Just as important as creating a strong marketing plan is following through on the results. (read the
full article http://www.entrepreneur.com/article/0,4621,265008,00.html#)
Why Measure? If a company doesn't identify and track important performance measures, it
increases its risks.
• Measurements are the raw outcome of a quantification process, such as a company's
numbers, ratios, and percentages.
• Metrics are the standards for measurement, providing target values that a company must
achieve to reach a certain level of success.
• Benchmarks are the best measurements to aspire to, the standard by which all others
are measured. Companies that set benchmarks in their industries are the ones often
lauded in quot;Top tenquot; and quot;Most Admiredquot; lists and articles.
Determine the Metrics Needed to Measure Your Company’s Performance:
Compile a list of factors that are important in your industry. Criteria may include:
• Marketing: sales growth; market share; distribution methods; sales force size,
effectiveness and training; advertising budget and effectiveness; inventory levels, delivery
time; product quality; customer retention rates
• Production: plant capacity, locations and age; age of equipment; ability to expand
capacity; skill and turnover of labor force; union relations; quality control; supplier
retention; raw material sources
• Administrative: employee turnover, age of facilities
• Management: experience, depth and turnover of top, middle and supervisory managers;
effectiveness of communication systems; access to information; cohesiveness of top
management ranks; compensation plans; decision-making speed; strategic planning
• Technology/Research & Development: age of R&D facilities; age of production
technology; production patterns; basic innovation; engineering abilities; experience of
R&D team; R&D budget; R&D project timelines
Three Important Metrics Gauges: market share, lifetime value and brand equity.
Four key performance indicators enable you to address market share:
• Customer growth rate
• Share of preference
• Share of voice
• Share of distribution.
The following performance indicators will help you drive these penetration-related metrics:
• Frequency and recency of purchase
• Share of wallet
• Purchase value growth rate
• Customer tenure
• Customer loyalty and advocacy
DEFINITIONS OF MEASUREMENTS & METRICS
The cost of a single response to a promotion or total cost divided by total number of responses.
If you ask 1,000 manufacturing managers whether they've heard of your brand, the result will indicate
your penetration into the minds of prospects.
What percent of those who are aware of your brand, prefer your brand over your competitors?
What percent of those who are aware of your brand feel positive (preferred, obviously) or negative
about your company and your products?
A measure of the degree to which a buyer recognizes, prefers and insists upon a particular brand;
brand loyalty results from continued satisfaction with a product considered important and gives rise to
repeat purchases of products with little thought but with high-involvement.
Cost of Servicing Customer
A measure of all of the actual costs, administrative, etc., associated with servicing a specific customer.
Customer-Acquisition Metrics: Key acquisition metrics include the following:
• Awareness levels
• Purchase-decision drivers
• Rate of customer acquisition
• Market share
• ROI of marketing programs
• Cost of customer acquisition
The rate at which customers are lost and the reason(s) why.
Customer-Retention Metrics: Improving customer retention remains one of the most effective ways to
drive profits to the bottom line. Marketers want customers not only to continue using products on an
ongoing basis but also to buy other products and services. Current customers are also vitally
important in spreading positive word-of-mouth, which attracts new customers. By turning loyal
customers into advocates, marketers can significantly reduce customer acquisition costs and
significantly increase the value of current customers. Some key customer retention metrics include:
• Retention rate
• Abandonment rate
• RFM (recency, frequency, monetary value)
• LTV (lifetime value)
• Brand equity
• Net promoter score -The net promoter score measures the difference between customers
who spread positive and negative word of mouth about your product.
Improved Customer Relationships
Happier customers can represent a return on investment. This can be gauged through repeat order
patterns, by a change in the number of complaints, compliments, or through customer surveys
comparing pre- and post-project satisfaction.
Lifetime Value (LTV)
Total anticipated revenue collected from a given customer. Lifetime values can be measured for:
Donors, Customers, Clients. Current Sales (or Donation) x estimated customer life
Product mentions or appearances per medium per month and whether those mentions were positive
or negative. Number of press releases, pieces of mail, number of new customers, number of web hits
or visitors, awareness changes (or the extent to which people are more aware of your product),
impressions (number of articles in the press multiplied by the potential readership of each
publication), content analysis, recall measures, and on and on.
Referrals by Customer/per Customer
A measure of the number of customers willing to refer new customers and number of referrals by each
Return on Investment (ROI)
ROI is a computation that tells you how much you received compared to what you put into a project.
You can express ROI in terms of a dollar amount ($) or as a ratio (%).
The dollar amount formula ($) tells how much you increased profit in total dollars as a result of the
project: (Cost savings and earnings as a result of the project) minus (Dollars invested)
The ratio formula (%) tells how much you got back, in dollars, for each dollar you invested in a
project: (Cost savings and earnings as a result of the project) divided by (Dollars Invested)
For a Commercial Measure: Increase in sales volume.
For a Rehab Measure: Social impact of person working in CRP versus not working (tax payer savings,
less gov’t reliance, etc.) or the “Doing Well while Doing Good” Factor
Sales Per Customer
Number of sales made by a given customer in a given time frame
Measuring promotion strategies as to which work and which do not:
The following can be used to measure success:
1. Asking. Everyone who makes an inquiry to your company should be asked how he/she found out
about your organization. The various order and inquiry forms should collect this data that are
periodically analyzed and then used in marketing planning.
2. Coding. Code every piece of marketing material, especially direct mail, to track success.
3. Surveys. Compare pre- and post-project satisfaction.
4. Internet. On your web site, a counter can be incorporated to keep track of the number of “hits” or
visits to the site. A guest book can also be included on the web site to get more information and leads
on potential customers. E-mail inquiries and on-line orders can also be tracked. Track messages
received via alias emails to analyze web traffic and web-site click-thrus.
NOTE: To be effective, we will need to track components of marketing separately within the
company’s accounting system: direct mail printing costs, postage costs (not invoices), ads
(not job classifieds), seminars/training, etc.
RETURN ON INVESTMENT (ROI) TOOL
Measure the cost per piece, cost per new customer, and more.
Use this tool to test different sets of assumptions to see how your program results might
vary with different response rates and different conversion rates.
Divide your customers into three: current users (your biggest asset), lapsed users
(particularly important if you are losing market share) and potential customers (your source
To make a simple calculation for the ROI you need the following information:
(A) The total costs of the campaign
(B) The total number of direct mail pieces (newsletters)
(C) The response rate from the newsletters (what percent of the people who got your direct
mail, for example, clicked through to your site?).
(D) The conversion rate (what percent of those who clicked through actually bought
(E) The average amount of sales per person who bought something based on the direct
The ROI = ((B*C*D*E)-A)/A
You can refine this figure by actually calculating the exact amount of sales from all the
people who bought something that came from the direct mail campaign (use this number
instead of (B*C*D*E).