# Marketing Metrics – MRKT 355

Metric

Measurement system; quantifies a trend, dynamic, or characteristic

How do metrics help?

Explain Phenomenon

Diagnose Causes

Share findings

Project results for future events

Diagnose Causes

Share findings

Project results for future events

Reasons metrics are needed in marketing

Shift toward more quantitative; Business is becoming more competitive

Trends as a result/cause of quantitative marketing

Direct marketing, Social media, and Web marketing

Stage 1 of Marketing Accountability

Denial: Marketing is more Art than Science

Stage 2 of Marketing Accountability

Fear: Will I loose my job?

Stage 3 of Marketing Accountability

Confusion: What do I measure?

Stage 4 of Marketing Accountability

Self-Promotion: Look at these charts

Stage 5 of Marketing Accountability

Accountability: Revenue results from Marketing

Kinds of Metrics

Dashboard and Triangulated

Dashboard

combination of many types of metrics; data is approximate for some metrics while some may be highly specialized

Primary demand

performance as growth with the market

Selective demand

performance as a captured share from competition

Unit Market Share Formula

Unit Sales (#) / Total Market Unit Sales (#)

Revenue Market Share Formula

Sales Revenue ($) / Total Market Sales Revenue ($)

Relative Market Share

Brand’s Market Share ($,#) / Largest Competitor’s Market Share ($,#)

What is Relative Market Share used for?

Benchmark against largest competitor

Brand Development Index Formula

[Brand Sales to Group (#) / Households in the Group (#)] / [Total Brand Sales (#) / Total Households (#)]

What does Brand Development Index measure?

How well the brand is performing among a segment of customers relative to all customers per-capita consumption in a segment versus per capita in the market

Category Development Index Formula

[Category sales in group (#) / Households in the group (#)] / [Total Category sales (#) / Total Households (#)]

Why do we measure Category Development Index?

Useful for understanding a specific customer segment — strong vs weak demographic or geographic

Market Penetration Formula

Customers who have purchased a product in the category (#) / Total Population (#)

Brand Penetration Formula

Customers who have purchased the brand (#) / Total Population (#)

Penetration Share formula

Brand Penetration / Market Penetration

Full Penetration Share Formula

Customers who have purchased the brand / Customers who have purchased a product in the category

Share of Requirements is equivalent to:

Loyalty

Unit Share of Requirements Formula

Brand Purchases (#) / Total Category Purchases by Brand Buyers (#)

Revenue Share of Requirements Formula

Brand Purchases ($) / Total Category Purchases by Brand Buyers ($)

Measurements of Loyalty

Share of Requirements

Sole Usage

Repeat Rate

Repurchases Rate

Sole Usage

Repeat Rate

Repurchases Rate

Sole Usage measures:

Die hard customers

Repeat Rate measures:

Customers in a given period who are also customers in the following period

Repurchase Rate measures:

Customers of a brand who repurchase that brand on their next purchase occasion

Heavy Usage Index Formula Full

Avg. Total Purchases in Category by Brand Customers (#,$) / Average Total Purchases in Category by all Customers for that Category (#,$)

Heavy Usage Index Formula condensed

Market Share (%) / [Penetration Share (%) * Share of Requirements (%)]

Net Promoter Formula

Percentage of Promoters (%) – Percentage of Detractors (%)

Willingness to Search measures:

Percentage of customers willing to delay purchases, change stores or reduce purchase quantity to avoid switching brands

Unit Margin formula

Selling Price per Unit ($) – Cost per Unit ($)

Margin (%) formula

[Total sales revenue ($) – Total cost ($)] / Total Sales Revenue ($)

Single Product Margin formula

Unit Margin ($) / Selling Price per Unit ($)

Multiple Product Margin formula

Weighted average margin of each product

Supplier Selling Price formula

Customer Selling Price ($) – Customer Margin ($)

Customer Selling Price formula

Supplier Selling Price ($) / [1 – Customer Margin (%)]

Average Price per Unit formula

Revenue ($) / Units Sold (#)

Expanded Average Price per Unit formula

[(Avg. Price of SKU1 x SKU1 percentage of sales) + (Avg. Price of SKUn x SKUn percentage of sales)…

Statistical Unit

Standard size mix; not actual mix of sizes

Statistical Unit example

Same product packaged in various sizes; think pop in cans, bottles, and liters

Total Costs formula

Fixed Costs ($) + Variable Costs ($)

Total Variable Costs formula

Unit Volume (#) * Variable Costs per Unit ($)

Total Selling (Marketing) Costs Formula

Total Fixed Selling Costs ($) + Total Variable Selling Costs ($)

Total Variable Selling Costs formula

Revenue ($) * Variable Selling Cost (%)

Contribution per Unit formula

Selling Price per Unit ($) – Variable Cost per unit

Contribution Margin (%) formula

Contribution per Unit ($) / Selling Price per Unit ($)

What is break-even?

Sales amount (either Unit or Revenue) that is required to cover total costs

Break-Even Volume (#) formula

Fixed Costs ($) / Contribution per Unit ($)

Break-Even Revenue ($) formula

Break-even Volume (#) * Price per Unit ($)

Alternative Break-Even Revenue formula

Fixed Costs ($) / Contribution Margin (%)

Target Volume (#) formula

[Fixed Costs ($) + Target Profits ($)] / Contribution per Unit ($)

Target Revenue ($) formula

Target Volume (#) * Selling Price per Unit ($)

Target Revenue ($) formula 2

[Fixed Costs ($) + Target Profits ($)] / Contribution Margin (%)

Measurements for new products

Trial, Repeat, Penetration

Trial Rate (%) formula

First time triers in Period t (#) / Total Population (#)

First time Triers in Period t (#) formula

Total Population (#) * Trial Rate (%)

Penetration t (#) formula

[Penetration in t-1 (#) * Repeat Rate Period t (%)] + First Time Triers in Period t (#)

Projection of Sales t (# –Volume Projection) formula

Penetration t (#) x Average Frequency of Purchase (#) x Average Units of Purchase (#)

Adjusted Trial Rate (%) formula

Trial Rate (%) x Awareness (%) x ACV (%)

[[AVC = Distribution penetration]]

[[AVC = Distribution penetration]]

Trial Population (#) formula

Target population (#) * Adjusted Trial Rate (%)

Trial Volume (#) formula

Trial Population (#) * Units per Purchase (#)

Industry average expectations for “Definitely Buy & Will Buy” and “Probably buy”

80% and 30%

Trial Volume formula expanded

Target Population (#) x [(.80xDefinitely Buy (#) + .30xProbably Buy (#)) x Awareness (%) x ACV (%)] x Units per Purchase (#)

Repeat Buyers (#) formula

Trial Population (#) * Repeat Rate (%)

Repeat Volume (#) formula

Repeat Buyers (#) x Repeat Unit Volume per customer (#) x Repeat Occasions (#)

Total Volume (#) formula

Trial Volume (#) + Repeat Volume (#)

Measurements of Growth

Percentage year-on-year growth; Compound Annual Growth Rate

Year on Year Growth formula

[Difference between Year 2 and Year 1] divided by Year 1; new-old over old

CAGR formula

{[Ending Value/Starting Value]^(1/number of years)} – 1

Cannibalization Rate formula

Sales lost from existing products / Sales of New Product

What does Fair Share Draw mean?

The new product will capture sales from existing products in direct proportion to the market shares held

Metrics for Brand Equity

Brand Equity Ten (Aaker)

Brand Asset Valuator (Young & Rubicam)

Brand Equity Index (Moran)

Brand Valuation Model (Interbrand)->Used in class

Brand Asset Valuator (Young & Rubicam)

Brand Equity Index (Moran)

Brand Valuation Model (Interbrand)->Used in class

Aaker model for Brand Equity

Evaluation and analysis of 11 measurements and characteristics

Moran Brand Equity Index formula

Effective Market Share (%) x Relative Price (I) x Durability (%)

Brand Asset Valuator – Y & R components

Differentiation, Relevance, Esteem, Knowledge

Interbrand Brand Valuation Model

Uses financial data on revenues and earnings to project value contributed by the brand; discount the future earnings basis the brand strengths and risks

Purpose of Conjoint Utilities

Measure consumer preference for an attribute then combine the valuation of multiple attributes to measure the overall choice

Cluster Analysis

Technique that calculates difference between customers and forms segmentation groups by minimizing differences within each group and maximizing the differences between groups

Customer Counts

# of customers

Recency

Length of time since the customer’ last purchase

Retention rate

Ratio of number of customers retained

***Define the customer properly

***Define the customer properly

Customer Profit formula

Revenues Earned – Cost of Maintaining Customer

CLV

Customer Lifetime Value

Customer Lifetime Value measures:

Present value of future cash flows attributed to the customer relationship

Customer Lifetime Value formula

Margin ($) * [Retention Rate (%) / (1 + Discount rate (%) – Retention Rate (%))]

IMPORTANT TO KNOW ABOUT CLV:

Per customer calculation, NOT entire population

Prospect Lifetime Value ($) formula

Acquisition Rate (%) x [Initial Margin ($) + CLV ($)] – Acquisition Spending ($)

-Initial Margin = Margin from first time people purchased

Average Acquisition Cost ($) formula

Acquisition Spending ($) / Number of Customers Acquired (#)*

*Not total customers; ONLY those who are acquired for specific promotion

Average Retention Costs ($) formula

Retention Spending ($) / Number of Customers Retained (#)

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