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Marketing Metrics: The Manager’s Guide to Measuring Marketing Performance, Third Edition

Book Description

Today’s Definitive Guide to Marketing Metrics

Choosing Them, Implementing Them, Applying Them

  • New quantitative formulas, applications, and analytical techniques

  • Best practices for measuring promos, ads, distribution, perception, market share, pricing, margins, portfolios, channels, dashboards, and more

  • All-new chapter on leveraging today’s rich online, email, and mobile metrics

  • Expert guidance for clarifying what to measure, and testing reliability and validity

  • Now extensively updated, this award-winning book will help you apply today’s most effective metrics to all your marketing investments, get accurate answers, and use them to systematically improve ROI.

    You’ll find practical techniques for measuring everything from brand equity to social media, market share to email performance. For each metric, the authors present real-world pros, cons, and tradeoffs—and help you understand what the numbers really mean. You’ll learn how to design and interpret marketing dashboards to identify emerging opportunities and risks, and use powerful modeling techniques to optimize every decision you make.

    A brand-new chapter on online metrics brings desperately needed clarity to metrics such as pageviews; rich media display time and interaction rates; clickthrough rates; cost-per-click, order, and customer acquired; visits, abandonments, and bounce rates; friends, followers, supporters, and even “likes.” This Third Edition adds important new coverage of topics ranging from brand valuation to neuromarketing, as well as crucial insights for selecting the right metrics, and making sure you can trust your data.

    www.management-by-the-numbers.com

    Marketing Metrics, Third Edition, is the definitive guide to today’s most valuable marketing metrics. In this thoroughly updated and significantly expanded book, four leading marketing researchers show exactly how to choose the right metrics for every challenge.

    The authors show how to use marketing dashboards to view market dynamics from multiple perspectives, maximize accuracy, and “triangulate” to optimal solutions. You’ll discover high-value metrics for virtually every facet of marketing: promotional strategy, advertising, and distribution; customer perceptions; market share; competitors’ power; margins and pricing; products and portfolios; customer profitability; sales forces and channels; and more.

    This edition adds a rigorous and comprehensive discussion of the latest web, online, social, and email metrics, helping you navigate today’s many new metrics to gain usable and trustworthy information. The authors have added new insights into measuring marketing ROI and brand equity, as well as practical advice for managing complex issues such as advertising elasticity and “double jeopardy.” You’ll also find updated and expanded discussions of prioritizing the right metrics for your business, and ensuring the information you capture is valid, reliable, and actionable.

    Choose the right metric for every marketing challenge

    Understand the full spectrum of marketing metrics: pros, cons, nuances, and application

    Gain a deep and thorough understanding of Marketing ROI (MROI)

    Quantify how your marketing spending actually contributes to profits

    Understand and apply web/online metrics far more effectively

    Get actionable knowledge from new web, rich media, and social metrics—including Google Analytics

    Measure what matters, and measure it reliably

    Choose the right metrics, and ensure accurate, valid data for decision-making

    Table of Contents

    1. About This eBook
    2. Title Page
    3. Copyright Page
    4. Dedication Page
    5. Contents
    6. Acknowledgments
    7. About the Authors
    8. Foreword
    9. Foreword to The Third Edition
    10. 1. Introduction
      1. 1.1 What Is a Metric?
      2. 1.2 Why Do You Need Metrics?
      3. 1.3 Marketing Metrics: Opportunities, Performance, and Accountability
      4. 1.4 Choosing the Right Numbers
        1. Data Availability and Globalization of Metrics
      5. 1.5 What Are We Measuring?
      6. 1.6 Value of Information
      7. 1.7 Mastering Metrics
      8. 1.8 Where are the “Top Ten” Metrics?
      9. 1.9 What’s New in the Third Edition?
        1. Organization of the Text
        2. Components of Each Chapter
        3. aReference Materials
        4. References and Suggested Further Reading
    11. 2. Share of Hearts, Minds, and Markets
      1. Introduction
      2. 2.1 Market Share
        1. Purpose: Key indicator of market competitiveness
        2. Construction
        3. Data Sources, Complications, and Cautions
        4. Related Metrics and Concepts
      3. 2.2 Relative Market Share and Market Concentration
        1. Purpose: To assess a firm’s or a brand’s success and its position in the market
        2. Construction
        3. Related Metrics and Concepts
        4. Data Sources, Complications, and Cautions
        5. Related Metrics and Concepts
      4. 2.3 Brand Development Index and Category Development Index
        1. Purpose: To understand the relative performance of a brand or category within specified customer groups
        2. Construction
        3. Data Sources and Complications
        4. Related Metrics and Concepts
      5. 2.4 Penetration
        1. Construction
        2. Data Sources, Complications, and Cautions
      6. 2.5 Share of Requirements
        1. Purpose: To understand the source of market share in terms of breadth and depth of consumer franchise, as well as the extent of relative category usage (heavy users/larger customers versus light users/smaller customers)
        2. Construction
        3. Data Sources, Complications, and Cautions
        4. Related Metrics and Concepts
      7. 2.6 Usage Index
        1. Purpose: To define and measure whether a firm’s consumers are “heavy users.”
        2. Construction
        3. Data Sources, Complications, and Cautions
      8. Understanding Double Jeopardy and Usage Index
        1. Related Metrics and Concepts
      9. 2.7 Awareness, Attitudes, and Usage (AAU): Metrics of the Hierarchy of Effects
        1. Purpose: To track trends in customer attitudes and behaviors
        2. Construction
        3. Data Sources, Complications, and Cautions
        4. Related Metrics and Concepts
      10. 2.8 Customer Satisfaction and Willingness to Recommend
        1. Purpose: Customer satisfaction provides a leading indicator of consumer purchase intentions and loyalty
        2. Construction
        3. Data Sources, Complications, and Cautions
        4. Related Metrics and Concepts
      11. 2.9 Net Promoter
        1. Purpose: To measure how well the brand or company is succeeding in creating satisfied, loyal customers
        2. Construction
        3. Data Sources, Complications and Cautions
      12. 2.10 Willingness to Search
        1. Purpose: To assess the commitment of a firm’s or a brand’s customer base
        2. Construction
        3. Data Sources, Complications, and Cautions
      13. 2.11 Neuroscience Measures (with Dr. Manuel Garcia-Garcia and Pasha Davoudian)
        1. Purpose: Using Technology to Understand Consumer Behavior
        2. Construction
        3. Why Use These Techniques?
        4. Data Sources, Complications and Cautions
        5. Further Reading
    12. 3. Margins and Profits
      1. Introduction
      2. 3.1 Margins
        1. Purpose: To determine the value of incremental sales, and to guide pricing and promotion decisions
        2. Construction
        3. Data Sources, Complications, and Cautions
        4. Related Metrics and Concepts
      3. 3.2 Prices and Channel Margins
        1. Purpose: To calculate selling prices at each level in the distribution channel
        2. Construction
        3. Data Sources, Complications, and Cautions
        4. Related Metrics and Concepts
      4. 3.3 Average Price per Unit and Price per Statistical Unit
        1. Purpose: To calculate meaningful average selling prices within a product line that includes items of different sizes
        2. Construction
        3. Price per Statistical Unit
        4. Data Sources, Complications, and Cautions
      5. 3.4 Variable Costs and Fixed Costs
        1. Purpose: To understand how costs change with volume
        2. Construction
        3. Data Sources, Complications, and Cautions
      6. 3.5 Marketing Spending—Total, Fixed, and Variable
        1. Purpose: To forecast marketing spending and assess budgeting risk
        2. Construction
        3. Data Sources, Complications, and Cautions
        4. Related Metrics and Concepts
      7. 3.6 Break-Even Analysis and Contribution Analysis
        1. Purpose: To provide a rough indicator of the earnings impact of a marketing activity
        2. Construction
        3. Data Sources, Complications, and Cautions
        4. Related Metrics and Concepts
      8. 3.7 Profit-Based Sales Targets
        1. Purpose: To ensure that marketing and sales objectives mesh with profit targets
        2. Construction
        3. Data Sources, Complications, and Cautions
        4. Related Metrics and Concepts
    13. 4. Product and Portfolio Management
      1. Introduction
      2. 4.1 Trial, Repeat, Penetration, and Volume Projections
        1. Purpose: To understand volume projections
        2. Construction
        3. Simulated Test Market Results and Volume Projections
        4. Data Sources, Complications, and Cautions
        5. Related Metrics and Concepts
      3. 4.2 Growth: Percentage and CAGR
        1. Purpose: To measure growth
        2. Construction
        3. Data Sources, Complications, and Cautions
        4. Related Metrics and Concepts
      4. 4.3 Cannibalization Rates and Fair Share Draw
        1. Data Sources, Complications, and Cautions
      5. 4.4 Brand Equity Metrics
        1. Purpose: To measure the value of a brand
        2. Construction
        3. Data Sources, Complications, and Cautions
        4. Related Metrics and Concepts
        5. Additional Citation
      6. 4.5 Conjoint Utilities and Consumer Preference
        1. Purpose: To understand what customers want
        2. Construction
        3. Data Sources, Complications, and Cautions
      7. 4.6 Segmentation Using Conjoint Utilities
        1. Purpose: To identify segments based on conjoint utilities
        2. Construction
        3. Data Sources, Complications, and Cautions
      8. 4.7 Conjoint Utilities and Volume Projection
        1. Purpose: To use conjoint analysis to project the market share and the sales volume that will be achieved by a product or service
        2. Data Sources, Complications, and Cautions
        3. References and Suggested Further Reading
    14. 5. Customer Profitability
      1. Introduction
      2. 5.1 Customers, Recency, and Retention
        1. Purpose: To monitor firm performance in attracting and retaining customers
        2. Construction
        3. Data Sources, Complications, and Cautions
      3. 5.2 Customer Profit
        1. Purpose: To identify the profitability of individual customers
        2. Construction
        3. Data Sources, Complications, and Cautions
      4. 5.3 Customer Lifetime Value
        1. Purpose: To assess the value of each customer
        2. Construction
        3. Data Sources, Complications, and Cautions
      5. 5.4 Prospect Lifetime Value Versus Customer Value
        1. Purpose: To account for the lifetime value of a newly acquired customer (CLV) when making prospecting decisions
        2. Construction
        3. Data Sources, Complications, and Cautions
      6. 5.5 Acquisition Versus Retention Cost
        1. Purpose: To determine the firm’s cost of acquisition and retention
        2. Construction
        3. Data Sources, Complications, and Cautions
        4. References and Suggested Further Reading
    15. 6. Sales Force and Channel Management
      1. Introduction
      2. 6.1 Sales Force Coverage: Territories
        1. Purpose: To create balanced sales territories
        2. Construction
        3. Data Sources, Complications, and Cautions
      3. 6.2 Sales Force Objectives: Setting Goals
        1. Purpose: To motivate sales personnel and establish benchmarks for evaluating and rewarding their performance
        2. Construction
        3. Data Sources, Complications, and Cautions
      4. 6.3 Sales Force Effectiveness: Measuring Effort, Potential, and Results
        1. Purpose: To measure the performance of a sales force and of individual salespeople
        2. Construction
        3. Data Sources, Complications, and Cautions
      5. 6.4 Sales Force Compensation: Salary/Reward Mix
        1. Purpose: To determine the mix of salary, bonus, and commission that will maximize sales generated by the sales force
        2. Construction
        3. Data Sources, Complications, and Cautions
      6. 6.5 Sales Force Tracking: Pipeline Analysis
        1. Purpose: To forecast upcoming sales and evaluate workload distribution
        2. Construction
        3. Data Sources, Complications, and Cautions
      7. 6.6 Numeric, ACV and PCV Distribution, Facings/Share of Shelf
        1. Purpose: To measure a firm’s ability to convey a product to its customers
        2. Construction
        3. Data Sources, Complications, and Cautions
        4. Related Metrics and Concepts
      8. 6.7 Supply Chain Metrics
        1. Purpose: To monitor the effectiveness of an organization in managing the distribution and logistics process
        2. Construction
        3. Data Sources, Complications, and Cautions
        4. Related Metrics and Concepts
      9. 6.8 SKU Profitability: Markdowns, GMROII, and DPP
        1. Purpose: To assess the effectiveness and profitability of individual product and category sales
        2. Construction
        3. Data Sources, Complications, and Cautions
        4. Related Metrics and Concepts
        5. References and Suggested Further Reading
    16. 7. Pricing Strategy
      1. Introduction
      2. 7.1 Price Premium
        1. Purpose: To evaluate product pricing in the context of market competition
        2. Construction
        3. Data Sources, Complications, and Cautions
        4. Related Metrics and Concepts
      3. 7.2 Reservation Price and Percent Good Value
        1. Purpose
        2. Construction
        3. Data Sources, Complications, and Cautions
        4. Linear Demand
      4. 7.3 Price Elasticity of Demand
        1. Purpose: To understand market responsiveness to changes in price
        2. Construction
        3. Constant Elasticity: Demand Curve with a Constantly Changing Slope
        4. Data Sources, Complications, and Cautions
      5. 7.4 Optimal Prices and Linear and Constant Demand Functions
        1. Purpose: To determine the price that yields the greatest possible contribution
        2. Construction
        3. Data Sources, Complications, and Cautions
        4. Related Metrics and Concepts
        5. Caution: Regulation
      6. 7.5 “Own,” “Cross,” and “Residual” Price Elasticity
        1. Purpose: To account for both customers’ price elasticity and potential competitive reactions when planning price changes
        2. Construction
        3. Data Sources, Complications, and Cautions
        4. Prisoner’s Dilemma Pricing
        5. References and Suggested Further Reading
    17. 8. Promotion
      1. Introduction
      2. 8.1 Baseline Sales, Incremental Sales, and Promotional Lift
        1. Purpose: To select a baseline of sales against which the incremental sales and profits generated by marketing activity can be assessed
        2. Construction
        3. Data Sources, Complications, and Cautions
      3. 8.2 Redemption Rates, Costs for Coupons and Rebates, Percent Sales with Coupon
        1. Purpose: To track and evaluate coupon usage
        2. Construction
        3. Data Sources, Complications, and Cautions
        4. Related Metrics and Concepts
      4. 8.3 Promotions and Pass-Through
        1. Purpose: To measure whether trade promotions are generating consumer promotions
        2. Construction
        3. Data Sources, Complications, and Cautions
      5. 8.4 Price Waterfall
        1. Purpose: To assess the actual price paid for a product, in comparison with the list price
        2. Construction
        3. Data Sources, Complications, and Cautions
        4. Related Metrics and Concepts
        5. References and Suggested Further Reading
    18. 9. Advertising Metrics
      1. Introduction
      2. 9.1 Advertising: Impressions, Exposures, Opportunities-To-See (OTS), Gross Rating Points (GRPs), and Target Rating Points (TRPs)
        1. Purpose: To measure the audience for an advertisement
        2. Construction
        3. Data Sources, Complications, and Cautions
      3. 9.2 Cost per Thousand Impressions (CPM) Rates
        1. Purpose: To compare the costs of advertising campaigns within and across different media
        2. Construction
        3. Data Sources, Complications, and Cautions
        4. Related Metrics and Concepts
      4. 9.3 Reach, Net Reach, and Frequency
        1. Purpose: To separate total impressions into the number of people reached and the average frequency with which those individuals are exposed to advertising
        2. Data Sources, Complications, and Cautions
      5. 9.4 Frequency Response Functions
        1. Purpose: To establish assumptions about the effects of advertising frequency
        2. Construction
        3. Data Sources, Complications, and Cautions
        4. Related Metrics and Concepts
      6. 9.5 Effective Reach and Effective Frequency
        1. Purpose: To assess the extent to which advertising audiences are being reached with sufficient frequency
        2. Construction
        3. Data Sources, Complications, and Cautions
      7. 9.6 Share of Voice
        1. Purpose: To evaluate the comparative level of advertising committed to a specific product or brand
        2. Construction
        3. Data Sources, Complications, and Cautions
      8. 9.7 Advertising Elasticity of Demand
        1. Purpose: Understanding the Responsiveness of Demand to Advertising
        2. Construction
        3. What Should You Spend On Advertising?
        4. What If Advertising Is An Investment?
        5. Data Sources, Complications and Cautions
        6. References and Suggested Further Reading
    19. 10. Online, Email, and Mobile Metrics
      1. Introduction
      2. 10.1 Impressions, Pageviews, and Hits
        1. Purpose: To assess Web site traffic and activity
        2. Construction
        3. Data Sources, Complications, and Cautions
      3. 10.2 Rich Media Display Time and Interaction Rate
        1. Purpose: To determine how an advertisement engages viewers
        2. Construction
        3. Data Sources, Complications, and Cautions
        4. Related Metrics
      4. 10.3 Clickthrough Rates
        1. Purpose: To capture customers’ initial response to Web sites
        2. Construction
        3. Data Sources, Complications, and Cautions
      5. 10.4 Cost per Impression, Cost per Click, and Cost per Order
        1. Purpose: To assess the cost effectiveness of Internet marketing
        2. Construction
        3. Data Sources, Complications, and Cautions
      6. 10.5 Visits, Visitors, and Abandonment
        1. Purpose: To understand Web site user behavior
        2. Construction
        3. Data Sources, Complications, and Cautions
      7. 10.6 Bounce Rate (Web Site)
        1. Purpose: To determine the effectiveness of the Web site at generating the interest of visitors
        2. Construction
        3. Data Sources, Complications, and Cautions
        4. Google Analytics
      8. 10.7 Social Media Metrics: Friends/Followers/Supporters/Likes
        1. Purpose: To determine the effectiveness of a social networking presence
        2. Construction
        3. Data Sources, Complications, and Cautions
      9. 10.8 Downloads
        1. Purpose: To determine effectiveness in getting applications out to users
        2. Construction
        3. Data Sources, Complications, and Cautions
      10. 10.9 Mobile Metrics
        1. Construction
        2. Data Sources, Complications, and Cautions
      11. 10.10 Email Metrics
        1. Purpose: To determine effectiveness of email campaigns
        2. Construction
        3. Data Sources, Complications, and Cautions
        4. References and Suggested Further Reading
    20. 11. Marketing and Finance
      1. Introduction
      2. 11.1 Net Profit and Return on Sales
        1. Purpose: To measure levels and rates of profitability
        2. Construction
        3. Data Sources, Complications, and Cautions
        4. Related Metrics and Concepts
      3. 11.2 Return on Investment
        1. Purpose: To measure per period rates of return on dollars invested in an economic entity
        2. Construction
        3. Data Sources, Complications, and Cautions
        4. Related Metrics and Concepts
      4. 11.3 Economic Profit—EVA
        1. Purpose: To measure dollar profits while accounting for required returns on capital invested
        2. Construction
        3. Data Sources, Complications, and Cautions
      5. 11.4 Evaluating Multi-period Investments
        1. Purpose: To evaluate investments with financial consequences spanning multiple periods
        2. Construction
        3. Data Sources, Complications, and Cautions
      6. 11.5 Marketing Return on Investment
        1. Purpose: To measure the rate at which spending on marketing contributes to profits
        2. Construction
        3. Data Sources, Complications, and Cautions
        4. Related Metrics
        5. References and Suggested Further Reading
    21. 12. The Marketing Metrics X-Ray AND TESTING
      1. 12.1 The Marketing Metrics X-Ray
        1. Put Your Money Where Your Metrics Are
        2. Hiding Problems in the Marketing Baggage?
        3. Smoking More But Enjoying It Less?
        4. Marketing Dashboards
        5. Summary: Marketing Metrics + Financial Metrics = Deeper Insight
      2. 12.2 The Value of Information
      3. 12.3 Testing
        1. The Gross Model
        2. Should You Test Another Advertisement?
        3. References and Suggested Further Reading
    22. 13. System of Metrics
      1. Modeling Firm Performance
      2. Three Reasons for Using Systems of Identities in Marketing
        1. Decomposing for Diagnostic Purposes
        2. Eliminating Error by Harnessing the Law of Large (and Not So Large) Numbers
        3. Using Identities to Estimate Metrics that are Difficult to Measure Directly
      3. Marketing Mix Models—Monitoring Relationships between Marketing Decisions and Objectives
      4. Related Metrics and Concepts
        1. References and Suggested Further Reading
      5. Conclusion
    23. Bibliography
    24. Endnotes
      1. Chapter 1
      2. Chapter 2
      3. Chapter 3
      4. Chapter 4
      5. Chapter 5
      6. Chapter 6
      7. Chapter 7
      8. Chapter 8
      9. Chapter 9
      10. Chapter 10
      11. Chapter 11
      12. Chapter 12
      13. Chapter 13
    25. Index