frequency, and monetary value.

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