Marketers use metrics to measure the effects of their activities. Marketing metrics can be defined as a “system that quantifies a trend, dynamic or characteristic. It can diagnose causes and help to project future events (Farris 2010:1).
Marketers need to be able to quantify what they do for a number of reasons. Firstly, marketing budgets account for approximately 10.2% of all spending by firms (Gartner research 2015). It is therefore a reasonable expectation of firms to expect marketers to be accountable for this expenditure. Secondly, measuring marketing activities allows marketers to have knowledge to make informed strategic decisions and decipher how well they are using current resources. In other words, “if you can’t measure it, you can’t manage it” (Farris 2010:3).
Data vs information vs knowledge
Marketing evaluation begins with the collection of data. The collection of data alone, however does not mean anything unless it is converted into information which can be interpreted by a human. Therefore, “one-way of thinking about the value of information is whether it creates knowledge or not” (Bendle 2016:6). Marketing evaluation needs to be able to convert information into knowledge, otherwise it is of no practical use in decision making.
In a very simple view, the goal of marketing is to increase profitability by increasing sales (Iacobucci 2013:211). Measurement of marketing through financial metrics alone, however does not account for the broad scope of marketing activities. It does not take into account assets such as brand equity or customer behaviours such as loyalty, intention to purchase and satisfaction (Ambler and Roberts 2008:743). It also does not include what is going on in the mind of consumers such as mental associations they may have with brands. Marketers need to look beyond a finance only approach to a “multiple metric approach…which bring together the multiple measures seen by senior management into a clear, integrated and concise package” (Ambler Roberts 2008:743). This dashboard approach can vary between organisations, but what is important is that marketers are looking at multiple metrics (Iacobucci 2013:219).
The case of Woolworths
A great example of the multiple metric approach is evaluating the data in the case of Woolworths.
|Market share – comparative strength of a business relative to competitors (Farris 2010:28).
|Brand equity – brands are assets and should be able to carry a financial value (Iacobucci 2013:87).
|Woolworths is the second most valuable brand in Australia worth $10.5 million
Coles is the eighth most valuable brand in Australia worth $6.5 million
|Share of voice – quantifies the advertising presence of a brand (Bendle 2010:312).||Woolworths – 50.82%
Coles – 24.27%
Aldi – 11.95%
IGA – 6.45%
|Customer loyalty – whether shoppers visit the same supermarket each time (Roy Morgan 2015)
|77% of grocery shoppers visit at least two different supermarkets in a four week average
Only 25% of regular Woolworths shoppers shop at Woolworths each time. Coles customers are a little less loyal at 24%
|Profits – = sales revenue – costs (Iacobucci 2013:87).
|Loss of $972.7 million in latest half year results|
Reviewing this data, we can see Woolworths have suffered a sizable decline in profitability in the last half-year result. However, if we were to focus on this one financial measure alone we would be misled. Most analysts would suggest the loss was due to its failing home improvement stores Masters, not its supermarket (ABC News 2016). It still has the largest market share in the industry, loudest share of voice in advertising and most valuable brand. On the down side, its customers are not as loyal as they could be.
In assessing a business, metrics, especially financial metrics are essential. But a multiple metrics approach shows that marketing decisions should be made based on all the relevant information.
Farris, P 2010, Marketing metrics : the definitive guide to measuring marketing performance, Upper Saddle River, N.J. : FT Press, c2010.
Bendle, NT 2016, Marketing metrics : the manager’s guide to measuring marketing performance, Upper Saddle River, New Jersey : Pearson Education, .
Iacobucci, D 2013, MM4, Mason, Ohio : South-Western ; Andover : Cengage Learning [distributor], .
Ambler, T, & Roberts, JH 2008, ‘Assessing marketing performance: don’t settle for a silver metric’, Journal of Marketing Management, vol. 24, no. 7/8, pp. 733-750
Written by amarg81