Business Development Metrics

Marketing Metrics “Today’s best marketers recognize the importance of metrics, measurement, and accountability, but few recognize the extraordinary range of metrics available for evaluating their strategies and tactics.”
Marketing metrics play a critical role in multi-channel marketing activities. Whether you are running online or offline campaigns, examining key metrics can put you in position to develop, execute, and refine marketing initiatives. Ultimately metrics can lay a path to cost effective marketing and increase the impact of your marketing expenditures. Before jumping head-first into the wonderful world of metrics it is important to sit down flush out you main objects and goals. What do you hope to achieve by examining key metrics? How are these metrics going to influence your business and marketing decisions? In Suzanne Taylor’s classic article Five Fundamentals for Useful Marketing Metrics she stresses the importance of limiting the number of metrics you chose to examine. She uses the following criteria when deciding what metrics are most valuable…

•   Metric drives business results.
•   Metric reflects business results.
•   Metric is something you can influence.
•   Metric is measured accurately.
•   Metric is measured consistently.
•   Metric is measured cost effectively.
•   Key stakeholders agree that key metrics meet these criteria.

In a Marketing NPV interview with David Reibstein (author of Marketing Metrics: 50 + Metrics Every Executive Should Master) he indicated that it takes time for marketers to determine what are the most important diagnostic and predictive metrics for their business. “There are some measures that are more appropriate for an early growth stage; others that might be more meaningful at later stages; and at a mature stage they might yet again be totally different.”

He broke down marketing metrics into 5 commonly used categories…

• Market Share. Most people know the concept of market share and think they know how it’s measured, but many get it wrong.
• Share of Requirements, often referred to as share of wallet. Of the customers I have today, what percent of their total spend in this category do I get? This is important because if my current share of requirements is high, the best way for me to grow is to get new customers. But if my share of requirements is low, then I should focus on selling more to my existing customers.
• Customer Satisfaction. I want to know how well I am currently serving my existing customers, and which aspects of my value proposition they are most appreciative of.
• Loyalty. It’s a broad term with many nuances. Many are using Net Promoter scores these days. There are other methods. But understanding the nature of the glue that binds you to your customers is critical.
• Efficiency. How much more financial value am I creating with my marketing investments year over year. Are we getting better and smarter at how (and how much) we spend?

It is important to align your metrics with your organizational and marketing goals and develop accurate reporting that provides a complete performance picture. Other factors to consider establishing marketing metrics report include balance between your offline and online marketing campaigns, what is your main strategic marketing objectives, what is your primary and secondary competitive advantages, pricing strategies, internal and external forces, industry benchmarks, and customer behavior.

We assembled a list of commonly use metrics that are valuable when examining your marketing expenditures, impact, and market position. Based on your business objectives and goals some of these metrics can provide key insights into your marketing campaigns.

Customer Acquisition Metrics

• Return on Ad Spend (ROAS) reflects how much revenue you generated per dollar you spent on an advertising method.
• Return on Marketing Investment (ROMI) illustrates the percentage of profit or revenue generated from specific marketing activities.
• Market Share is the percentage of a market accounted for by a specific company or offering. This metric is commonly used as an indicator of how well a firm is doing against its competitors and can show total market growth or decline.
• Willingness to Search is the percentage of customers willing to delay purchases, change stores, or reduce quantities to avoid switching brands. Hard to capture. Indicates importance of distribution coverage.
•  Average Sale Amount is used to show the typical amount spent by a customer on a transaction.

Awareness Metrics

• Brand Awareness or the percentage of potential, current, or former customers who recognize a given brand. Often measured by examining “aided” and “unaided” awareness.
• Top of Mind or the first brand that comes to mind when a customer is asked an unprompted question about a category.
• Ad Awareness which refers to the percentage of target consumers who demonstrate awareness (aided or unaided) of a brand’s advertising. Ad Awareness can be campaign, media-specific, or encompass the sum of all advertising buys.
• Share of Voice achieved by an advertiser or product in a category or market over a fixed period of time. Calculated by Brand Advertising/ Total Market Advertising
• Brand Equity is the perceived value and quality of a brand measured by the level of brand loyalty, awareness and associations the brand has engendered in the market.

Customer Retention Metrics

• Retention Rate is used to determine rates by which you retain customers over time. This can be extremely useful in industries where there is a very high level of competition and reduced exit barriers for customers.
• Net Promoter Score is used to gauge of the extent to which customers will refer you to others like them. Based on customer satisfaction survey data, the NPS is determined by asking customers the likelihood that they will recommend you to others they know.
• RFM Analysis is used to determine which customers are the most valuable by examining how recently a customer has purchased, how often they purchase, and how much the customer spends. This is then used to determine ideal customers. The Database Marketing Institute provides an in-depth look at how RFM Analysis.
• Customer Lifetime Value. The Database Marketing Institute offers a downloadable spreadsheet and a great definition on CLV.

Lead Generation

• Cost per Lead is used to determine how much you are spending to acquire leads.
• Close Ratios are the percent of leads that are actually converted to paying customers.
• Time to Close measures the length of time to convert a lead into a sale. A useful metric when analyzing sales productivity and length to customer conversion.

Online Marketing Metrics

• Bounce Rate measures the percentage of people who come to a site and immediately leave. Bounce rate shows the quality of traffic you are acquiring and offers insights into where and how your site is failing your visitors. It is typically measured in two ways, by examining the percentage of visitors who see just one page on your site and the percentage of visitors who stay on the site for a small increments of time (5-30 seconds).
•  Click Through Rate is a way of measuring the success of an online advertising campaign. A CTR is obtained by dividing the number of users who clicked on an ad by the number of times the ad was delivered (impressions).
•  Cost Per Impression is used when measuring the worth and cost of a specific online marketing campaign. It is calculated by = Advertising Cost ($) / Number of Impressions
• Unique Visitors are individual users who have accessed your web site. It should be noted that the “user session” metric does not yield an accurate unique visitor count, as multiple user sessions can be generated by one unique visitor.
•  Cost Per Click (CPC) is the cost or price paid for a clickthrough to a website, advertisement, landing page, banner ad, or text link. Calculated by = Advertising Cost ($) /Number of Clicks.
•  Cost Per Order (cost per acquisition or transaction) is the number of orders received as a result of an online ad placement. Calculated by Cost Per Order = Advertising Cost ($) / Orders.
•  Shopping Cart Abandon Rate looks at how many visitors added products to their cart and provides a percentage of those that actually complete the order. To calculate abandon rate take Purchases Not Completed / Customer Initiation.
• Other Marketing Metrics
•  A few other metrics to consider are SERP position, number of incoming backlinks (reciprocal or one way), frequency of repeat visits, customer satisfaction levels and customer click paths.

Below is a list of useful resources that can assist when researching, selecting, and implementing your marketing metrics plan. It is important to remember to carefully select metrics based on their impact on your business. In addition to these articles we included a list of recommended books that provide expert analysis on marketing metrics. We often refer to these guides in our daily marketing activities. We hope that the aforementioned marketing metrics and resources are beneficial as you continue to hone your marketing prowess.

Tags: databases, logs, Metrics, Qualitative metrics, statistical sampling

This entry was posted on Friday, February 22nd, 2008 at 7:49 am and is filed under Articles Marketing, Articles about BSC, Articles on Advertising, Articles on consulting. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.