Marketing Metrics free essay sample

Marketing is no longer characterised by spontaneous investments. Marketing performance is controlled and diagnosed on a continuous basis, making the need for simple, but comprehensive measures/metrics to do so even more important. There are aspects of Marketing that can be identified, separated and measured. The effectiveness of a Company’s marketing department is often measured on the number of new clients and customers, the amount of leads generated and successful follow up on these leads. The main objective of any company that intends on being a major player is not only to create new customers, but to retain the ones they already have. By taking the cost of different marketing activities and comparing them against the number of sales or new customers, the success of these activities can be determined. In addition, it allows for comparison between different marketing initiatives. This facilitates the creation of an environment in which the customer can relate to the company and creates the appropriate condition for the making of sales. We will write a custom essay sample on Marketing Metrics or any similar topic specifically for you Do Not WasteYour Time HIRE WRITER Only 13.90 / page The effectiveness of a company’s marketing department can be quantified by sales targets reached the enhancement of profits and improved bottom-line performance. This is achieved by making the marketing function more accountable as it ensures a continuous testing of its effectiveness through the application of scorecards. These scorecards, or metrics, allows for the development of a set of measures and provide a means through which the performance of marketing activities can be measured. One of the most important questions that should be asked is how many metrics should be used to enable measurement to be comprehensive. There are cast amount of different metrics, but not all of them are equally important or relevant. The key is to identify those metrics that are most relevant to the particular situation of the company and those that evaluate what is really important. Fundamental metrics should include quantifiable metric such as Return on Investment and number of new customers, but also non-quantifiable metrics such as brand awareness and brand equity. Most often these non-quantifiable metric are the ones that determine the long-term survival and profitability of a company. TABLE OF CONTENTS Item nrHeadingPage . Introduction5 2. How to ensure that marketing activities are measurable5 3. Reasons for growth in the use of marketing metrics5 3. 1 A corporate trend for greater accountability of value added activities 3. 2 Discontent with traditional metrics 3. 3 Availability of IT and Internet Infrastructure 4. The direction in which metrics can lead a company7 4. 1 From non-financial to financial 4. 2 F rom backward looking to forward looking 4. 3 From short-term to long-term 4. 4 From micro to macro data 4. 5 From independent metrics to causal chains 4. 6 From subjective to objective 5. An investigation of key metrics can put an organisation in the position to develop and refine new marketing initiatives to increase market share. Therefore it can be said that metrics lead the way to cost effective marketing and ensuring that marketing expenditures are worthwhile. The difference between a marketing department that is considered a highly valuable organisational asset and one that is not regarded as highly often depends on the intensity of the focus on applying marketing metrics as a measure of success. When choosing among different metrics to be used, one has to consider the cost of these as well. Marketers have previously relied heavily on applying subjective measures of performance, especially when measuring customer attitudes, product attributes and brand associations. 3. 3 Availability of IT and Internet Infrastructure. Technology facilitates the existence of new metrics. New developments such as Enterprise Resource Planning, Customer Relationship Management Software etc enables the company to make use of alternative, more immediate metrics. For instance, companies can measure the profit for each time a customer visits their stores. Therefore performance is measured more accurately.   From non-financial to financial: One of the key reasons for the undertaking of performance assessment is to ensure that corrective steps can be taken to improve it. Senior management should view marketing as actions taken in terms of financial impact and to view marketing investments the same as other types of investment will guarantee success. There has been a perception among marketers that their discipline is a â€Å"soft one† that has not been taken seriously by management. By accepting the more rigorous financial measures, they stand a better chance of gaining increased legitimacy and credibility with Top Management. Care should however be taken not to focus only on the use of financial metrics as future income can often not be predicted. Metrics measures must be non-financial (customer loyalty, market penetration) as well as financial (sales, costs and profits). The correct mix between the two needs to be determined according to the requirements of the situation. 4. 2From backward-looking to forward-looking It is better to create forward-looking estimates as the future competitive environment is different than the current one. These estimates need to take the following into account such as competitive dynamics, and initiatives such as new product launches and brand extensions. 4. 3From short-term to long-term It is more profitable to focus on the creation of long-term wealth. The challenge here lies with the fact that the longer the forecast horizon, the bolder the assumptions must be in preparing the estimates. It will continue to be a challenge to construct a valid current basis for the projection of future marketing performance. . 4From micro to macro data To succeed in a competitive environment, a company must keep in mind that often a small loss of market share can often conceal the fact that a huge number of major contributing customers have defected to the competition. 4. 5From independent metrics to causal chains This move will have major breakthroughs to effect in the areas of efficiency and control. This will allow all marketing activities to be evaluated in terms of their effect on the bottom line and will enable the selection of the most profitable actions. 4. 6From subjective to objective If an investment’s EVA is greater than zero, that option is worthwhile. EVA allows the marketing department to communicate to other departments and this increases the legitimacy of the marketing department in the eyes of the other functional departments. EVA is not used that frequently as it makes use of historical values. 5. 2The balanced scorecard approach This approach allows for the whole organisation to be looked at from different perspectives (customer perspective, innovation and learning perspective, internal business perspective and financial perspective). This allows for a more comprehensive view of the company’s situation. What makes this approach more viable is that it is partially forward looking and geared towards the long-term performance of the company. 5. 3Brand Equity Brand equity is often the biggest and most valuable asset for many companies. It can be measured by looking at customer loyalty and perceived product quality and is determined by investigating financial data showing the profits from the marketing of the brand and incorporates the value of future returns. The managing of Brand Equity is one of marketing’s most important functions, and facilitates the transfer of value in the market to the company’s customers and shareholders. 5. 4Relational Equity This equity comprises four different types of partnerships, namely supplier, lateral, internal and buyer partnerships. Swahney and Zabin (2002) define Relational Equity as the wealth creating potential that resides in the company’s relationships with its stakeholders. They also proposed the use of the Relational Maturity Model which provides a holistic measure to focus on the quality of customer relationships. This measure is primarily dependant on macro data and provides information that is generally of a subjective nature. 5. 5Customer equity This viewpoint states that the focus of the company should rather be on the customer than the brand. This is actually a valuable point as it is the customer that determines the value of the brand. The challenge for marketers would be to find the most dominant driver of customer equity for the company.