Printed with permission from Prentice Hall and Wharton School Publishing
Marketing Metrics: Opportunities, Performance, and Accountability
Marketers are by no means immune to the drive toward quantitative planning and evaluation. Marketing may once have been regarded as more an art than a science. Executives may once have cheerfully admitted that they knew they wasted half the money they spent on advertising, but they didn't know which half. Those days, however, are gone. Today, marketers must understand their addressable markets quantitatively. They must measure new opportunities and the investment needed to realize them. Marketers must quantify the value of products, customers, and distribution channels––all under various pricing and promotional scenarios. Increasingly, marketers are held accountable for the financial ramifications of their decisions. Observers have noted this trend in graphic terms: "For years, corporate marketers have walked into budget meetings like neighborhood junkies. They couldn't always justify how well they spent past handouts or what difference it all made. They just wanted more money––for flashy TV ads, for big-ticket events, for, you know, getting out the message and building up the brand. But those heady days of blind budget increases are fast being replaced with a new mantra: measurement and accountability."
Choosing the Right Numbers
The numeric imperative represents a challenge, however. In business and economics, many metrics are complex and difficult to master. Some are highly specialized and best suited to specific analyses.Many require data that may be approximate, incomplete, or unavailable. Under these circumstances, no single metric is likely to be perfect. For this reason, we recommend that marketers use a portfolio or "dashboard" of metrics. By doing so, they can view market dynamics from various perspectives and arrive at "triangulated" strategies and solutions. Additionally, with multiple metrics, marketers can use each as a check on the others. In this way, they can maximize the accuracy of their knowledge. They can also estimate or project one data point on the basis of others. Of course, to use multiple metrics effectively, marketers must appreciate the relations between them and the limitations inherent in each. When this understanding is achieved, however, metrics can help a firm maintain a productive focus on customers and markets. They can help managers identify the strengths and weaknesses in both strategies and execution. Mathematically defined and widely disseminated, metrics can become part of a precise, operational language within a firm.
Read the rest of this excerpt and download Chapter 1:
Introduction to Marketing Metrics
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