V. Design Decisions for Marketing Metrics
Designing an informational dashboard for the top management team provides a clear
signal about the kinds of data to which the rest of the organization should attend.
The four key questions, or design parameters, of marketing performance measuring
systems that need to be addressed are:
oWho needs what information?
oWhen and how often is the information needed?
oIn what media and in what format(s) or levels of aggregation should the information
be provided?
oWhat contingencies should be planned for?
A. Who Needs What Information?
Top management, functional managers in other parts of the organization, and
marketing managers responsible for the various marketing-mix activities, need sales
information.
Sales Analysis
oA sales analysis involves breaking down aggregate sales data into categories
such as products, end-user customers, channel intermediaries, sales territories,
and order size.
oThe objective of a sales analysis is to find areas of strength and weakness
oAn important decision in designing the firm’s sales analysis system concerns
which units of analysis to use.
oMost companies analyze data in the following groupings:
Geographical areas
Product, package size, and grade
Customer
Channel intermediary
Method of sale
Size of order
Sales Analysis by Territory
oThe first step in a sales territory analysis is to decide which geographical
control unit to use.
oAnalysts can compare actual sales by county against a standard.
oAnalysts can then single out territories that fall below standard for special
attention.
Sales Analysis by Product
oBefore deciding which products to abandon, management must study
variables such as market-share trends, contribution margins, scale effects, and
the extent to which a product is complementary with other items in the line.
oA product sales analysis is particularly helpful when combined with account
size and sales territory data.
Sales Analysis by Order Size
oAnalysis by order size locates products, sales territories, and customer types
and sizes where small orders prevail.
oSuch an analysis may leads to setting a minimum order size, charging extra
for small orders, training sales reps to develop larger orders, and dropping
some accounts.
Sales Analysis by Customer
oSales analysis by customer typically shows that a relatively small percentage
of customers account for a large percentage of sales.
oThe key to sales analysis by customer is to find useful decomposition of the
sales data that are meaningful in a behavioral way.
Line-Item Margin and Expense Analysis
oBudgeted revenues and profits serve as objectives against which to measure
performance in sales, profits, and actual costs.
oBudget analysis requires that managers continuously monitor marketing
expense ratios to make certain the company does not overspend in its effort to
reach its objectives.
oManagers also evaluate the magnitude and pattern of deviations from target
ratios.
B. SEO and SEM Analysis
Search engine optimization (SEO) refers to a set of techniques that helps ensure
that a company’s web pages are ranked highly when consumers search for
information using a search engine.
oThe search engine’s organic search, as it is called, is driven by propriety
algorithms which vary from one search engine to another and are
programmed to look for certain things.
SEO’s job is to optimize the company’s web pages by, for example, ensuring that
commonly searched-for keywords appear where the search engines are
programmed to look for them.
Search engine marketing (SEM) is a related but fundamentally different activity
from SEO.
oIt involves buying keywords for which consumers are likely to search so that
one’s paid links come up at or near the top of the paid search listings.
For marketers whose websites are intended to deliver completed transactions—
booking a week’s stay on the Villa Poggiale site, for example—there is a host of
other metrics that the villa’s webmaster should track to measure how effective each
of its web pages is.
oThe goal is that the consumer’s journey from the Villa Poggiale landing page
to its various other pages ultimately ends up on the booking page with an
inquiry at least, or a completed booking, at best.
oThe use of web analytics, which take advantage of the inherent measurability
of the web, opens a wide array of possibilities in an exciting new world in
which marketing results can be clearly linked to marketing actions.
C. When and How Often is the Information Needed?
Timeliness is a key criterion for development of a marketing performance
measurement system.
Managers attend to performance information—whether for sales, margins, expenses
—on a periodic basis, since they do not have time or the need to assess the
performance of every item at every minute of every day.
D. In What Media and in What Format(s) or Levels of Aggregation Should the
Information Be Provided?
Having good and timely information and reporting it in a manner that it is easy and
quick to use are different things.
The format or medium in which performance information is presented can make a
big difference to the manager using the data.
Thoughtful attention to the format in which marketing performance information is
reported, to the levels at which it is aggregated, for different kinds of decision
purposes, and for different users can provide a company with a significant
competitive advantage.
E. Does Your System of Marketing Metrics Measure Up?
A key issue in developing a set of marketing metrics as part of an overall
performance measurement system is getting the metrics aligned with the strategy.
F. What Contingencies Should Be Planned For?
Identifying Critical Assumptions:
oAssumptions about events beyond the control of the individual firm but that
strongly affect the entry’s strategic objectives are particularly important.
oAssumptions about industry price levels must be examined in depth because
any price deterioration can quickly erode margins and profits.
oAssumptions about the effects of certain actions taken by the firm to attain its
strategic objectives also need to be considered in depth.
oOnce the targeted levels of various primary objectives are reached, there are
assumptions about what will happen to sales and share.
Determining Probabilities
oThis step consists of assigning to the critical assumptions probabilities of
being right.
Rank Ordering the Critical Assumptions
oIf assumptions are categorized on the basis of their importance, the extent to
which they are controllable, and the confidence management has in them,
then the basis for rank ordering the assumptions and drafting the contingency
plan has been set forth.
Tracking and Monitoring
oThe next step is to specify what information or measures are needed to
determine whether the implementation of the action plan is on schedule—and
if not, why not.
Activating the Contingency Plan
oThis step requires a specification of both the level at which an alert will be
called and the combination of events that must occur before the firm reacts.
Specifying Response Options
oThe firm’s preplanned specific responses can be difficult to implement,
depending in the situation and how it develops.
Thus, most firms develop a set of optional responses that are not detailed
to any great extent to provide flexibility and ensure further study of the
forces that caused the alert.
G. Global Marketing Monitoring
Global companies typically use the same format for both their domestic and foreign
operations, though report frequency and extent of detail can vary by the
subsidiary’s size and environmental uncertainties.
The great advantage of using a single system is that it facilitates comparisons
between operating units and communications between home office and local
managers.
On the surface, the use of electronic data interchange and the Internet should
simplify performance evaluation across countries.
oWhile this is true in terms of budget control, it leaves much to be desired in
terms of understanding the reasons for any deviations.
VI. A Tool for Periodic Assessment of Marketing Performance: The Marketing Audit
Marketing audits are growing in popularity, especially for firms with a variety of SBUs that
differ in their market orientation.
Marketing audits are both a control and planning activity that involves a comprehensive
review of the firm’s or SBU’s total marketing efforts cutting across all products and
business units.
Marketing audits are broader in scope and cover longer time horizons than sale and
profitability analyses.
A. Types of Audits: Refer to exhibit 13.15
The marketing environment audit requires an analysis of the firm’s present and
future environment with respect to its macro components.
The objective and strategy audit calls for an assessment of how appropriate these
internal factors are, given current major environmental trends and any changes in
the firm’s resources.
The unit’s planning and control system audit evaluates adequacy of the systems
that develop the firm’s product-market entry action plans and the control and
reappraisal process.
The organization audit deals with the firm’s overall structure, how the marketing
department is organized, and the extent of synergy between the various marketing
units.
The marketing productivity audit evaluates the profitability of the company’s
individual products, markets, and key accounts.
The marketing functions audit examines in depth, how adequately the firm
handles each of the marketing-mix elements.
The company’s ethical audit evaluates the extent to which the company engages in
ethical and socially responsible marketing.
The product manager audit, especially in consumer good companies, seeks to
determine whether product managers are channeling their efforts in the best ways
possible.
VII. Measuring and Delivering Marketing Performance
The challenges entailed in measuring expenditures in marketing programs in relation to
marketing performance in such a manner as to produce information that is timely, relevant,
easy to use, cost effective, useful to managers, and credible across the organization are
daunting.
oBut tackling these challenges head-on can make the difference when it comes to the
sort of superior returns on investment some companies deliver year after year.
oIt is for this reason that companies are paying increased attention to development of
information dashboards that provide people at all levels the information they need to
make timely, well-informed decisions about marketing, operational, and other crucial
decisions.