Chapter 22: Managing Marketing Metrics
• Discontent with traditional metrics
• Availability of ICT and Internet infrastructure
What marketing metrics should do
The chain of marketing productivity
1 Marketing metrics should be financial.
2 You cannot drive a car, or a company, by looking in the rearview mirror.
3 Marketing actions may have both short- and long-term effects.
4 Looking only at aggregated, or average, tendencies among customers may mask impor- tant shifts among customer segments or even individual customers.
5 Independent metrics should be moved from separate measures to causal chains, thereby facil- itating the direct measure of marketing activities as evaluated by their effect on the bottom line.
6 No company exists in a vacuum and value is most often reached in competition with com- pany rivals.
7 Marketing metrics should be able to deliver objective data
Effectiveness versus efficiency
Marketing metrics and shareholder value
1 A shareholder value approach helps marketing properly define its objective
3 A shareholder value approach allows marketing to demonstrate the importance of its assets
Customer lifetime value
Brand equity and financial performance
BSC is not only a tool for measurement, but also a tool for strategic management.
• The first process: translating the vision
• The second process: communicating and linking
• The third process: business planning
• The fourth process: feedback and learning
1 A customer-performance scorecard
2 A stakeholder-performance scorecard
2 Good marketing metrics are financial, forward-looking and capture both short-term and long-term effects.
3 Marketing performance and productivity is multidimen- sional and therefore different metrics should be seen as complements rather than substitutes. Marketing has the main responsibility for achieving profitable revenue growth and this is done by finding, keeping and growing the value of profitable customers.
4 Marketing metrics are divided into three dimensions: (1) counting-based (or activity) metrics;
(2) accounting-based (or operational) metrics; and (3) outcome metrics. All three dimensions comprise both external and internal metrics.4 Marketing metrics are divided into three dimensions: (1) counting-based (or activity) metrics;
5 While ROI analyses may provide some insight into the financial performance of marketing activities, they may at the same time capture only one-third of the total value creation of the marketing programme. Net present value is a method that explicitly deals with the expected future cash flows as a result of company marketing activity.
6 Marketing should develop and implement customer- led strategies that create shareholder value. Taking a shareholder perspective enhances the opportunity of making marketing recognised as a significant corpo- rate value driver.
7 Customer lifetime value is the net profit or loss to a company from a customer flowing from the lifetime of that customer’s transactions with the company. CLV assumes that customers who stay with a company for a long period of time generate more profits as compared to customers who stay for only a short period of time.
8 There are two primary perspectives related to brand equity, one based on financial outcomes for the company and one based on softer, consumer-based perceptions of company performance. Marketing per- formance during a period will be judged by whether brand equity has risen, is static, or has declined.
9 The balanced scorecard approach provides a system- atic tool that combines financial and non-financial performance metrics in one coherent measurement system. Metrics are constructed according to a predefined strategy, and the company’s processes are aligned towards this strategy. BSC systematically measures the company from four perspectives: the financial perspective, the customer perspective,
the internal business process perspective, and the innovation and learning perspective.
10 A marketing dashboard provides up-to-the-minute information necessary to run the business operations for a company – such as sales versus forecast, distri- bution channel effectiveness, brand equity evolution and human capital development.
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