Should it be managed by mathematicsorartistsorpsychologists?
“If you can’t measure it, you can’t manage it.”– Peter F. Drucker• “When you can measure what you are speaking about, and expressit in numbers, you know something about it; but when you cannotmeasure it, when you cannot express it in numbers, your knowledgeis of a meager and unsatisfactory kind: it may be the beginning ofknowledge, but you have scarcely, in your thoughts, advanced to thestage of science.”––William Thomson, Lord Kelvin, Popular Lecturesand Addresses (1891–94)
“...every metric, whether it is used explicitly to influence behavior, toevaluate future strategies, or simply to take stock, will affect actions anddecisions.”Marketing needs metricsto knowwhat to do next.
• A metric is a measuring system that quantifies a trend, dynamic, orcharacteristic.• In virtually all disciplines, practitioners use metrics to explainphenomena, diagnose causes, share findings, and project the resultsof future events.• Throughout the worlds of science, business, and government,metrics encourage rigor and objectivity. They make it possible tocompare observations across regions and time periods. Theyfacilitate understanding and collaboration.• Philip Kotler, Nancy Lee, Paul W. Farris - Marketing Strategy fromthe Masters
• CEO’s and company Boards are looking for more oncosts. Costs are calculated in € or $• To know how spending on marketing contributes toprofits.• Marketers are under more and more pressure to “show areturn” on their activities.
IncomeMarketing costs=RealEffectivityOf marketingROI = Return on Investment =ROMI = Return on Marketing Investment
Marketing Spending ($)Return on Marketing Investment (ROMI) =[Incremental Revenue Attributable to Marketing ($* Contribution Margin (%) - Marketing Spending ($contribution margin is the marginal profit per unit sale
• Company spends 100.000€ direct marketingcampaign, and makes 500.000€ revenue.Contribution margin is 50%.• (500000*50% - 100.000) / 100.000 = 1,5• Every 1 € spent on marketing brings 1,5 € profitback.
Actual Metric % Compared with planand/or prior year% compared withcompetitionSales Volume / value Market shareMarketing investment Period costs Share of voiceBottom line e.g economic profit Share of profitCan you really manage your marketing channels with these metrics
Consumer metric Measured byFamiliarity Salience, i.e. familiarity relative to the otherbrands in the consideration set.Penetration Number of customers or the number ofactive customers as a per cent of theintended marketWhat they think about the brand Brand preference as a per cent ofpreference of other brands within theconsideration set or intention to buy orbrand knowledgeWhat they feel Customer satisfaction as per cent averagefor consideration set about the brandLoyalty This may be behavioural (share of categoryrequirements, repeat buying, retention,churn) and / or intermediate (commitment,engagement or bonding)Availability Distribution, e.g. weighted percentage ofretail outlets carrying the brand
• Every company needs their ownmetrics• Define your own KPIs(key performance indicators)• How do you measure yoursuccess?Example ThyssenKrupp
• Yes, marketing can be measuredand therefore you can manage it.• Marketing is art but you measure it in numbers. Thereforeyou need to talk to your IT about mathematics andstatistics• Sources: Marketing and the bottom line -The Marketingmetrics to pump up cash flow• Wikipedia http://en.wikipedia.org/wiki/Marketing_ROI
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