Friday, August 12, 2005

Measure Marketing or Perish

Consider All Metrics Categories

Metrics are standards that convert measurements that you make into values that indicate whether a project or effort has succeeded. These results are often compared against benchmarks—the metrics values of the companies that are the best in their industries.

Metrics for evaluating the effectiveness of a marketing campaigns and longer-term efforts are numerous. The CMO Council has noted that metrics for marketing fall in four areas of performance, with perhaps the last two, because of their long-term impact, having greater significance:

1. Business acquisition and demand generation (e.g., market share, lead quantity and quality)
2. Product innovation and acceptance (e.g., adoption rates, user attachment, customer loyalty, word-of-mouth)
3. Corporate image and brand identify (e.g., brand value, financial equity, awareness, employee and customer retention)
4. Corporate vision and leadership (e.g., share of voice, message retention and relevance)

However, close to three-quarters of the senior marketing executives responding to a CMO survey said their primary role was to generate leads that culminated in sales, i.e., the other three performance areas were substantially less considered. At the same time however, other studies show that close to half of business decision-makers (read “customers”) considering technology purchases strongly look at the brand of the product. Fewer than 20% of respondents in the same study would buy a brand they had heard only little about. Furthermore, companies that reduced their brand identity-oriented advertising have found that their cost per sales lead generated rose substantially in the ensuing year.

These findings, among others, may indicate some degree of misalignment between the internal drivers of marketing departments versus what customers are actually looking for—which brings up the issue of customer-centricity versus product-centricity, a recurring theme in Cincom’s effort to help you simplify your business operations.

Consider Your Company’s Overall Goals and Individual Product Goals

What are your company’s objectives in the marketplace? Are there different objectives for different products? Where are those products in their life cycles? All these questions affect the marketing messages and programs developed to promote the company and products, and by extension, the metrics used to measure the success of those messages and programs.

A new company or a company introducing new products is likely to be more focused on building market share, for example, than an established company with very recognizable brands. A company established in the marketplace may emphasize building, extending, improving, and retaining customer relationships. The metrics related to different company goals also correlate to the metrics categories mentioned earlier.

Market Share Goals

To increase market share, marketing efforts usually emphasize awareness and education of customers about products, i.e., help take potential customers through a good part of the buying process. Some metrics that may be used to evaluate market share growth as a result of marketing activities are:

1. Growth in number of customers/lead generation (from all sources)
2. Share of preference
3. Share of voice/discussion
4. Share of distribution

Customer Retention/Market Penetration Goals

It’s been said many times that it costs a great deal more to find a new customer than to keep the customers you have. Losing customers after just one purchase indicates dissatisfaction with your products, a lack of up-selling and cross-selling ability among your reps, or a severely limited product line that does not pique further interest among customers—all of which point to serious problems. Some metrics that relate to your long-term growth in market penetration are:

1. Purchase frequency and recency
2. Share of wallet—the amount of your customers' total purchases that your company controls; to some degree, an evaluation of customer loyalty and potential for greater sales that exists in your customer base)
3. Customer loyalty and advocacy—how active your customers are as “sales reps” for your company
4. Customer satisfaction

Market Value Goals
Over the past 50 years, the intangible assets of companies have grown to comprise close to half the total market value of nonfinancial companies. In other words, today, the brands, customers, franchises, goodwill, and intellectual property of a company generally comprise around half the value of the company. Plant, equipment, cash and marketable securities, and receivables—which used to play more important roles because companies were evaluated only in terms of book value—are only part of the picture now. Some metrics that provide proof of market value improvement from marketing activities are:

1. Price/share premium—an indicator of brand equity (the price your product commands in the marketplace compared to your competitors that have similar market shares, or the share of the market your product commands in the marketplace compared to your competitors that sell their products at similar prices)
2. Customer franchise value
3. Rate of new product acceptance
4. Net-advocate score

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