Marketing Metrics can save your day

As mentioned in my former blog post I would write this time on marketing metrics and co-creation. I guess that was a bit too ambitious to put everything here in one go. Let’s focus on marketing metrics for this blog post. Last time I came to the conclusion that marketers don’t follow a left-brain approach to their activities and are therefore not able to do a valuable contribution to the business performance. The background is probably that some issues they deal with (loyalty, brand/awareness, beliefs and likeability) are difficult to measure, at least according to them. I'm afraid that top management, not being aware that there are metrics for these issues, agrees with that.

Let’s put first things first, what is a metric? A metric is a measuring system that quantifies a trend, dynamic, or characteristic. From this definition one can already deduct that something like a brand can be measured. Being able to ‘crunch the numbers’ is vital in marketing. I will start with penetration from which we can also measure Brand Penetration. With penetration I mean: the proportion of people in the target group who bought (at least once in the period) a specific brand or category of goods. We all know that this can be calculated at Market Penetration (%) = Customers who have purchased a product in the category (#) : Total Population (#).
Brand Penetration calculation is then easy. Brand Penetration (%) = Customers who have purchased the brand (#) : Total Population (#). So if over a period of a month, in a market of 10.000 households, 500 households purchased Coca Cola Light we can calculate this as 500:10.000 = 5% Brand Penetration Coca Cola Light.

Share of wallet
But how do I measure the Brand Loyalty? Loyalty means we have to look for heavy users. We might do that by the share of requirements (share of wallet) which is calculated solely among buyers of a specific brand. Within this group, it represents the percentage of purchases within the relevant category, accounted for by the brand in question. Easier maybe to say that it is the average market share enjoyed by a product among the customers who buy it. To make this clear I give the example that in a given month, the unit purchases of Coca Cola Light is 1.000.000 bottles. But among the households of heavy users that bought Coca Cola Light, total purchases of soft drinks came to 2.000.000. This means 1.000.000:2.000.000 = 50% Share of Requirements/Wallet.

Awareness
Even after former examples issues like awareness, beliefs and likeability are still taken for granted and may not (yet) have been put into metrics or performance indicators by marketers. But awareness – the percentage of potential customers or consumers who recognize or name a given brand - can be (un)aided or (un)prompted. To reveal this awareness different kind of questions have to be asked:

To measure awareness: have you heard of Brand X? What brand comes to mind when you think luxury car?

To measure beliefs/likeability: Is Brand X for me? On a scale of 1-5, is Brand X for young people?

To measure loyalty: Did you use Brand X this week? What brand did you last buy?

Next to metrics there are also key performance indicators (KPI’s). Like metrics they indicate what to do to dramatically improve business performance and are connected with the business most important/critical processes. KPI’s therefore indicate the critical success factors. But how to control all these kind of metrics? To get an immediate overview of your business performance the Balanced Scorecard was invented by Kaplan and Norton (1996). A very interesting subject which I may address in one of my next blog posts.

Source: Farris et al (2006), Marketing Metrics: 50+ Metrics Every Executive Should Master, Wharton School Publishing.

The marketing department is in danger

It occurs to me that during the time the internet bubble bursted (2001/2002), there was also a crash in the marketing value in companies. Both phenomenas focus on increasing market share at the expense of the bottom line: spending money but have no proof if there will be enough income in return on investments done. Recently I read an article mentioning that only 10 percent of executive meeting time is devoted to marketing (Ambler 2003, p.62). Clearly respect for marketing in organizations is declining.

Lately I received a direct mail from Tele2, offering me a far lower price for internet and phone usage. Next to that they offered me the service that they will close my subscription with my former internet provider. All for free of course. So there was customer value involved, they were cheaper and they would save me time. Just to check I called my former internet provider and they told me they were not informed that I would leave them and move to Tele2. Then I called Tele2. The person from customer service admitted that no such service existed for the internet/phone bundle I took. Well, why mentioning it on the direct mail then, I asked? Yep, also in this company marketing is used as a tool to feed customers with propaganda. It has lost its role to take care of customers and is only able to report on my rage afterwards. This is when my complaint appeared on klachtenradar.nl

A left-brain approach
But what to do about it? To me marketing is in itself a strong business driver and should be looked at as an investment. Most organizations though perceive it as cost. This is quite logic. First of all most marketers nowadays are engaged in more tactical decisions as advertising, sales support and public relations. Second, they don’t follow a left-brain approach to their activities. According to prof. dr. Verhoef (customer based marketing) and prof. dr. Leeflang (marketing) the two major drivers to increase marketing influence and respect within the company are accountability and innovativeness. Marketing plans should include a financial section that features the planned financial consequences of their marketing actions. To increase the innovativeness of marketing departments, marketers might capitalize on their market and customer knowledge to develop successful new product and service concepts. They could build on new trends, such as customer codevelopment and customer solutions (Verhoef & Leeflang, 2009).

In my next blog post I will more concretely indicate examples of the usage of marketing metrics and will further elaborate on customer codevelopment and solutions (co-creation).

Source: Verhoef P.C. & Leeflang S.H., Understanding the Marketing Department’s Influence Within the Firm, Journal of Marketing Vol. 73 (March 2009), 14-37.